## g7globalvaluechainsandtradeinvalueadded

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---

### Globalization, fragmentation of production, and rationale for GVC/TiVA
- Globalization increased fragmentation of production across national economies through reductions in transportation costs, the information technological revolution, lower production costs and more open economic policies.
- Production processes for a final product are increasingly fragmented across resident and non-resident firms; parts and components (goods or services) are increasingly produced in different countries—“unbundling” or “fragmentation” of production.
- Intermediate goods and associated services may cross national borders several times before assembly and sale as a final product.
- International trade is increasingly intra-firm trade, often organized by large multinational enterprises (MNEs) or enterprise groups.
- Purpose of GVC and TiVA indicators:
  - Provide insights into commercial relations between nations and dependencies across industries and countries.
  - Measure the value added (compensation of employees, other taxes on production and operating surplus) by each country in the production of exported goods and services.
  - Support analysis of foreign content of exports, contribution of upstream domestic industries, and potential adverse effects of protectionist measures.

### Definitions, approaches, and satellite-account perspectives
- GVCs: interlinked core production activities and supporting services from conception to end use, coordinated by lead firms; include research and development, production, transportation and distribution, marketing and sales, after-sales services.
- TiVA statistics: top-down approach attributing value added by each country and industry in production consumed worldwide.
- GVC satellite account: bottom-up, enterprise-centered approach using GVC-specific Supply and Use Tables (national or multi-country) to identify production, earnings, employment, income, investment, balance sheets and transactions for a specific GVC.
- TiVA vs GVC satellite account vs eSUTs:
  - TiVA: macro, comprehensive, requires linking country/regional SUTs with international trade statistics.
  - GVC satellite account: targeted, bottom-up for specific product/industry chains; built on firm-level micro-data and business-function information.
  - eSUTs: extensions of national SUTs/IOTs to provide targeted granularity addressing homogeneity assumptions.

### Limitations of conventional statistics and analytical questions
- Conventional national input-output analysis maps domestic linkages but usually stops at national borders and provides limited information on how exports are used abroad.
- Business censuses, surveys and customs data are useful but insufficient alone to map full GVC engagement.
- Fragmentation widens divergence between gross trade flows and contributions to GDP and the balance of payments.
- Key analytical questions TiVA/GVC indicators address:
  - What part of a country’s exports is value added produced at home or abroad?
  - How is value added allocated across bilateral and sectoral trade flows?
  - Which markets absorb production as final demand?
  - What share of imports are consumed in production and embodied in exports?
  - To what extent is domestic production affected by macroeconomic shocks abroad?
  - How are production and value added affected by trade policies?

### Value-added perspective and extended applications
- TiVA reveals foreign content of exports, upstream domestic contributions to exports, and potential obscured impacts of protectionism in gross statistics.
- TiVA and the accounting framework can be extended to:
  - Carbon and resource footprints (embodied CO2).
  - Trade in Employment (employment supported by trade).
- The COVID-19 crisis illustrated vulnerabilities and macroeconomic shocks propagated through GVCs.
- Example statistic preserved: Statistics Netherlands (2021) estimated that 16 percent of domestic value added in trade ultimately ends up abroad because MNEs transfer profits abroad.

### eSUTs: extensions, purposes, and design principles
- eSUTs can include extensions to:
  - Show origin (imports) and destination (exports) countries of products.
  - Provide details on goods for processing (manufacturing services on physical inputs owned by others) and re-exports.
  - Break down by size-class of firm, by trading status (e.g., export orientation), or by control (foreign-controlled vs domestic within MNE groups).
  - Link production accounts to generation of income accounts, employment, and CO2 and other greenhouse gas emissions.
- Key design principles (WG-GVC):
  - Country-driven implementation: develop eSUTs according to national priorities and data availability.
  - Integration objective: link structural business statistics, trade by enterprise characteristics, foreign affiliate trade statistics, and trade data.
  - Parsimony in construction: focus on core activities and industries/products where extra granularity is needed.
- Examples and references: Hagino and Kim (2021) for Japan extended input and output tables; Ahmad (2018) describes implementations and importance.

### Balance of payments statistics, WG-GVC proposals, and MNEs
- BPM6 is integral for constructing GVC satellite accounts and TiVA indicators; WG-GVC identified BPM6 components and proposed auxiliary tables and supplementary items with more detailed geographic/product breakdowns.
- WG-GVC recommendations include:
  - Identify merchandisers and factoryless goods producers (Guidance Note C.4 CATT and GZTT).
  - Highlight MNE roles via Trade by Enterprise Characteristics (TEC) and breakdowns of Direct Investment (DI) income by ultimate controlling parent residency.
- WG-GVC proposed supplementary data to highlight MNE role:
  - TEC for total exports and imports of goods and services with breakdowns by domestic MNEs, foreign-controlled enterprises, and other domestic enterprises.
  - Extensions to DI income distinguishing receipts and payments by ultimate controlling parent residency (resident and non-resident ultimate investors).
- Value-added decomposition considerations:
  - Return to capital (operating surplus) vs labor (compensation of employees).
  - Labor return expected to largely remain in host economy; profits of direct investee enterprises ultimately accrue to foreign parent; domestic MNEs benefit from profits of foreign affiliates.

### Illustrative TiVA example and implications for trade balances
- Conceptual example:
  - Country A exports 100 of goods, produced entirely within A, to Country B.
  - Country B adds value of 10 and exports 110 to Country C where goods are consumed.
  - Conventional trade statistics show total global exports and imports of 210 while only 110 of value added has been generated.
  - Conventional statistics show C has a trade deficit of 110 with B and no trade with A, despite A being the chief beneficiary of C’s consumption.
  - TiVA recalculation: C’s trade deficit with B, on the basis of value added purchased from B as final demand, is reduced to 10; C’s deficit with A on a value-added basis is 100.
  - C’s overall trade deficit with the world remains 110.
- TiVA implications:
  - No change to overall trade balance or GDP measured as sum of final expenditures; TiVA reallocates bilateral attribution of trade balances across partners.

### Practical implementation, data needs, and capacity considerations
- National approaches to measure GVCs within SNA include:
  - Extending production, distribution and use of income, capital, financial, price, and volume accounts to detail international contributions by industry.
  - Combining SUTs/IOTs with international trade data to compile national TiVA (imports and exports in SUTs/IOTs split by country); examples cited: Statistics Finland, Statistics Netherlands, United States BEA.
- Detailed balance of payments statistics and a reporting template for GVC data were supported by the 2019 Committee; recommended items include:
  - total value of re-exports and main product/partner breakdown;
  - total value of goods acquired/sold under merchanting and main products/partners (encouraged);
  - reconciliation table between IMTS and BOP goods statistics (along lines of BPM6 Table 10.2);
  - product and partner breakdown of total trade in goods on a BOP basis and geographical breakdown of EBOPS categories.
- Data collection and integration approaches:
  - Harmonization and integration (new IT systems, data exchange, micro-data linking, central business registers, administrative and other big data) can be lower cost than expanding respondent burden.
  - eSUTs integrate MNE surveys, BOP surveys, tax data, non-financial flows and ownership, integrated business statistics, and reconciled trade statistics.
- GVC satellite accounts built on firm-specific micro-data, existing input-output coefficients, and governance/business function information; focus on traded products and group products by GVC industries (examples: horticulture, automotive, apparel and textile, electronics).
- Integrated business registers should include links to foreign parents and affiliates; international/regional efforts to create common registers for MNE groups can facilitate data sharing and bilateral collaboration.
- Capacity and prioritization recommendations:
  - Leave breakdown and implementation choices to national compilers/policymakers due to varying statistical capacity.
  - For BPM, a two-level approach: (i) core/minimum set of items and (ii) encouraged/extensions for more statistically developed economies.
  - Recommendations for identifying MNEs in the current account were subject to global consultation in GN C.2; identification of ultimate investor for DI income breakdown proposed in DITT GN D.6.
- Asymmetry resolution and reconciliation:
  - Resolving asymmetries by trading partner and product is important for ICIOs and TiVA quality.
  - Reconciliation between IMTS and balance of payments data by trading partner is particularly important; WG-GVC stocktaking survey indicates difficulties in producing these data in most countries.

### eSUTs extensions, selection rules and sample availability figures
- eSUTs extension examples:
  - Re-exports — Total value: Included in reporting template: Yes. Comment: Availability is close to 50%.
  - Re-exports — Main products and/or major partners: Included: Yes (only top products and trading partners, such as top 5). Comment: Availability is 38%.
  - Goods acquired/sold under merchanting — Total gross value: Included: Yes. Comment: Availability above 50%.
  - Goods acquired/sold under merchanting — Main products or major trading partners: Included: No. Comment: Stocktaking survey does not support collection.
  - Reconciliation table between IMTS and trade in goods on BOP basis (Total, Table 10.2 in BPM6): Included: Yes. Comment: Availability above 50%.
  - Breakdown of total trade in goods on a BOP basis — Major trading partners and/or most important products: Included: Yes. Comment: Availability above 50%; priority to trading partners.
  - Geographical breakdown of trade in services — 12 main EBOPS categories: Included: Yes. Comment: Availability above 50%.
  - Supplemental breakdown of the travel services item — Supplemental classification proposed in BPM6: Included: No. Comment: Stocktaking survey does not justify asking for this item at this time.
- Selection rule for reporting template: include any item for which 50 percent or more of stock-taking survey respondents indicated data were available and already published or available but not yet published. Items below 50 percent availability could still be included if of particular value for GVC analysis or policymaking.

### Conceptual stance and proposed changes to statistical manuals
- No conceptual changes required to central 2008 SNA and BPM frameworks to account for GVCs; conventional gross trade flows should remain featured measures because:
  - Gross flows are essential for calculating a country’s overall trade balance and GDP (net exports = gross exports less gross imports).
  - Bilateral gross trade flow statistics are timely, long-standing, and prerequisites for GVC satellite accounts and TiVA estimates.
- Agreed outcomes and actions (AEG and Committee):
  - Include a description of GVCs and TiVA in BPM7 and 2025 SNA.
  - Develop supplementary information for analysis on a voluntary basis, considering countries’ statistical capacity.
  - Favor building: (i) TiVA indicators, (ii) GVC satellite accounts, and (iii) eSUTs for more granularity within the SNA.
  - Within BPM, supplemental cross-border statistics detailed by geography or product were proposed and agreed in 2019 as part of a reporting template.
  - International Organizations to commit to maintaining statistical infrastructure to produce Inter-Country Input-Output tables (ICIOs).
- Proposed SNA chapters to update or include in a globalization chapter:
  - Chapter 14: The Supply and Use Tables and Goods and Services Accounts
  - Chapter 26: The Rest of the World Accounts and Links to the Balance of Payments
  - Chapter 28: Input-Output and Other Matrix-Based Analyses
  - Chapter 29: Satellite Accounts and Other Extensions

### MNEs in the current account and proposed reporting framework
- WG-GVC proposed incorporating TEC data in trade in goods and services accounts and a further breakdown of DI income distinguishing receipts and payments by residency of the ultimate owner.
- Proposed current account detail (selected lines summary):
  - Lines 1–11: Exports of goods and services (BOP) with breakdowns by domestic MNEs (TEC/STEC), foreign-controlled enterprises (TEC/STEC), and other domestic enterprises (TEC/STEC).
  - Lines 11–21: Primary income receipts (BOP) including Direct investment income (BOP/DI) and breakdowns by resident UBOs and foreign UBOs; portfolio investment income; other investment income; reserve asset income; compensation of employees; secondary income receipts.
  - Lines 22–31: Imports of goods and services (BOP/DI) with analogous TEC/STEC breakdowns.
  - Lines 32–41: Primary income payments (BOP) including Direct investment income (BOP/DI) with inward DI income breakdowns by resident UBOs and foreign UBOs; portfolio investment income; other investment income; compensation of employees; secondary income payments.
- Note on terminology: the term ultimate beneficial owners (UBOs) has subsequently been addressed in DITT GN D.6; the DITT GN D.6 proposes concepts for ultimate investor (UCP/UIE/UHE) and a “Winner Takes All (WTA)” approach consistent with the UCP concept.

*International Monetary Fund, g7globalvaluechainsandtradeinvalueadded — SECTION I: INTRODUCTION TO THE ISSUE; SECTION VI: CHANGES REQUIRED TO THE 2008 SNA AND OTHER STATISTICAL MANUALS.*

### SECTION I: INTRODUCTION TO THE ISSUE

### SECTION I: INTRODUCTION TO THE ISSUE

### Globalization and fragmentation of production
- Globalization—defined as the economic integration of countries around the world—has increased fragmentation of production across national economies, driven by reductions in transportation costs, the information technological revolution, lower production costs and more open economic policies.
- Production processes for a final product are increasingly fragmented across resident and non-resident firms; parts and components (goods or services) are increasingly produced in different countries, a phenomenon described as “unbundling” or “fragmentation” of production.
- Intermediate goods and associated services may cross national borders several times before assembly and sale as a final product or delivery to a third party.
- International trade is increasingly intra-firm trade, often organized and led by large multinational enterprises (MNEs) or enterprise groups.
- Global value chains (GVCs) and Trade in Value Added (TiVA) indicators are designed to provide new insights into the commercial relations between nations and better inform policymakers.

### Definition and structure of GVCs; TiVA and satellite-account perspectives
- GVCs, coordinated and headed by lead firms, represent interlinked core production activities and supporting services to produce a final product; they cover the full range of activities from conception to end use, including research and development, production, transportation and distribution, marketing and sales, and after-sales services.
- A GVC satellite account uses a bottom-up approach that looks at a specific GVC production chain within the framework of national accounts.
- TiVA statistics use a top-down approach and provide a more comprehensive view of interlinkages and dependencies by considering value added by each country and industry in the production of goods and services consumed worldwide.

### Limitations of conventional national and trade statistics
- National input-output analysis produced within the framework of national accounts maps domestic value-chain linkages across industries within a country but usually stops at the border and contains limited information on how exports are used abroad.
- Business censuses, surveys, and customs data contain important firm-level input sourcing and export participation details but are not sufficient alone to map engagement in GVCs.
- Conventional macro (input-output) and micro (firm) data sources lack the information needed to map the entire global production process and measure GVC linkages.
- The fragmentation of production has deepened the divergence between gross trade flows recorded by traditional international trade statistics and the contributions those flows make to GDP and the balance of payments as accounted for in TiVA or GVC satellite-account-based statistics.

### Key analytical questions addressed by GVC/TiVA indicators
- What part of a country’s exports can be ascribed to value added produced at home or abroad?
- How can value added be allocated across different bilateral and sectoral trade flows?
- Which markets absorb production as final demand?
- What share of imports are consumed in production and subsequently embodied in exports?
- To what extent is a country’s production affected by macroeconomic shocks originating abroad?
- How can production be affected by trade policies implemented in a given country, industry, or against certain partners?

### Value of TiVA indicators and broader applications
- TiVA measures flows related to the value that is added (compensation of employees, other taxes on production and operating surplus) by a country in the production of any exported good or service.
- The TiVA accounting framework can be extended to address other global phenomena, such as carbon and other resource footprints, and measures of employment supported by trade (Trade in Employment).
- Measuring trade in value added terms affects trade policy, competitiveness, upgrading and innovation, and management of global systemic risk; the recent COVID-19 crisis highlighted the challenges of GVCs and associated macro-economic shocks.
- A value-added perspective reveals the foreign content of exports, the contribution of upstream domestic industries to exports, and potential adverse effects of protectionist measures that gross trade statistics can obscure.

### Options and scope of the Guidance Note (GN)
- The main scope of the GN is to discuss options to better highlight GVC activity within the current framework of the 2008 SNA and BPM without changing core concepts, by providing extensions or more granular data.
- Options discussed include:
  - TiVA indicators
  - GVC satellite account
  - extended Supply and Use Tables (eSUTs)
  - other useful information, including supplemental data from the BPM to support analysis
- The GN builds on recommendations of the OECD Expert Group on eSUTs and the IMF Committee on Balance of Payments Statistics Working Group on Balance of Payments Statistics relevant for GVCs (WG-GVC).

### Role and design of a GVC satellite account
- The GVC satellite account approach identifies and articulates a GVC for a specific product or group of products produced within a GVC using GVC-specific SUTs (national or multi-country) and an enterprise-centered approach with detailed business statistics and business-function information.
- A GVC satellite account would include production, earnings and employment, income and investment (capital and financial), and information on balance sheets and transactions—detail not readily available in standard sector or sub-sector accounting presentations.
- National and/or multi-country GVC-specific accounts would be compiled from national SUTs with a common breakdown of industries and products produced within a GVC; the scope and participating firms must be determined by compiling institutions.
- The decision to include direct suppliers only or to include indirect suppliers depends on analytical usefulness and data availability.
- Business, trade and investment data for a GVC satellite account should be collected from business lines of global enterprises to correctly specify industry-specific GVCs controlled by lead firms, and firms should be further categorized by foreign-controlled or nationally-controlled and by GVC-related versus non-GVC-related within relevant ISIC categories.
- The GVC satellite accounting framework is flexible and can be implemented according to a country’s needs without reducing the accuracy or consistency of the central SNA framework; countries can choose GVCs based on importance to value added, investment and trade relations, or specific policy questions.

### Extended Supply and Use Tables (eSUTs) within the SNA framework
- Greater granularity through eSUTs helps GVC and TiVA analysis by addressing homogeneity assumptions among firms with different degrees of integration into GVCs and by better revealing trade in income and potential repatriation of income by MNEs.
- The OECD Expert Group on Extended Supply and Use Tables (created in 2014) addresses issues to improve TiVA quality, including assumptions of homogeneity in production functions and trade-in-income challenges.
- Ahmad (2018) provides detailed descriptions and country examples of eSUT implementations and their importance for addressing these questions.

*Source: Guidance Note (GN) "SECTION I: INTRODUCTION TO THE ISSUE", prepared under the SNA/BPM framework and reviewed by the IMF Globalization Task Team and related expert groups.*

### 19.      ESUTs are flexible, containing a number of possible extensions. Extensions range f rom

### ESUTs are flexible, containing a number of possible extensions. Extensions range from

### eSUTs: extensions, purposes, and design principles
- eSUTs can include extensions that:
  - show estimates of the origin (imports) and destination (exports) countries of products;
  - provide more details on goods for processing transactions (manufacturing services on physical inputs owned by others) and re-exports (if import flow tables are not also provided);
  - break down by size-class of firm (statistical unit), by trading status (e.g., export orientation), or by control (e.g., foreign controlled or domestic entities that are part of an MNE group).
- eSUTs can link production accounts to generation of income accounts, employment statistics, and carbon dioxide (CO2) and other greenhouse gas emissions to address trade in income, employment, and embodied CO2.
- Key design principles emphasized by the Working Group on GVCs (WG-GVC):
  - Country-driven implementation: countries develop eSUTs according to their priorities, circumstances, and data availability (Annex IV).
  - Integration objective: create an integrated accounting framework linking disparate sources such as structural business statistics, trade by enterprise characteristics, foreign affiliate trade statistics, and trade data.
  - Parsimony in construction: it is not necessary to break down all activities; focus on core activities and industries/products where extra granularity is needed.
  - Examples: Hagino and Kim (2021) demonstrated extended input and output tables for Japan; if there is no foreign presence in an industry, no additional granularity is needed.

### Balance of payments statistics, WG-GVC recommendations, and MNEs
- Balance of payments (BPM6) is integral to constructing GVC satellite accounts and TiVA indicators; BPM6 provides a useful framework for additional information bridging detailed trade statistics and accounting frameworks.
- The WG-GVC (October 2019) identified balance of payments components, often involving auxiliary tables, supplementary items, or more detailed geographic/product breakdowns than standard BPM6 reporting.
- WG-GVC recommended additional guidance to help identify merchandisers and factoryless goods producers; Guidance Note C.4 (CATT and GZTT) addresses these issues.
- Transactions of multinational enterprises (MNEs) are central to globalization and GVCs; identifying MNEs in the current account is critical to address treatment of income.
- Value-added decomposition: return to capital (operating surplus) and labor (compensation of employees); labor return is expected to largely remain in host economy, while profits of direct investee enterprises ultimately accrue to the foreign parent; domestic MNEs benefit from profits from foreign affiliates.
- WG-GVC proposed a further breakdown of the current account to highlight MNE activity (Annex V, Table 3A); CATT and DITT work incorporates WG-GVC recommendations for international standards updates.
- WG-GVC proposed supplementary data to highlight MNE role in the current account, including:
  - Trade by Enterprise Characteristics (TEC) for total exports and imports of goods and services with breakdowns by domestic MNEs, foreign-controlled enterprises, and other domestic enterprises; and
  - Extensions to direct investment (DI) income distinguishing receipts and payments by ultimate controlling parent (UCP) residency (resident and non-resident ultimate investors).
- Table 2 (WG-GVC proposal) summary (items preserved as source):
  - Item: Total Exports and imports of goods and services (balance of payments basis)
    - Source data: Balance of payments
    - By domestic MNEs: TEC for goods and Services
    - By foreign-controlled enterprises
    - Other—domestic enterprises
  - Item: DI income (receipts and payments)
    - Source data: Balance of payments
    - By resident ultimate controlling parent: Balance of payments /DI
    - By non-resident ultimate controlling parent: Balance of payments /DI
- Example statistic preserved from the source: Statistics Netherlands (2021) estimated that 16 percent of domestic value added in trade ultimately ends up abroad because MNEs transfer profits abroad.

### Conceptual recommendations for GVC measurement
- No conceptual changes required to the central SNA and BPM frameworks to account for GVCs; conventional gross international trade flows should remain featured measures because:
  - Gross flows are essential for calculating a country’s overall trade balance and GDP (net exports = gross exports less gross imports).
  - Bilateral gross trade flow statistics are timely, long-standing, and prerequisites for GVC satellite accounts and TiVA estimates.
- TiVA approach implications:
  - TiVA reallocates a country’s overall trade balance among its trading partners without affecting the overall trade balance or GDP measured as the sum of final expenditures.
  - In the value-added approach, measures of exports and imports individually are smaller, but net exports remain the same.
- Comparative roles:
  - TiVA estimates: macro approach requiring massive international effort to link country/regional SUTs with international trade statistics.
  - eSUTs: improve TiVA by focusing on targeted aggregations to address homogeneity assumption challenges.
  - GVC satellite account: targeted bottom-up approach focused on a specific product/industry or group of industries within a GVC.

### Practical implementation, data needs, and capacity considerations
- Multiple national approaches to measure GVCs within existing SNA:
  - Extend SNA production, distribution and use of income, capital, financial, price, and volume accounts to detail international contributions by industry.
  - Combine SUTs/IOTs with international trade data to compile “national TiVA” (imports and exports in SUTs/IOTs split by country). Examples: Statistics Finland, Statistics Netherlands, and the United States BEA.
- Detailed balance of payments statistics are needed; 2019 Committee supported developing a reporting template for GVC data comprising items such as:
  - total value of re-exports and main product and/or partner breakdown;
  - total value of goods acquired/sold under merchanting and main products and/or major trading partners (encouraged item);
  - reconciliation table between IMTS and balance of payments goods statistics (along lines of BPM6 Table 10.2);
  - product and partner breakdown of total trade in goods on a balance of payments basis and geographical breakdown of EBOPS categories.
  - IMF and OECD prepared a reporting template included in CATT GN C.2.
- Data collection and integration approaches:
  - Harmonization and integration techniques (new IT systems, data exchange, micro-data linking, central business registers, administrative and other big data) can be lower cost than expanding respondent-burdening data collections.
  - eSUTs build on national SUTs/IOTs and integrate MNE surveys, BOP surveys, tax data, non-financial flows and ownership, integrated business statistics, and reconciled trade statistics.
- GVC satellite accounts:
  - Built on firm-specific micro-data, publicly available micro-data, existing input-output coefficients, and information on governance and business functions.
  - Focus on traded products related to specific industries (e.g., horticulture, automotive, apparel and textile, electronic) and group products by GVC industries for international comparison.
- Integrated business statistics and business registers:
  - Foundational for profiling firms (employment, income, productivity, international trade) and for understanding interdependencies in cross-border transactions.
  - National business registers should include links to foreign parents and affiliates; international/regional efforts exist to create common business registers for MNE groups to facilitate data sharing and bilateral collaboration.
- Capacity and prioritization:
  - Varying statistical capacity across countries implies adoption of the most beneficial, country-specific approach.
  - Recommendation: leave decisions on breakdowns and implementation approach to national compilers and policymakers while being mindful of fragmentation risks if countries do not produce consistent views.
  - For BPM, a two-level approach is proposed: (i) core/minimum set of items and (ii) encouraged/extensions for more statistically developed economies.
  - Recommendations for identifying MNEs in the current account have been subject to global consultation as part of GN C.2; identification of ultimate investor for DI income breakdown has been proposed in DITT GN D.6.
- Asymmetry resolution and reconciliation:
  - Resolving asymmetries by trading partner and product is important for high-quality ICIO tables and TiVA indicators.
  - Reconciliation between IMTS data and balance of payments data by trading partner is particularly important; WG-GVC stocktaking survey indicates difficulties in producing these data in most countries (see Appendix Table 2A).

*Source: Working Group on Global Value Chains (WG-GVC) and related Committee and Task Team guidance as presented in the specified IMF guidance note excerpts.*

### SECTION VI: CHANGES REQUIRED TO THE 2008 SNA AND OTHER STATISTICAL MANUALS

### SECTION VI: CHANGES REQUIRED TO THE 2008 SNA AND OTHER STATISTICAL MANUALS

### Outcomes and agreed actions
- The AEG and Committee at the joint meeting unanimously agreed with all proposals put forward in the Guidance Note (GN):  
  - Include a description of GVCs and Trade in Value Added (TiVA) in the BPM7 and 2025 SNA.  
  - Develop supplementary information for analysis, on a voluntary basis considering countries’ varying degrees of statistical capacity and scarce resources, to help motivate greater uptake.  
  - Within the SNA, to better understand GVC at a global level, the GN favors building: (i) TiVA indicators, addressing the double counting implicit in gross flows of trade, (ii) GVC satellite account, and (iii) more granularity using the extended supply and use tables (eSUTs).  
  - Within the BPM, supplemental cross-border statistics detailed by geography or product were proposed and agreed by the Committee in 2019 as part of a reporting template for GVC data collection.  
  - International Organizations to commit to maintaining the statistical infrastructure to produce Inter-Country Input-Output tables (ICIOs).

- The work on globalization could support adding a new chapter to the next update of the SNA and BPM; editors should consider how best to incorporate the GN. While there are no conceptual changes to the central frameworks, a description of GVCs and TiVA could be included in the next set of manuals as well as the additional data needed to aid such analysis (such as eSUTs or highlighting MNEs in the current account).

### Proposed SNA chapters to update or include in a globalization chapter
- The following 2008 SNA chapters could be updated or potentially included in a new globalization chapter:  
  - Chapter 14: The Supply and Use Tables and Goods and Services Accounts  
  - Chapter 26: The Rest of the World Accounts and Links to the Balance of Payments  
  - Chapter 28: Input-Output and Other Matrix-Based Analyses  
  - Chapter 29: Satellite Accounts and Other Extensions

### TiVA conceptual illustration and implications
- Example (Figure 1A):  
  - Country A exports 100 of goods, produced entirely within A, to Country B.  
  - Country B adds value of 10 and exports 110 to Country C where goods are consumed.  
  - Conventional trade statistics show total global exports and imports of 210 while only 110 of value added has been generated.  
  - Conventional statistics show C has a trade deficit of 110 with B and no trade with A, despite A being the chief beneficiary of C’s consumption.  
  - TiVA recalculation: C’s trade deficit with B, on the basis of value added purchased from B as final demand, is reduced to 10; C’s deficit with A on a value-added basis is 100.  
  - C’s overall trade deficit with the world remains 110.

### GVC-specific SUTs and extensions
- GN references UN guidelines on Accounting for Global Value Chains: GVC Satellite Accounts and Integrated Business Statistics for full set of extensions.  
- Table 1A and related tables propose GVC-specific SUTs with breakdowns by business functions and standardized products (examples of functions listed include: Research and development; Manufacture of motor vehicles; Distribution and logistics; Marketing, sales and after-sale services; ICT services; Engineering and related technical services; Administration and management functions).  
- Use table elements include: Compensation of employees; Other taxes less subsidies on production; Consumption of fixed capital; Net operating surplus/net mixed income; Gross operating surplus/gross mixed income; GVA; Total input at basic prices; Final use categories including Final consumption expenditure, Gross capital formation, Exports.

### Extended Supply and Use Tables (eSUTs) — rationale and principles
- The OECD Expert Group on Extended Supply-Use Tables (created in 2014) proposes extensions to the 2008 SNA SUTs framework (2008 SNA, Chapter 14) to improve ability to understand the impact of globalization on the domestic economy.  
- Underlying principle: generate greater homogeneity in activity types by breaking down industries into firm-level aggregations that reflect homogeneity in production functions and use of imports and generation of exports (examples of breakdowns: ownership status; size-class; export orientation; trade status such as processor/non-processor).  
- Ahmad (2018) and the Expert Group’s Terms of Reference note that not all activities need decomposition; national circumstances, statistical capacity, and policy demands drive eSUT development.  
- The GZTT suggested breakdowns of GVA by domestic MNEs versus foreign-controlled affiliates of foreign MNEs.

### Balance of payments components identified by the Working Group on GVC (WG-GVC)
- Items identified by the WG as relevant for GVC analysis:  
  - All standard components in BPM6 for the goods account, with a breakdown of main products involved, including Re-exports; Goods acquired under merchanting; Goods sold under merchanting.  
  - A reconciliation table between international merchandise trade statistics (IMTS) and balance of payments trade in goods statistics, along the lines of BPM6 Table 10.2, including main products and/or partner countries where possible.  
  - Balance of payments trade in goods statistics identified by CPC or CPA and partner country, consistent with national accounts SUTs (particularly where GVC transactions are important).  
  - Supplementary breakdown of the travel item as identified in BPM6 standard components.  
  - Geographical breakdowns for trade in services statistics, starting with the 12 main EBOPS categories (and total services trade) and prioritizing more detailed services categories by relevance and importance.

### Proposed items for data collection and reporting template (summary of selection rules and items)
- Selection rule: include any item for which 50 percent or more of stock-taking survey respondents indicated data were available and already published or available but not yet published. Items below 50 percent availability could still be included if of particular value for GVC analysis or policymaking.  
- Guidance for economies: prioritize providing detail by main product and/or major trading partner; report details (e.g., re-exports, merchanting) where significant; consider reporting to international organizations without requiring publication to address quality or confidentiality concerns.

- Table 2A summary of proposals (selected entries preserved):  
  - Re-exports — Total value: Included in reporting template: Yes. Comment: Availability is close to 50%, and data are very useful for GVC indicators.  
  - Re-exports — Main products and/or major partners: Included: Yes, but only top products and trading partners, such as top 5. Comment: Availability is 38%; very useful for economies with significant re-exports.  
  - Goods acquired/sold under merchanting — Total gross value: Included: Yes. Comment: Availability above 50%.  
  - Goods acquired/sold under merchanting — Main products or major trading partners: Included: No. Comment: Stocktaking survey does not support collection; economies could provide national accounts estimates.  
  - Reconciliation table between IMTS and trade in goods on BOP basis (Total, Table 10.2 in BPM6): Included: Yes. Comment: Availability above 50%. Main products/trading partners: No (survey results point to difficulties).  
  - Breakdown of total trade in goods on a BOP basis — Major trading partners and/or most important products: Included: Yes. Comment: Availability above 50%; priority to trading partners.  
  - Geographical breakdown of trade in services — 12 main EBOPS categories: Included: Yes. Comment: Availability above 50%; focus on most important categories and trading partners.  
  - Supplemental breakdown of the travel services item — Supplemental classification proposed in BPM6: Included: No. Comment: Stocktaking survey does not justify asking for this item at this time.

### MNEs in the current account and proposed current account framework
- WG-GVC developed a framework for incorporating TEC data in the trade in goods and services account and a further breakdown of Direct Investment (DI) income that distinguishes income receipts and payments based on the residency of the ultimate owner of the MNE.  
- Historical frameworks from the 1990s and ownership-based disaggregation approaches (e.g., Julius (1990); National Research Council (1992); U.S. BEA) were reviewed; reconciling AMNE/FATS with BOP posed definitional and conceptual issues the WG could not adequately address.  
- Proposed framework provides additional detail within trade in goods and services accounts and within the primary income account for DI income as shown in Table 3A (selected lines preserved):  
  - Lines 1–11: Exports of goods and services (BOP); breakdowns by goods (BOP basis) and services; goods and services attributed to: By domestic MNEs (TEC/STEC); By foreign-controlled enterprises (TEC/STEC); Other—domestic enterprises (TEC/STEC).  
  - Lines 11–21: Primary income receipts (BOP) including Direct investment income (BOP/DI) and adjustments to directional basis; breakdown by resident UBOs and foreign UBOs; Portfolio investment income; Other investment income; Reserve asset income; Compensation of employees; Secondary income receipts.  
  - Lines 22–31: Imports of goods and services (BOP/DI) with analogous breakdowns by domestic MNEs, foreign-controlled enterprises, and other domestic enterprises for goods and services.  
  - Lines 32–41: Primary income payments (BOP) including Direct investment income (BOP/DI) with inward direct investment income breakdowns by resident UBOs and foreign UBOs; Portfolio investment income; Other investment income; Compensation of employees; Secondary income payments.  
- Note: The term ultimate beneficial owners (UBOs) has subsequently been replaced by recommendations discussed in GN D.6. The DITT GN D.6 “Ultimate Investing Economy/Ultimate Host Economy and Pass-through Funds” proposes to streamline concepts for ultimate investor (UCP/UIE/UHE) used in the standards; the UCP concept used in that GN would be consistent with the UIE concept under the proposed “Winner Takes All (WTA)” approach.

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/g7globalvaluechainsandtradeinvalueadded.pdf_