Trade in Intangibles and A Global Value Chain-based View of International Trade and Global Imbalances (Xiaolan Fu)
This paper aims to develop a framework for the measurement of global trade that integrates trade-in-intangibles and trade-in-goods and services in the context of globalisation, and applies it for the analysis of global trade imbalance. Through in-depth discussions of the five modes through which trade-in-tangibles are carried out, it develops an integrated framework from the perspective of global value chains. Applying this framework to the estimation of trade imbalance of the U.S., its overall trade deficit reduces nearly half of its size from USD750 billion to USD396 billion in 2016 with a cautious adjustment without taking into account the income from trade-in-intangibles in most of the U.S. firms accrued through outsourcing and collaboration. It argues that the global trade imbalance and policy responses to solve this should be discussed using a framework that fully incorporates different types of trade activities in the 21st century as its basis. The fragmented global production finely orchestrated by MNEs implies that it is impossible for one single country involved in the GVCs to achieve high value-added per capita and mass employment at the same time. This is a new paradox of globalisation. Re-distribution of the often hidden or shifted income from the entities who gained a lot from the trade in intangibles to the rest of the society is crucial to reducing the inequalities. Tax avoidance by shifting these benefits abroad should be curbed.