european commission enterprise and industry ‹#› trade in intermediate products and eu...

European CommissionEnterprise and Industry

1

Trade in intermediate products and EU

manufacturing supply chains


Budapest, 25 January 2011


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Trade in intermediates – the study

• Context

• Patterns of EU trade in intermediates

• Supply chains

• Case study


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Context

• What are intermediates?

• Intermediate trade and globalisation


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Intermediate products

• Products, parts and components, used for production of a final product.

• Directs inputs: parts and components used in the final products.

• Indirect inputs: some parts and components consist of other inputs which thus are used indirectly.

• Many goods, services, firms and countries involved in the process of a final product.


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Intermediate trade and globalisation

• Increased globalisation• Fragmentisation of production• Location of production globally

according to comparative advantages.• Outsourcing-offshoring and Cross-

border networks• Global value chains• Intra-firm trade


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Patterns of EU trade in intermediate products

• Overview of EU27 intermediate trade

• EU27 exports and imports

• Geographical patterns


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Overview of EU27 intermediate tradePercent of total EU trade in 2008

Exports Imports

Intermediates 51 54

Consumer goods 22 23

Capital goods 20 18

Mixed categories (N.E.C)

7 5


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EU27 trade in intermediates in 2008 (%) and 1999-2008 (percentage points)

Imports Exports

EU15 61 (-4.5) 58 (-5)

EU12 9 (3.9) 10 (3.9)

Advanced OECD

11 (-5.3) 12 (-3.4)

ASIA 3 (-1) 3 (-0.5)

BRIC 9 (5) 6 (3.1)

ROW 7 (1.9) 11 (2.1)


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High technology industries

RoW

EU-15

EU-12

BRICS

ASIA

AOECD

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-15 -10 -5 0 5 10 15 20

Changes in market shares

Cha

nges

in u

nit v

alue

ratio

s


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Supply chains

• Manufacturing

• Services

• Changes over time


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Imported to domestic inputs in manufacturing 1995 and 2005 (%)

0

10

20

30

40

50

60

70

80

IE EE SK HU SI NL AT SE DK FI ES DE IT FR

%

1995 2005


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Imported to domestic inputs in services 1995 and 2005 (%)

0

5

10

15

20

25

30

35

40

IE DK EE NL SI HU FI SE AT SK DE ES FR IT

%

1995 2005


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Imported intermediates by industry

• Manufacturing: Highest shares of imported intermediates in high-tech, 55%

• Hungary, Ireland, Slovenia, Slovakia display high shares in all tech categories

• Services: highest shares in transport services, 26%

• Ireland, Denmark and Estonia above average all services.


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Case Study – Who captures the value of the mobile phone?

• Stylised picture of the supply chain

• Breakdown of value by parts of the value chain

• Breakdown of value by regions


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The vertical supply chain of a mobile phone

Firm

Distributors

Pure component suppliers Big

retailers

Smaller retailers

Sub-assembliers Consumer

Engines’ final assembly

Assembly to

order

Components manufactured by sub-assembliers

Material providers, mines,concentrating plants

Sub-componentsuppliers


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Software and other companies selling licenses

3 %

Suppliers of material inputs

11 %

Nokia50 %

Distributor3 %

Retailer11 %

Unaccountable inputs

3 %

Vendors of vendors

19 %

• The brand owner, captures a half of the total value.

• The distribution channel creates 14% of the total value added.

• Suppliers of material inputs account for 11% of the total value added.

The value added breakdown by participants in the phone’s value chain


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EU-27

ASIA

OTHER COUNTRIES

NORTH AMERICA

55%55%

18%18%17%17%

11%11%

• On average, overall 55% of the value added is captured in EU-27.

• Even in the case of final assembly in China and final sales in the U.S, EU-27 cap-tures 51% of the value added.

• In the case when the device was assembled and sold in Europe, the share of Europe rises to 68%.

The phone’s value added breakdown by regions


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Thank you

• For your attention.

european commission enterprise and industry ‹#› trade in intermediate products and eu...

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