adding value to trade measures: understanding canada’s ...value (or supply) chain: the...

Briefing April 2012

Trade, InvesTmenT PolIcy and InTernaTIonal cooPeraTIon

International trade is central to Canada’s economic

prosperity, but conventional trade figures rarely tell

the full story. This briefing is the second in a series

exploring the concept of value-added trade and how it

affects our understanding of Canada’s trade relationships

with the rest of the world. In it we examine the key

findings of the earlier briefing in more detail,1 high-

lighting their significance for both industry strategy

and government policy.

As discussed in the first briefing, value-added trade

measures challenge conventional wisdom for one main

reason: the growing prevalence of vertical trade. (See

box “Key Definitions.”) Over the past two decades,

1 The first briefing, by Maxim Armstrong, is titled Adding Value to Trade Measures: An Introduction to Value-Added Trade.

Adding Value to Trade Measures: Understanding Canada’s Role in Global Value Chains

at a Glance � Conventional trade measures are becoming less

representative of actual trading relationships. Although it has its own challenges, value-added trade can yield valuable insights for those framing trade policy and corporate strategy.

� Even if Canada seems globally integrated, its proximity to and dependence on the U.S. mar-ket is skewing the overall picture depicted by the value-added trade data.

� Value-added trade shows the high interconnect-edness between Canada’s services industries and the more export-oriented industries. This means that Canada’s services industries are also exposed to international competition.

Find this briefing and other Conference Board research at www.e-library.ca

2 | Adding Value to Trade Measures: Understanding Canada’s Role in Global Value Chains—April 2012

international trade patterns have changed, spurred by

free trade agreements, better integration of emerging

markets into the global economy, and communication

technologies that make it easier for companies to break

down production processes to make the best use of each

country’s advantages.

As a result, businesses are importing more inputs and

relocating operations to countries where it is most advan-

tageous. Such vertical trade has encouraged specializa-

tion and enabled businesses to generate economies of

scale. However, although this can improve production

processes, we now find that conventional trade meas-

ures, namely imports and exports, are becoming less

representative of the actual trading relationships. These

traditional trade measures were developed in a world

where one country made a product and exported it to

another. Today, multiple countries are usually involved

in the production of finished goods or even in services.

Conventional trade data can distort our understanding of

trade in many ways. First, when a country is engaged in

vertical trade, double counting of inputs that cross borders

multiple times will cause conventional measures to over-

estimate the overall trade figure. Second, conventional

trade figures can distort the relative importance of some

sectors’ contributions to a country’s international trade.

This is because transactions are classified by the type

of good or service that is being traded, rather than by

what transformations took place within a specific coun-

try. And finally, conventional trade can give a distorted

picture of who a country is trading with. Ultimately, this

traditional picture of trade can lead to misinformed

policy and business decisions.

Despite these concerns regarding conventional trade

measures, it is important to note that value-added trade

is a complementary trade measure. It does not replace

conventional trade data as much as enhance it. (See box

“Value-Added Versus Conventional Trade.”) Value-

added trade provides additional insights regarding

Bilateral trade: imports and exports occurring between two countries.

domestic exports used in foreign exports: exports of domestic goods and services subsequently used as inputs by other countries in their own exports.

double counting: the error caused when the value of a prod-uct is counted more than once as it passes through the value chain.

Finished product: a product that is ready for consumption.

GTaP: Global Trade Analysis Project.

Imported inputs used in exports: imported inputs used in producing exports and/or producing domestic inputs subse-quently used for production of exports.

Input–output tables: tables counting how much of each input is required to produce one unit of output.

Integrative trade: trade in intermediate goods and services that results from the location of different stages of production in different locations around the world.

Intermediate inputs: a partly transformed product that is used in the production of another product.

oFce: Observatoire français des conjonctures économiques.

openness rate (by country): ratio of a country’s total trade (imports and exports) to its GDP.

openness rate (by industry): ratio of imports and exports of an industry to its output.

returning exports: domestic content embedded in imported goods and services.

value-added: the amount by which the value of a good or service increases from a specific step in the production pro-cess. This can also be estimated by the value of sales minus the cost of non-labour inputs.

value-added trade: the amount by which the value of a good or service increases while transiting through a country. This can be estimated by subtracting vertical trade from conven-tional trade measures.

value (or supply) chain: the transformation process of a product from raw materials to finished good, or the process of developing tradable services.

vertical trade: the production of a good or a service that involves at least two countries and for which one country imports some of the inputs and will export at least some of the output. It consists of imported inputs used in exports and returning exports. It is also the difference between conven-tional and value-added trade.

Key definitions


The Conference Board of Canada | 3

where value in trade is created and how global value

chains work, but it too has its limitations. As the first

briefing notes, these include the fact that the data are

not timely and that several assumptions are required

in order to create the value-added trade data set.

Because vertical trade has been growing in importance

for many years, the concept of value-added trade has

gained significant attention from many key organizations,

such as the World Trade Organization, the Organisation

for Economic Co-operation and Development, and the

National Bureau of Economic Research. Indeed, the use

of value-added trade measures would provide a much

clearer idea of the “real” trading patterns in today’s

economy and would make it easier to identify the real

contribution of China to the U.S. economy and vice-

versa, for example. The problem is that value-added

trade measures don’t exist, and creating estimates of

these measures is a significant challenge. Statistical sys-

tems aren’t set up to provide such detailed information,

especially in the case of less-developed countries.

The present briefing will examine in detail what value-

added trade tells us about Canada’s trade dependence,

Canada’s trade relationship with the U.S. and its other

major trading partners, and why the contribution of ser-

vices to trade is much more important than conventional

wisdom suggests. This analysis will shed light on Canada’s

trading strengths and weaknesses while measuring its

interdependence with other countries. Finally, it will

explore Canada’s role in global value chains.

canada Is a small, oPen economy, rIGhT?

Canada is often characterized as a “small, open

economy”—that is, it is a relatively small player in

the global economy, yet international trade accounts

for a sizable share of its GDP. However, when we con-

vert conventional trade measures into value-added terms,

trade accounts for a much smaller share of the Canadian

economy. Indeed, Canada’s openness rate, the average

of imports and exports as a share of GDP, drops from

34.9 per cent in conventional terms to 24 per cent in

value-added terms. (See Table 1.)

Because double counting is eliminated, all countries see

reduced trade flows when these are expressed in value-

added terms, with the global openness rate falling from

26.5 per cent to 19.2 per cent. As such, Canada’s openness

rate remains above the global average by both measures,

and the decline in openness when using the value-added

measure is not surprising. What is unexpected, however,

is that Canada’s openness ranking changes significantly

when compared with that of other countries.

For comparison purposes, Canada’s peers are the 30 lar-

gest trading nations. (See Table 1 in the appendix for

detailed trade statistics for these countries.) Combined,

these countries account for 83 per cent of global trade

value-added versus conventional Trade

Value-added trade data provide insights about where, and by whom, value is created in Canadian trade. However, this does not mean that there isn’t valuable information in the conventional trade data. For example, the conventional trade data are current and allow us to observe how Canada’s trade is changing over time; this is not true of value-added trade data. Because they are based on transactions, conventional trade figures also provide insights about the currency flows that underpin trade. The difference between the two measures of trade also provides valuable insights, since it shows the degree to which firms are using cross-border activities in their production processes.

The calculation of vertical trade allows us to quantify and eliminate the effects of double counting in the conventional trade statistics to create value-added trade. This transform-ation results generally in a smaller trade volume overall, but this does not imply that vertical trade is “bad.” Indeed, ver-tical trade is part of integrative trade, and it defines Canada’s involvement in global value chains. If Canada’s vertical trade were zero, the distortions in the conventional trade data would be much smaller, but it would also imply that Canada had little or no involvement in global value chains, which is not desirable.

As such, it is better to think of value-added and conven-tional trade as complementary measures. An analogy can be found in sales and GDP data for a particular industry, where both measures tell you something about that industry. Sales data provide information on transaction sizes and cash flows, whereas the GDP data indicate how much value the industry creates and adds to the economy. Neither is the “correct” measure; instead they provide indications of dif-ferent things within the same industry.

Source: The Conference Board of Canada.



and 89 per cent of global GDP. For the most part, these

countries see only a modest change in their openness

rankings when the trade figures are converted from

conventional to value-added.

For example, the most trade-dependent country, Singapore,

sees its openness rate fall from 164.6 per cent in conven-

tional terms to 56.7 per cent in value-added terms. Yet

its ranking as the world’s most trade-dependent nation

is not affected by the shift to value-added trade. As well,

among the top 30 trading nations, the U.S. remains the

least trade-dependent, with its openness rate falling from

11.9 per cent to 9.7 per cent in value-added trade terms.

In comparison, Canada’s openness rate ranking drops

from 17th to 20th among the 30 largest trading nations.

Only a handful of countries experience such a large

change. Other countries that show large downward move-

ments in their openness rankings include South Korea

and Switzerland. At the opposite end of the spectrum,

Russia and Norway see significant upward movements

in their rankings. The fact that some countries see larger

reductions in their trade flows than others when trade is

measured in value-added terms may reflect a deeper use

of cross-border value chains by firms in these countries.

For example, Canada, South Korea, and Switzerland all

make above-average use of imported inputs in their

exports. The more vertical trade that a country under-

takes, the larger the downward revision in its trade

ranking when measured in value-added terms.

In comparison, Russia and Norway make limited use

of vertical trade, which is why their openness rankings

improve. Both of these countries have similar trade pro-

files: Their primary exports are raw materials (oil and

other petroleum products), and they are major importers

of finished goods (machinery and equipment).2 As such,

their trade is located at the beginning and end of global

value chains, and they have more traditional trade rela-

tionships with the rest of the world.

Although Canada’s export base is more diversified than

Russia’s or Norway’s, it too is a major exporter of raw

materials. This similarity makes the difference in how

value-added trade affects our understanding of each

country’s trade openness more stark. What differentiates

Canada from Norway and Russia is its trade relationship

with the United States. The high degree of integration

among Canadian manufacturers’ value chains and those

of their counterparts in the U.S. means that, on the whole,

Canada makes above-average use of vertical trade.

2 United Nations Commodity Trade Statistics Database.

Table 1Openness Rates by Country*

conventional value-added rank conventional rank value-added

Singapore 164.6 56.7 1 1

Malaysia 114.7 55.7 2 2

Hong Kong 73.7 50.0 5 3

Ireland 78.1 46.8 4 4

Belgium 89.0 44.4 3 5

Median top 30 36.7 25.3

Canada 34.9 24.0 17 20

Japan 13.2 11.0 29 29

U.S. 11.9 9.7 30 30

*for selected countries among the top 30 trading nations Note: Openness rate is: (Import + Exports)/2/GDP*100. Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.



Another outcome of estimating trade in value-added terms

is that Canada’s share of global trade shrinks: Whereas

Canada accounts for 3.1 per cent of total global trade in

conventional terms, its share falls to 2.9 per cent when

measured on a value-added basis. Among the top 30 trad-

ing nations, some other countries see even larger down-

ward revisions in their share of trade. Belgium sees the

largest revision, with its share of global trade falling from

2.8 to 1.9 per cent, but other small economies, including

Singapore and Taiwan, also see large downward revisions.

(See Chart 1.) This is not that surprising given that smaller

economies generally have less capacity to produce inputs

domestically and thus are more likely to use imported

inputs in their exports.

Conversely, it is the larger consumer-oriented econ-

omies that tend to see the largest upward revisions. The

U.S., Japan, and the United Kingdom in particular see

significant increases in their shares of global trade. (See

Chart 2.) These countries’ large domestic economies

make them better able to source their inputs domestically

and thus make less use of imported inputs in exports. In

the case of the U.S. and the U.K., the fact that services

account for an above-average share of trade may also be

a factor. Since far less vertical trade occurs in services

industries, the U.S. and U.K. receive smaller downward

revisions when trade is converted to value-added terms.

although canada is characterized as a small, open econ-omy, the value-added trade figures reveal that canada is less dependent on trade than traditionally thought.

Among large economies, China is the main outlier. China

sees a significant downward revision in its share of global

trade, from 6.2 to 5.6 per cent, when the figures are con-

verted to a value-added basis. Even though the data on

which this analysis is based are from 2004, which is

early in the period in which China became more deeply

integrated into global value chains, China’s heavy use

of vertical trade is already apparent in the data. In fact,

among the 30 largest trading nations, only a handful of

small countries make more use of imported inputs in

their exports than China.

chart 1Countries Contributing Less to Global Trade*(global trade share difference between value-added and conventional, percentage points)

*among the top 30 trading nationsSource: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

BelgiumSingapore

TaiwanChinaKorea

MalaysiaThailand

IrelandSwitzerland

CanadaNetherlands

AustriaGermany

Hong KongSweden

−1.0 0−0.8 −0.6 −0.4 −0.2

chart 2Countries Contributing More to Global Trade*(global trade share difference between value-added and conventional, percentage points)

*among the top 30 trading nationsSource: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

U.S.Japan

U.K.Italy

RussiaAustralia

SpainIndia

BrazilNorwayFranceTurkey

0.0 0.4 0.8 1.2 1.6 2.0



Overall, when we examine how different countries’

openness rates change when translated to a value-added

basis, it is generally the smaller economies where the

largest revisions occur because of their inability to pro-

duce all their inputs domestically. Canada is part of this

phenomenon. However, given that Canada still has an

above-average openness rate under value-added trade,

it can still be accurately characterized as a small, open

economy. That said, the value-added trade figures reveal

that Canada is less dependent on trade than we trad-

itionally think.

WhaT aBouT canada’s larGe Trade ParTners?

The importance of Canada’s trade relationship with the

U.S. is irrefutable. Using conventional figures, Canada

and the U.S. have the largest bilateral trade relationship

in the world, with $1.8 billion in goods and services

crossing the border every day. However, when there are

multiple countries involved in global value chains, dis-

tortions begin to appear in these bilateral relationships.

Indeed, under conventional trade data, transactions are

recorded based on the last country from which a prod-

uct originated, even if that country’s contribution to the

value of the product was small.

The first briefing of this series gave an example of a chair

being produced in France but painted in the U.S. before

being imported into and sold in Canada. Conventional

trade statistics would indicate that all of the value of the

chair was created in the U.S., whereas France created the

value of the chair and the U.S. the value of the painting

services. In this case, converting trade data into value-

added terms provides a better representation of each coun-

try’s actual trade with Canada. This is because value-added

trade measures transfer the value of a product to the

countries of origin, instead of attributing all of it to

the last country through which the product transited.

Thus, converting trade data to a value-added basis is

likely to change the relative importance of our trading

partners. For example, countries that appear to be large

partners could see their prominence reduced if the prod-

ucts Canada trades with them are mostly at the final stage

of production. On the other hand, countries that are at

an earlier stage of the production chain, but do not

necessarily trade directly with Canada, could see

their share of Canadian trade increased.

For Canada, converting the trade data does alter the

relative importance of its trading partners, particularly

that of the United States. Because of the two countries’

proximity, goods often cross the border several times

during the production process, which inflates the trade

figures through multiple counting. There is thus a big

adjustment for the United States. As well, many of the

goods and services that Canada imports from the U.S.

contain value that has been created elsewhere in the world.

The U.S. remains by far Canada’s largest trading partner,

but the link is smaller when measured in value-added

terms. More precisely, the U.S. share of Canadian trade

declines by about 7 percentage points, from 69 per cent

in conventional terms to 61.8 per cent in value-added

terms. This is because vertical trade between Canada

and the U.S. is equivalent to 38.3 per cent of the con-

ventional trade flows. (See Table 2.)

The u.s. is dominant in canada’s linkages to global value chains, but china and the u.K. remain important inter-mediaries between canada and the rest of the world.

Other countries become more important trading partners

when trade is measured in value-added terms. Japan, in

particular, is a bigger trading partner than traditionally

thought: When measured in conventional terms, Japan’s

bilateral trade with Canada is smaller than China’s, but

after adjusting to a value-added basis, Japan’s share

of Canadian trade surpasses China’s by half a per-

centage point. One reason why Japan’s share of

Canadian trade increases so much is that the revision

caused by adjusting for vertical trade is minimal. Indeed,

vertical trade between Canada and Japan is only 3.8 per

cent of conventional trade, meaning that conventional

measures and value-added measures are very similar. In

comparison, more than a quarter of the trade with China

is vertical trade. Moreover, other countries in Asia see

their share of Canadian trade rise from 4.3 per cent in

conventional terms to 4.7 per cent in value-added terms.



(Figures derived from Table 2 in the appendix.) This is

consistent with the idea that China is a hub for assem-

bling final products and using parts that are produced in

surrounding countries.

The U.K., Germany, Mexico, France, and Italy are also

all among Canada’s 10 biggest trading partners and all

see their share of the Canadian trade increase when con-

verting to value-added measures. Like in the case of Japan,

Canada’s trade relationships with Germany, France,

Mexico, and Italy tend to be conventional, with only

limited vertical trade between Canada and each of these

countries. Trade between Canada and the U.K., on the

other hand, contains more vertical trade, at 23.1 per cent

of conventional trade. As with China in Asia, it appears

as though the U.K. is an assembly point between Canada

and Europe. In other words, many imports coming to

Canada from the U.K. contain value created elsewhere in

Europe, and Canadian exports to the U.K. may ultimately

end up in a third country as part of finished products.

One reason many European countries see their share of

Canadian trade increase is that the value of their exports

is embedded in products coming to Canada from other

countries. For example, auto parts produced in Germany

and shipped to a plant in the U.S. might be assembled into

a car that is then sold in Canada. Conventional trade

would count this as an export from the U.S. only, but

value-added trade will repatriate the value of the parts to

Germany. The multitude of trading countries in Europe

is another factor. If a product originates in one European

country, is transformed in a second, and is then exported

to Canada, that is considered vertical trade. However, if

these transactions occur between U.S. states before the

final sale to Canada, it is not considered vertical trade.

All in all, the analysis shows the dominance of the U.S. in

Canada’s linkages to global value chains. In fact, 85 per

cent of the vertical trade that Canada is involved with takes

place between Canada and the United States. Only two

other countries, China and the U.K., account for a sig-

nificant share of Canada’s vertical trade at 3 per cent

and 2 per cent, respectively—a finding that highlights

the tenuousness of Canada’s links to global value chains

beyond the U.S. Although the U.S. share of Canadian

trade shrinks when trade is converted from a conventional

to a value-added basis, the U.S. plays a critical role in

linking Canada with the rest of the world. Canada’s prox-

imity to the U.S., the largest economy in the world, and

the free trade agreement between the two makes this result

Table 2Share of Canadian Trade, by Country*(per cent)

share of canadian trade (%)ratio of vertical trade to

conventional trade**conventional value-added difference

U.S. 69.0 61.8 –7.2 38.3

Japan 3.0 4.2 1.2 3.8

China 3.5 3.7 0.2 26.3

U.K. 2.9 3.3 0.3 23.1

Germany 2.1 2.9 0.8 6.2

Mexico 1.5 1.9 0.5 8.8

France 1.4 1.8 0.4 9.7

Italy 1.0 1.3 0.4 4.4

Korea 1.1 1.2 0.1 27.0

Caribbean 0.9 0.8 –0.1 36.1

*top 10 trading partners **Vertical trade is the difference between conventional and value-added trade. Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.



almost inevitable. However, as this analysis shows, China

and the U.K. remain important as second-tier intermedi-

aries between Canada and the rest of the world.

In short, it appears that Canada has two types of trade

relationships. The first is with the U.S., where Canada

has a high degree of integration. The second is with the

rest of the world, where trade relations are much more

traditional and Canada has only limited involvement in

global value chains.

servIces are larGe conTrIBuTors To canadIan Trade

The conversion from conventional to value-added trade

also alters our understanding of what Canada trades.

There are two primary reasons for this. The first is that

the use of vertical trade is more developed in some indus-

tries than in others. For example, manufacturing in gen-

eral is much more prone to use global value chains than,

say, construction. However, even within manufacturing

the use of global value chains can vary widely. Global

value chains are far more common in transportation

equipment and electronics, for example, than cement

manufacturing. This is because of factors such as the

value of the product, how tradable it is, and transporta-

tion costs.

The second reason for the change in Canada’s traded

product and services mix is that many of the products

and services it trades have value from earlier stages in

the production process embedded in them. For example,

our exports of lumber and paper are not possible without

the logs produced by the forestry industry, the electricity

produced by utilities, and the transportation services

provided by railroads. As such, value-added trade gives

us a better understanding of the ancillary support struc-

ture that is necessary for Canada to be a successful

player on the world stage.

When converting the Canadian trade data to value-added

terms, manufacturing becomes far less important than

traditionally thought and the contribution of services

becomes much greater. (See Chart 3.) Because vertical

trade is most common in the manufacturing sector, elim-

inating double counting causes a much larger downward

revision in the manufacturing trade figure. At the same

time, because many services are embedded in the value

of traded goods, that value is now reattributed back to

those services industries. For example, an imported smart-

phone contains a variety of services such as an operating

system, engineering, insurance on the transactions,

financing to support its development and production, and

transportation to get it to market. All of these services

may have been produced in many countries, including

Canada. Yet conventional trade data merely record the

smartphone as an import of telecommunications equip-

ment from one country.

Overall, the services sector becomes much more important

relative to the goods-producing sector. Services exports

are about 85 per cent bigger and services imports are

about 70 per cent larger when presented in value-added

terms. As a result, services account for 40 per cent of

total Canadian value-added trade—a substantial revision

from the 16 per cent as measured by conventional meas-

ures. Conversely, the share of manufacturing in total

Canadian trade is revised down to 44 per cent from

71 per cent when estimated in value-added terms.

The increase in the importance of services to Canada’s

trade is nearly universal across the various services cat-

egories. The category “other professional services,” which

chart 3Industry Contribution to Canada’s Trade(share of total trade, per cent)

Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

Services

Utilities

Construction

Manufacturing

Raw materials and energy

Agriculture and food

0 20 40 60 80

Conventional Value-added



includes legal, accounting, engineering, and computer

support services, sees the largest upward revision, with

its share of Canada’s trade rising from 4.6 per cent on

a conventional basis to 12.3 per cent on a value-added

basis. (See Chart 4.) The categories “trade” (which

includes wholesale and retail activities) and “financial

services” also see large upward revisions in their shares

of Canadian trade. This finding reflects the fact that ser-

vices are integral to facilitating the trade in goods. In

fact, other professional services are so important under

value-added trade that they become one of the largest

components of trade, larger even than motor vehicle

manufacturing, for example.

“other professional services” are so important under value-added trade that they become one of the largest components of trade.

Another significant change is revealed for the utilities

sector, where value-added exports and value-added imports

are bigger (by 4.5 and 3.4 times, respectively) than shown

by conventional figures. Utilities’ share of total Canadian

trade is revised from 0.4 per cent to 3 per cent of total

trade. This is because utilities are major contributors to

production processes, but this value is usually embedded

in the products themselves. Thus, not only does Canada

export electricity directly, but electricity is also embed-

ded in its exports of energy-intensive products such

as aluminum.

The contribution of raw materials and energy to Canadian

trade is also revised upward by the conversion to value-

added trade, with their share of Canada’s trade rising from

6.1 per cent to 9.4 per cent. This is because the value

added by the producers of raw materials is generally

embedded in the value of the manufactured products

that Canada trades.

Oil, the most important contributor to Canada’s raw

materials trade, sees the largest upward revision in its

share of Canadian trade, with its share rising from 2.8 per

cent on a conventional basis to 4.8 per cent on a value-

added basis. This is because the conversion to value-

added repatriates the value of oil exports embedded in

manufactured products, such as refined petroleum prod-

ucts, chemicals, and plastics, to the raw materials sector.

This is also why the forestry and natural gas industries see

their shares of Canadian trade increase when converted

to a value-added basis. (See Table 3 in the appendix.)

Within manufacturing, the only industry to see a signifi-

cant increase in its share of Canadian trade is the metal

products industry. (See Chart 5.) Like many raw materials,

these products are part of other manufactured goods,

and thus value-added trade data properly capture the

value that these products add to major export categories

such as machinery and transportation equipment. At the

opposite end of the spectrum, motor vehicles and parts,

electronic equipment, and machinery and equipment are

the three industries that see their share of Canadian

trade decline the most when trade is measured in value-

added terms.

The results for motor vehicles and parts is not surprising

considering that several North American car companies

have plants on both side of the Canada-U.S. border and

have well-integrated production chains across the border.

Therefore, the conventional measures are strongly influ-

enced by the double counting of inputs that are used

within the production process. Electronic equipment

and machinery and equipment generally import a large

share of their inputs, which also artificially boosts their

overall trade figures. In Dollar Volatility: Who Should

chart 4Services Contribution to Canada’s Trade(share of total trade, per cent)


Pub. admin., defence, health, educationRecreation and other services

Other professional servicesInsurance

Financial servicesCommunication

TransportTrade

0 5 10 15




Care?,3 the Conference Board noted that, within the

manufacturing sector, the electronic product manufac-

turing industry imports more than 40 per cent of its

inputs and that only the auto assembly and machinery

manufacturing industries import a higher share of their

inputs within the manufacturing sector.

All in all, there are significant differences between

conventional trade data and value-added trade estimates

with respect to the industrial mix of Canadian trade.

Conventional trade data tend to overestimate the import-

ance of trade flows in manufactured goods to the Canadian

economy, while underestimating the importance of

many other sectors’ contribution to trade. Manufacturers

rely heavily upon the inputs provided by other sectors,

and the conventional manufacturing trade data contain

significant double counting of inputs used in cross-border

3 Poulin and Thériault, Dollar Volatility.

production. Converting the trade data to a value-added

basis recalibrates the weight of industries in the trade mix

according to their contribution to a product’s underlying

value, while eliminating double counting.

servIces are more exPosed To InTernaTIonal comPeTITIon

If services are stronger contributors to trade, it also means

that they are more open than generally thought and thus

more exposed to international competition. Indeed, when

we look at the openness rates by industry, we see that the

services sectors are generally more open than indicated by

conventional measures. However, they remain much less

exposed to trade than most goods-producing industries.

On an industry basis, the openness rate is the average of

imports and exports of an industry compared with its

output. The higher the rate is, the more of that indus-

try’s products are imported and/or the more of its pro-

duction is exported. It is, however, important to note that

openness rates are not necessarily linked to vertical

trade, because an industry could export all of its entirely

domestically produced output and have a high openness

rate without being involved in vertical trade. That said,

higher openness rates are strongly indicative of an

industry being involved in vertical trade.

services generally see their openness rate increase significantly when converting from conventional to value-added trade measures.

Part of what makes openness rates at the industry level

difficult to interpret is that imports for a particular indus-

try can consist of both competing finished products and

inputs to be used by that sector as part of its production

process. For example, imports of motor vehicles and parts

can be either a car part to be used at an assembly facility

in Canada or a finished car ready for sale. Nevertheless,

this indicator gives a strong indication of an industry’s

degree of openness and thus how exposed it is to com-

petition from international trade.

chart 5Manufacturing Contribution to Canada’s Trade(share of total trade, per cent)


Other manufacturesMachinery and equipment

Electronic equipmentOther transport equipment

Motor vehicles and partsMetal products

MetalsFerrous metals

Mineral productsChemical, rubber, plastic products

Petroleum, coal productsPaper productsWood products

Leather productsWearing apparel

TextilesFood products

0 5 10 15 20




Among the major sectors, all those related to manufac-

turing, with the exception of wood, pulp, and paper

manufacturing, have openness rates greater than 100 per

cent when measured with conventional measures. (See

Table 3.) This reflects the importance of their depend-

ence on trade, but it also suggests that they are likely

highly involved in vertical trade. When converted into

value-added measures, the openness rate falls for all

manufacturing industries. However, even when meas-

ured in value-added terms, manufacturing is still very

open and trade-dependent. Only in a handful of cases

do industries within manufacturing, such as many food

products and mineral products, have particularly low

openness rates.

Services, on the other hand, generally see their open-

ness rates increase significantly when converting from

conventional to value-added trade measures. Services

trade usually appears relatively small in the conventional

data, and thus the sector is not thought to be very open

to the trade. Professional services, for example, have an

openness rate of 12.7 per cent with conventional meas-

ures, but the rate jumps to 23.1 per cent in value-added

terms. This means professional services are much more

involved in international trade than conventionally thought,

because services are often embedded in the value of the

goods being produced, as discussed earlier. Still, even

if services industries are more open under value-added

trade, they are still far less so than most goods-producing

industries. Indeed, the major manufacturing segments

have openness rates between 46 and 93 per cent in value-

added terms, which is much more than the highest among

the services industries.

canada’s role In GloBal value chaIns

As discussed in the first briefing of this series, calculating

value-added trade provides three types of information

that is useful in analyzing trade patterns. (See Exhibit 1.)

Imported inputs used in exports and returning exports

are the two components composing vertical trade, while

domestic exports used in foreign exports is complement-

ary information that results from the calculation. Looking

at how Canada compares with competitors on each of

these components helps shed light on Canada’s role in

global value chains.

As shown in Table 4, the ratio of Canada’s vertical

trade to its total conventional trade is higher than the

world average. It is also higher than the median of the

top 30 trading countries. This suggests that Canada is

more involved in vertical trade than average. However,

the share of Canada’s domestic exports used in foreign

exports is lower than the world average and lower than

the median of the top 30 trading countries. Thus, Canada’s

involvement in vertical trade is largely through importing

inputs to produce its exports.

ImPorTed InPuTs In exPorTs Canada uses an above-average amount of imported

inputs to produce its exports. (See Chart 6.) However,

among the 30 biggest trading nations, 12 have a share of

imported inputs in exports that is higher than Canada’s.

Most are small economies where trade accounts for a

high share of GDP. (See Table 1 in the appendix.)

exhibit 1Estimating Value-Added Trade From Conventional Measures

Source: The Conference Boad of Canada.

Conventional Trade

Returningexports

Equals Value-Added Trade

Imported inputs used in exports

Domestic exports used in foreign exports

Less Vertical Trade



Smaller economies are generally less able to source

inputs domestically, so they need to import more of

their inputs.

Of those 12 countries, 7 are Asian. For top-ranking

Singapore, imported inputs account for nearly two-

thirds of the value of its exports. Malaysia, Taiwan, and

Thailand follow with nearly half their export value gen-

erated by imported inputs. Singapore and Malaysia are

examples of economies that live off vertical trade, since

their conventional trade is bigger than their GDPs.

China is the biggest economy of the group and imports

about a third of the inputs it uses in exports. China is

also the country among this group with the highest ratio

of returning exports (that is, products that are exported

and then reimported as part of something else), at 1.3 per

cent of conventional trade. All the other Asian countries

in the group have extremely low levels of returning exports,

hovering between 0.1 and 0.4 per cent. The other Asian

countries also have higher-than-average ratios of domes-

tic exports used in foreign exports. This finding supports

the notion that China is widely using other Asian coun-

tries in its supply chain to provide the inputs used in the

production of its own exports.

Other countries with a high share of import content in

exports are Belgium, Austria, Switzerland, Ireland, and

the Netherlands. These countries all have relatively small

economies, and all are more trade-intensive than Canada.

They are strongly linked to the bigger economies in

Europe, such as the U.K. and Germany. As well, these

countries are more integrated into global value chains

than Canada is, with a high percentage of their exports

Table 4Vertical Trade Indicators(per cent)

Import content of exports*

domestic exports used in foreign exports*

returning exports*

ratio of vertical trade to conventional trade

ratio of value-added trade to GdP

Canada 30.2 14.2 0.9 31.1 24.0

World 25.8 25.8 1.8 27.6 19.2

Median of top 30 trading countries 27.9 25.9 0.5 28.3 25.5

*as a share of conventional trade Note: Vertical trade is the difference between conventional and value-added trade; value-added trade is conventional trade less the import content of exports and returning exports. Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

chart 6Imported Inputs in Exports*(per cent of conventional trade)

*for selected countries among the top 30 trading nationsSource: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

U.S.Australia

RussiaJapanBrazilWorld

CanadaThailand

TaiwanBelgium

MalaysiaSingapore

0 10 20 30 40 50 60 70



subsequently re-exported to a third country. Compared

with Canada, European countries are much smaller geo-

graphically and are often more accessible by several dif-

ferent means of transportation. This reduces the costs

associated with integrating production processes and

helps explain why their share of import content in

exports is higher than Canada’s.

canada has a low level of returning of exports compared with the world average, but that is because the average is skewed upwards by a few large countries.

reTurnInG exPorTs Returning exports include exported raw materials and

intermediate inputs that are subsequently reimported back

into Canada as part of a more finished good. Canada has

a low level of returning exports compared with the world

average, but that is because the average is skewed upwards

by three countries. (See Chart 7.) In fact, Canada is

slightly above the median of the 30 top trading countries

on this measure. Still, the U.S., Germany, and Japan are

clearly different from the other countries. The U.S. in

particular stands out with returning exports equivalent

to 7 per cent of its conventional trade. Germany and

Japan follow with 2.8 per cent and 2.3 per cent, respect-

ively. Those countries are also the three largest economies

and account for a large share of global trade. These fac-

tors help explain why the global average for returning

exports is so high, even though most countries have

much lower figures.

In the case of Japan and the U.S., both have high levels

of returning exports and low import content in exports,

but high ratios of domestic exports used in foreign exports.

This suggests that their businesses use global value chains

early in the production processes. For example, com-

panies could be creating concepts and designs that they

will get assembled elsewhere for subsequent reimport

or export to other countries.

Germany, in contrast, has a much higher share of imported

inputs in its exports and a lower ratio of domestic exports

used in foreign exports. This suggests that companies in

Germany are concentrated in the final stages of the pro-

duction chain and export more finished products. Germany

is nonetheless well integrated into global value chains,

with 28.3 per cent of its trade being vertical trade. The

country’s large share of returning exports suggests that

businesses take advantage of other countries’ compara-

tive advantages to produce inputs for goods and services

consumed in Germany.

The unITed sTaTes’ neIGhBoursOne thing that distinguishes Canada from other major

trading economies is its low share of domestic exports

going into foreign exports (i.e., exports of goods and

services subsequently used as inputs by other countries

in their own exports). (See Chart 8.) Among the top 30

trading nations, Canada is second only to Mexico in

this respect. Indeed, both countries have a higher-than-

average share of import content in exports and a low

share of exports used as inputs into further exports.

The key reason for this pattern is that both countries

are closely tied to the U.S. and benefit from the North

American Free Trade Agreement. The U.S. has the low-

est degree of trade dependence among the top 30 trad-

ing nations, with value-added trade equivalent to only

9.7 per cent of GDP. When this fact is combined with

the U.S.’s high ratio of returning exports, a picture

chart 7Returning Exports*(per cent of conventional trade)


SingaporeTaiwanIreland

ThailandTurkey

CanadaFranceWorld

RussiaJapan

GermanyU.S.

0 2 4 6 8



emerges of the U.S. using other countries, such as

Canada and Mexico, to supply raw materials and to

assemble finished goods for consumption at home.

hoW are counTrIes usInG verTIcal Trade?

As noted above, how countries use vertical trade to

participate in global value chains varies widely. At one

extreme is the U.S., with the lowest import content in

exports and the highest share of returning exports among

the 30 largest trading nations. Singapore stands at the

opposite extreme, with the highest share of imported

inputs in exports and the lowest ratio of returning exports.

Chart 9 compares how the 30 largest trading nations

make use of returning exports and imported inputs in

exports. The import content in exports relative to total con-

ventional trade is mapped on the horizontal axis, and the

ratio of returning exports to total conventional trade is

mapped on the vertical axis. The results are then divided

into four quadrants using the global median figures for

returning exports and for the import content in exports.

Comparing country figures with the median points to

some interesting patterns among the different markets.

The countries in the lower right quadrant have high

import content in exports but limited returning exports.

We called them “Middlemen.” These countries tend to

be smaller economies that are more dependent on trade

and generally have limited ability to produce all the inputs

they need. As well, it appears that countries with small

domestic markets tend to make limited use of returning

exports. This may be because their small size means there

is not much benefit in local companies using global value

chains to supply the domestic market. However, a more

likely reason is that large multinationals—which are sig-

nificant contributors to the development of global value

chains4—are less likely to be headquartered in smaller

countries. We find a strong correlation between the size

of a country and the number of large multinationals head-

quartered there. (See Chart 10.) Thus, the importance

of returning exports to a country may have more to do

with the presence of locally headquartered multinational

companies than the size of its economy. Regardless, the

end result is that countries in the “Middlemen” quadrant

tend to be stepping stones along global value chains.

The upper left quadrant in Chart 9 shows countries that

have a high share of returning exports but limited import

content in exports. These “End Markets” are generally

larger developed countries, although Russia is a notable

exception. Russia is a large exporter of raw materials,

which it later reimports as processed consumption

goods—reflecting a more traditional import-export

approach than that embodied in integrated value chains.

These results suggest there is a trade-off between the

import content in exports and returning exports: As econ-

omies grow, they move up the curve, possibly because

they are better able to diversify their economies and

produce more of the necessary inputs domestically.

So what about countries that do not fall into the “End

Market” or “Middlemen” categories? Chart 9 shows

several countries with low levels of import content in

exports and low levels of returning exports. These coun-

tries, among them Turkey and India, appear in the lower

left quadrant and are called “Late Adopters.” Among

4 Lanz and Miroudot, Intra-Firm Trade.

chart 8Domestic Exports in Foreign Exports*(per cent of conventional trade)


MexicoCanadaTurkeySpain

Hong KongWorld

TaiwanSingaporeMalaysia

NorwayRussia

0 10 20 30 40



the 30 largest trading countries, these are the countries

least involved in global value chains. Their trade rela-

tionships are likely to be more conventional, based on

exporting and importing goods and services that contain

limited content from other countries.

The final quadrant, on the upper right, shows countries

where returning exports and the import content of exports

are both high. These are the “Global Integrators.” China

is the only country that is well within this quadrant,

consistent with its deepening integration in global value

chains and evolution as an important end market in itself.

Canada is also a “Global Integrator,” although to a lesser

degree than China. This is because Canada uses more

imported inputs in its exports than many of the larger

economies, largely because U.S. companies use Canada

as part of their production chain for products that will

be sold in the United States. Thus, even if Canada

seems globally integrated, its proximity to and depend-

ence on the U.S. market may be skewing the overall

picture depicted by the data—with most of the integra-

tion being with the U.S. only.

chart 9Top Trading Countries by Market Type(logarithmic scale, per cent; per cent)

Note: The vertical axis is displayed on a logarithmic scale to make it easier to see the variations in returning exports across countries, some of which have a very low ratio.Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

F

F

F

FF

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

F

0.1

0 10 20 30 40 50 60 70

1

10

FRetu

rnin

g ex

ports

(log

arith

mic

scale

, per

cent

)

Import content of exports (per cent)

Global IntegratorsEnd Markets

Late Adopters Middlemen

Canada

Ireland

Hong KongPoland

Switzerland

Turkey

India

NorwayBrazil

Denmark

TaiwanThailand

KoreaAustriaNetherlands

Sweden

Malayasia

Belgium

Singapore

China

U.S.

Japan Germany

France

Italy

Spain

MexicoAustralia

U.K.Russia



acTIons and ImPlIcaTIons For BusIness

The preceding analysis was conducted at the country

level. However, value-added concepts can also provide

some valuable insights for Canadian firms—the entities

that are actually engaged in trade. These insights include:

� look beyond the united states. Canada’s trade is dom-

inated by the U.S., and this is particularly true when

it comes to Canada’s involvement in global value

chains. By failing to diversify trade flows away

from the U.S., Canada is missing opportunities.

To some extent this diversification is beginning

to occur, but the process should be accelerated

to capture additional benefits.

� Know whom you are actually trading with. Global value

chains are complex, as evidenced by the multi-country

and multi-industry nature of trade. Knowing your

customer’s customers or your supplier’s suppliers

may lead to new opportunities and the identification

of unexpected risks. For example, some businesses

were surprised by the supply chain disruptions caused

by the 2011 earthquake and tsunami in Japan; they

had never examined the true end-supplier of key

inputs and therefore never fully understood the

business risks.

� make global value chains work for you. Canada’s low

ratio of returning exports suggests that domestic com-

panies are making limited use of global value chains

to create products that will ultimately be used for

domestic consumption. Expanding the rate of returning

exports is one way that companies can use the strong

dollar to their advantage.

acTIons and ImPlIcaTIons For GovernmenT

As the makers and implementers of economic policy

within Canada, and as the gatekeepers for Canada’s for-

eign trade and investment flows, Canadian policy-makers

can draw some important lessons from the value-added

trade data. These lessons include that it is important to:

� recognize the multi-country nature of trade. Since

products and services may cross multiple borders

before reaching their final destination, one key to

Canada’s trade success may be facilitating trade not

just with bilateral partners, but also between bilateral

partners and other countries. For example, the suc-

cess of Canada’s wood exports is partly linked to

the success of U.S. furniture manufacturers in

accessing their own export markets.

� recognize that trade is a multi-industry effort. Trade-

oriented industries need competitive services pro-

viders, utilities, and other input-providing industries,

as well as efficient public infrastructure, if they are

to be successful. Policy-makers should ensure that

adequate sustained investment is made in these sup-

porting sectors and that restrictions on the availability

and efficiency of needed inputs are kept to a minimum.

chart 10Multinationals and Economy Size*(per cent of global total)

*for selected countries Note: Fortune Global 500 rankings data are based on 2005 figures to make them as comparable as possible with the value-added trade data, which are from 2004.Source: The Conference Board of Canada; Fortune Global 500.

NetherlandsBrazil

AustraliaMexico

IndiaKorea

CanadaSpain

ItalyChina

FranceU.K.

GermanyJapan

U.S.

0 10 20 30 40

Share of world output

Share of Global Fortune 500 Firms



� devote special attention to trade-dependent industries.

Industries with high openness rates and use of vertical

trade are major contributors to Canadian trade. When

considering further reductions in trade barriers, policy-

makers should accord these industries a high priority.

Such priority setting will benefit not only these indus-

tries, but also all of the ancillary support industries

that contribute to trade.

� strengthen linkages to global value chains beyond the

united states. The Canada–U.S. relationship shows

that facilitating trade helps the integration of Canadian

firms into global value chains and spurs overall trade

and investment. While maintaining this relationship,

policy-makers should also work to help Canadian

businesses develop global value chain links with

other countries as well.

� continue to pursue free trade agreements. Given the

increased importance of many countries to Canadian

trade in value-added terms, reducing trade barriers

by negotiating additional free trade agreements, such

as the one currently being pursued with the European

Union, will pay dividends for many industrial sectors.

conclusIon

Vertical trade is a growing phenomenon, as companies

increasingly take advantage of each country’s strengths

in order to increase their overall efficiency. Thanks to

the value-added trade methodology, we have a better

understanding of how Canada is involved in integrated

global value chains. This briefing has shown that Canada’s

linkages to global value chains are mostly through the

United States. As well, it has revealed how the nature of

the U.S. economy, and its dominance of Canadian trade,

has implications for our understanding of how Canada

trades with the rest of the world. For example, few of

Canada’s exports are subsequently re-exported to a third

country or return to Canada, because the vast majority

of Canada’s exports to the U.S. remain there to be con-

sumed domestically. Other major exporters of raw

materials, such as Australia and Russia, whose major

markets are Asia and Europe respectively, see far more

of their domestic exports used in foreign exports, because

their primary customers usually import the materials to

modify them and export them later on.

A large share of vertical trade between two countries—

reflecting highly integrated value chains—is usually a

desirable thing. For example, Canada is highly integrated

with the U.S., and even though trade volumes are smaller

in value-added terms than in conventional terms, it is

clear that the trade relationships are deeply established

and mutually beneficial to both countries. The question

is, would trade between Canada and the U.S., or Canada

and the U.K., be as large if the value chains were not as

integrated? The answer is probably not. Further, because

Japan, France, Germany, Mexico, and Italy are large

trading partners for Canada but also have small shares

of vertical trade, Canada could potentially benefit from

increased integration with those countries. Using Canada’s

strengths to improve the efficiency of companies located

in those countries and vice-versa would create a win-

win situation.

even though trade volumes between canada and the u.s. are smaller in value-added terms than in conventional terms, it is clear that the trade relationships are deeply established and mutually beneficial to both countries.

Another outcome of the value-added trade research is a

better understanding of the interconnectedness between

Canada’s services industries and the more export-oriented

manufacturing industries. This means that, indirectly,

Canada’s services industries are more trade-dependent

than we traditionally think. This is particularly true of the

financial and other professional services industries. It also

means that these industries may be more open to inter-

national competition and expansion in the coming years.



The value-added trade research also tells us that Canada’s

success in global markets will require a suite of ancil-

lary supports. These include high-value business ser-

vices but also things such as transportation services and

infrastructure, and sustainable development of our natural

resources, including our forest and agricultural resour-

ces, mineral wealth, and fresh water. All of these are

inputs into what we traditionally think of as our exports.

The final briefing in this series of three will compare

and contrast Canada’s comparative advantages in inter-

national trade in both conventional and value-added terms.

It is expected that the results of this analysis will differ

depending on whether conventional or value-added trade

data are used, with the value-added data helping to iden-

tify areas where Canada has competitive strengths and

areas where its performance could be improved. In the

end, the analysis should help Canadian policy-makers

develop trade strategies that leverage those strengths,

by focusing on the bilateral relationships that appear to

offer the greatest potential for further integration. This

is how Canada will position itself to compete effect-

ively in tomorrow’s global economy.

BIBlIoGraPhy

Armstrong, M. Adding Value to Trade Measures:

An Introduction to Value-Added Trade. Ottawa: The

Conference Board of Canada, 2012.

Daudin, G.C. “Who Produces for Whom in the World

Economy?” Canadian Journal of Economics 44, no. 4

(November 2011): 1403–37.

Goldfarb, D., and K. Beckman. Canada’s Changing

Role in Global Supply Chains. Ottawa: The Conference

Board of Canada, 2007.

Koopman, R., W. Powers, Z. Wang, and S.-J. Wei. Give

Credit Where Credit Is Due: Tracing Value Added in

Global Production Chains. NBER Working Paper no.

16426, National Bureau of Economic Research,

September 2010.

Lanz, R., and S. Miroudot. Intra-Firm Trade: Patterns,

Determinants and Policy Implications. OECD Trade

Policy Working Paper no. 114, Organisation for

Economic Co-operation and Development, 2011.

http://dx.doi.org/10.1787/5kg9p39lrwnn-en.

Poulin, V., and L. Thériault. Dollar Volatility: Who

Should Care? Ottawa: The Conference Board of

Canada, 2010.

United Nations Commodity Trade Statistics (UN

Comtrade). Country profiles. http://comtrade.un.org/

db/mr/rfReportersList.aspx.

http://dx.doi.org/10.1787/5kg9p39lrwnn-en

http://comtrade.un.org/db/mr/rfReportersList.aspx

http://comtrade.un.org/db/mr/rfReportersList.aspx


aPPendIx a

Supplementary Trade Data

Table 1Top 30 Trading Countries: Components of Vertical Trade, by Country(US$ billions; per cent)

Total trade (US$ billions)


domestic exports in foreign exports*

returning exports*

Total vertical trade*

ratio of con-ventional trade

to GdP (%)

ratio of value-added trade to

GdP (%)

World 20,779 25.8 25.8 1.8 27.6 26.5 19.2

U.S. 2,726 11.8 28.2 7.0 18.8 11.9 9.7

Germany 1,784 25.5 26.1 2.8 28.3 34.9 25.0

China 1,279 32.6 21.9 1.3 33.9 38.6 25.5

Japan 1,189 14.2 29.2 2.3 16.5 13.2 11.0

U.K. 1,038 16.8 26.1 1.6 18.4 26.3 21.5

France 1,003 24.8 24.6 1.6 26.4 26.6 19.6

Italy 809 21.7 23.0 1.2 22.8 25.9 20.0

Canada 641 30.2 14.2 0.9 31.1 34.9 24.0

Belgium 582 49.7 25.1 0.4 50.1 89.0 44.4

South Korea 563 41.1 28.8 0.4 41.5 42.4 24.8

Spain 545 22.7 21.6 0.8 23.5 27.8 21.2

Netherlands 461 31.2 25.8 0.5 31.8 42.4 28.9

Taiwan 400 49.2 31.9 0.2 49.4 66.7 33.8

Mexico 380 27.5 13.1 0.6 28.0 31.0 22.3

Singapore 327 65.4 31.9 0.1 65.6 164.6 56.7

Switzerland 306 37.3 25.8 0.3 37.6 44.3 27.6

Russia 293 12.9 38.6 1.8 14.6 29.5 25.2

Austria 287 32.4 25.9 0.4 32.8 53.4 35.9

Sweden 275 30.1 25.4 0.5 30.6 43.0 29.9

*as a per cent of conventional trade Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada. (continued . . . )



Table 1 cont’dTop 30 Trading Countries: Components of Vertical Trade, by Country(US$ billions; per cent)

Total trade (US$ billions)


domestic exports in foreign exports*

returning exports*

Total vertical trade*

ratio of con-ventional trade

to GdP (%)

ratio of value-added trade to

GdP (%)

Ireland 269 39.9 26.7 0.2 40.1 78.1 46.8

Malaysia 261 51.1 32.7 0.3 51.4 114.7 55.7

Hong Kong 240 31.8 21.6 0.3 32.1 73.7 50.0

Australia 231 12.8 27.8 0.6 13.4 19.0 16.4

India 231 17.8 21.8 0.3 18.2 18.7 15.3

Thailand 224 45.1 27.0 0.2 45.3 70.8 38.7

Brazil 196 16.4 22.7 0.5 16.9 17.2 14.3

Denmark 190 28.0 23.7 0.3 28.3 43.3 31.1

Turkey 182 22.2 20.5 0.2 22.5 31.9 24.7

Norway 172 18.4 33.4 0.4 18.8 34.9 28.3

Poland 168 27.9 26.4 0.3 28.2 39.2 28.2

*as a per cent of conventional trade Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

Table 2Canadian Bilateral Trade, by Country and Measure(US$ billions; per cent)

exports (US$ billions) Imports (US$ billions) share of canadian trade (%)share of canadian vertical trade (%)conventional value-added conventional value-added conventional value-added

U.S. 243,047 153,874 199,314 119,065 69.0 61.8 85.0

Japan 8,646 8,133 10,508 10,301 3.0 4.2 0.4

China 7,474 5,721 14,975 10,832 3.5 3.7 3.0

U.K. 9,985 7,588 8,919 6,941 2.9 3.3 2.2

Germany 5,438 5,573 8,156 7,176 2.1 2.9 0.4

Mexico 3,431 3,802 5,898 4,706 1.5 1.9 0.4

France 3,850 3,876 4,915 4,040 1.4 1.8 0.4

Rest of Western Asia 3,043 2,931 2,948 3,530 0.9 1.5 –0.2

Italy 2,230 2,521 3,866 3,308 1.0 1.3 0.1

Korea 2,638 1,879 4,437 3,284 1.1 1.2 1.0

Caribbean 2,808 1,969 2,679 1,536 0.9 0.8 1.0

Australia 1,722 1,688 1,741 1,388 0.5 0.7 0.2

Taiwan 1,594 1,004 2,477 1,996 0.6 0.7 0.5

Spain 1,564 1,746 1,288 1,232 0.4 0.7 –0.1

*European Free Trade Association Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada. (continued . . . )



Table 2 cont’dCanadian Bilateral Trade, by Country and Measure(US$ billions; per cent)


Netherlands 1,414 1,363 1,634 1,426 0.5 0.6 0.1

India 1,236 1,255 1,758 1,506 0.5 0.6 0.1

Brazil 1,222 1,105 1,827 1,624 0.5 0.6 0.2

Norway 1,504 717 2,744 1,943 0.7 0.6 0.8

Hong Kong 1,390 973 2,149 1,644 0.6 0.6 0.5

Switzerland 1,088 903 2,363 1,714 0.5 0.6 0.4

Russia 825 895 890 1,404 0.3 0.5 –0.3

Sweden 1,084 932 1,827 1,367 0.5 0.5 0.3

Belgium 1,625 1,180 1,533 1,017 0.5 0.5 0.5

Thailand 821 592 1,554 1,148 0.4 0.4 0.3

Malaysia 868 513 1,305 1,218 0.3 0.4 0.2

Ireland 997 592 1,220 1,131 0.3 0.4 0.2

Austria 1,025 907 1,024 785 0.3 0.4 0.2

Indonesia 997 800 783 802 0.3 0.4 0.1

Singapore 1,387 674 1,496 879 0.4 0.4 0.7

Denmark 582 546 1,055 855 0.3 0.3 0.1

Venezuela 552 429 875 871 0.2 0.3 0.1

Rest of North Africa 496 448 963 764 0.2 0.3 0.1

South Africa 474 468 701 653 0.2 0.3 0.0

Turkey 487 605 561 505 0.2 0.3 0.0

Poland 482 514 623 509 0.2 0.2 0.0

Finland 446 380 755 542 0.2 0.2 0.1

Philippines 420 338 790 544 0.2 0.2 0.2

Chile 420 319 941 553 0.2 0.2 0.2

Greece 427 494 288 318 0.1 0.2 0.0

New Zealand 436 353 531 435 0.2 0.2 0.1

Colombia 435 401 301 342 0.1 0.2 0.0

Iran 332 365 108 279 0.1 0.1 –0.1

Pakistan 441 405 238 227 0.1 0.1 0.0

Argentina 245 253 355 359 0.1 0.1 0.0

Nigeria 178 219 107 370 0.0 0.1 –0.2

Portugal 240 284 339 284 0.1 0.1 0.0

Egypt 242 239 382 303 0.1 0.1 0.0

Peru 204 214 387 311 0.1 0.1 0.0




Table 2 cont’d Canadian Bilateral Trade, by Country and Measure(US$ billions; per cent)


Vietnam 226 219 436 271 0.1 0.1 0.1

Czech Republic 233 237 244 232 0.1 0.1 0.0

Rest of Western Africa 329 301 176 155 0.1 0.1 0.0

Hungary 254 255 216 200 0.1 0.1 0.0

Ukraine 216 194 233 221 0.1 0.1 0.0

Morocco 234 218 225 196 0.1 0.1 0.0

Bangladesh 140 135 357 239 0.1 0.1 0.1

Romania 203 205 191 160 0.1 0.1 0.0

Rest of Central America 126 186 194 167 0.0 0.1 0.0

Central Africa 128 125 184 216 0.0 0.1 0.0

Rest of Eastern Asia 115 87 336 252 0.1 0.1 0.1

Ecuador 183 172 111 155 0.0 0.1 0.0

Guatemala 143 183 159 134 0.0 0.1 0.0

Rest of Eastern Africa 210 204 97 96 0.0 0.1 0.0

Croatia 103 113 240 184 0.1 0.1 0.0

Kazakhstan 197 154 85 142 0.0 0.1 0.0

Luxembourg 253 159 194 107 0.1 0.1 0.1

South Central Africa 112 120 21 125 0.0 0.1 –0.1

Bulgaria 126 106 169 114 0.0 0.0 0.0

Rest of Europe 111 139 95 80 0.0 0.0 0.0

Rest of Oceania 143 124 113 87 0.0 0.0 0.0

Costa Rica 99 99 110 111 0.0 0.0 0.0

Slovenia 120 96 121 103 0.0 0.0 0.0

Tunisia 79 78 100 88 0.0 0.0 0.0

Cyprus 68 64 131 103 0.0 0.0 0.0

Slovakia 59 66 106 91 0.0 0.0 0.0

Rest of EFTA* 132 95 82 63 0.0 0.0 0.0

Sri Lanka 79 78 115 74 0.0 0.0 0.0

Lithuania 61 68 151 81 0.0 0.0 0.0

Rest of former Soviet Union 59 59 68 81 0.0 0.0 0.0

Uruguay 47 43 128 90 0.0 0.0 0.0




Table 2 cont’d Canadian Bilateral Trade, by Country and Measure(US$ billions; per cent)


Rest of South America 42 35 273 83 0.0 0.0 0.1

Estonia 48 40 81 56 0.0 0.0 0.0

Latvia 56 52 50 40 0.0 0.0 0.0

Rest of North America 88 78 20 10 0.0 0.0 0.0

Belarus 43 40 56 48 0.0 0.0 0.0

Rest of South Asia 45 49 45 37 0.0 0.0 0.0

Cambodia 12 12 129 73 0.0 0.0 0.0

Azerbaijan 56 64 12 21 0.0 0.0 0.0

Malta 32 30 60 53 0.0 0.0 0.0

Rest of Southern African Customs Union 27 23 70 57 0.0 0.0 0.0

Rest of Southeast Asia 22 26 36 53 0.0 0.0 0.0

Tanzania 51 48 39 27 0.0 0.0 0.0

Panama 21 28 50 46 0.0 0.0 0.0

Paraguay 13 23 51 45 0.0 0.0 0.0

Nicaragua 27 33 52 30 0.0 0.0 0.0

Mauritius 27 23 48 39 0.0 0.0 0.0

Botswana 28 26 36 33 0.0 0.0 0.0

Bolivia 30 31 30 27 0.0 0.0 0.0

Ethiopia 33 39 25 18 0.0 0.0 0.0

Albania 29 31 29 23 0.0 0.0 0.0

Senegal 42 40 16 14 0.0 0.0 0.0

Uganda 25 24 18 18 0.0 0.0 0.0

Mozambique 27 23 14 14 0.0 0.0 0.0

Madagascar 13 12 29 25 0.0 0.0 0.0

Georgia 17 21 20 14 0.0 0.0 0.0

Zambia 20 17 4 14 0.0 0.0 0.0

Zimbabwe 14 12 8 12 0.0 0.0 0.0

Rest of Eastern Europe 13 14 12 8 0.0 0.0 0.0

Armenia 11 15 8 7 0.0 0.0 0.0

Kyrgyzstan 12 11 5 5 0.0 0.0 0.0

Laos 2 5 11 9 0.0 0.0 0.0

Malawi 7 8 4 4 0.0 0.0 0.0

Total 328,010 228,300 313,059 213,349

*European Free Trade Association Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.



Table 3Canadian Trade Indicators by Industry(per cent)

openness rate* share of canadian trade

conventional value-added conventional value-added variation of trade**

Wheat 68 41 0.5 0.4 –40

Cereal grains 73 50 0.1 0.1 –32

Vegetables, fruit, nuts 214 140 0.8 0.7 –35

Oil seeds 84 57 0.3 0.3 –32

Crops 47 49 0.2 0.4 6

Cattle, sheep, goats, horses 9 28 0.0 0.1 227

Animal products 57 39 0.2 0.2 –33

Forestry 8 38 0.2 1.0 355

Fishing 54 42 0.2 0.2 –21

Coal 71 76 0.2 0.4 8

Oil 46 55 2.8 4.8 19

Gas 42 41 2.1 2.9 –3

Minerals 62 54 1.0 1.3 –13

Meat 39 17 0.4 0.2 –55

Meat products 83 31 0.5 0.3 –62

Vegetable oils and fats 120 36 0.3 0.1 –70

Dairy products 16 8 0.1 0.1 –46

Sugar 56 31 0.1 0.1 –44

Food products 74 33 2.3 1.5 –55

Beverages and tobacco products 32 20 0.5 0.5 –38

Textiles 155 90 1.3 1.1 –42

Wearing apparel 136 51 0.9 0.5 –63

Leather products 399 165 0.4 0.2 –59

Wood products 110 49 4.3 2.8 –55

Paper products, publishing 71 44 4.2 3.9 –37

Petroleum, coal products 145 43 1.3 0.6 –70

Chemical, rubber, plastic products 144 73 10.1 7.4 –49

Mineral products 51 36 0.9 0.9 –30

Ferrous metals 104 77 1.6 1.8 –26

Metals 207 70 3.8 1.9 –66

*Openness rate is: (exports+imports)/2/GDP*100. **Variation of trade is: ((VA exports+VA imports)/(standard exports+ standard imports)-1)*100. Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada. (continued . . . )



Table 3 cont’dCanadian Trade Indicators by Industry(per cent)

openness rate* share of canadian trade

conventional value-added conventional value-added variation of trade**

Metal products 61 54 2.1 2.7 –13

Motor vehicles and parts 289 69 18.8 6.5 –76

Transport equipment 157 65 3.1 1.9 –59

Electronic equipment 343 116 5.6 2.7 –66

Machinery and equipment 213 100 11.8 8.0 –53

Other manufacturing 76 39 1.1 0.8 –48

Electricity 6 28 0.4 2.6 361

Gas manufacture, distribution 3 38 0.0 0.3 1,058

Water 10 90 0.0 0.1 846

Construction 0 4 0.1 0.9 824

Trade 3 14 1.0 7.5 391

Transport 45 43 4.4 6.0 –5

Communication 9 16 0.7 1.8 80

Financial services 6 20 0.8 3.7 224

Insurance 36 27 1.3 1.4 –25

Other professional services 13 24 4.6 12.3 86

Recreation and other services 25 17 1.3 1.3 –30

Pub. admin., defence, health, education 2 3 1.3 2.5 34

Total 35 24 100.0 100.0 –31

*Openness rate is: (exports+imports)/2/GDP*100.**Variation of trade is: ((VA exports+VA imports)/(standard exports+ standard imports)-1)*100. Source: Value-added trade database by OFCE calculation, based on GTAP input–output and trade data; The Conference Board of Canada.

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Adding Value to Trade Measures: Understanding Canada’s Role in Global Value Chains

by Maxim Armstrong and Michael Burt

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aBouT The InTernaTIonal Trade and InvesTmenT cenTreThe International Trade and Investment Centre aims to help Canadian leaders better understand what global economic dynamics—such as global and regional supply chains—mean for public policies and business strategies. The Centre brings together business and government leaders in an off-the-record forum to discuss successful trade and investment strategies. The Centre’s independent, evidence-based reports propose effective policy and business solutions for improving Canada’s trade and investment performance.

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