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Upstream export pattern helps increase total value added: report

All News 12:54 January 15, 2019

SEOUL, Jan. 15 (Yonhap) -- Countries that export intermediate goods to a third party nation through global value chains enjoy a higher share of the total value added, a report said Tuesday.

In the network of trade links across countries, exports of raw materials or intermediate goods create additional value through crossing international borders and being put into the next stage of production, the findings said.

Global value chains involve both 'upstream' and 'downstream' activities. An upstream supplier exports intermediate goods such as components to a downstream country, which assembles parts to export a final product.

Based on value-added terms, South Korea's share in the world's total exports of manufacturing goods ranked eighth out of 61 surveyed countries. Asia's fourth-largest economy, meanwhile, is the 10th biggest exporter in terms of gross exports.

"At the aggregate level, countries located upstream are associated with a higher share of total value added," said Eum Ji-hyun, one of three authors of the report. "By sector, the positive effect of participating in global value chains through upstream activities is apparent in the automotive industry."

The United States, Germany and Japan have a clear edge in the car sector, as their auto parts and other technologies are imported by other countries to create additional value.

On the other hand, benefits of downstream activities increase in the electronics industry, such as refrigerator and washer manufacturing.

The author said it is advantageous for a country to import cheaper components to produce electronic devices and sell them at higher prices abroad.

She said South Korea is considered an upstream country in the automotive industry, while it is positioned downstream in the electronics sector.

Upstream export pattern helps increase total value added: report - 1


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