Analyzing the Value-Added Trade of Korea under Global Value Chain

Abstract

With the increase in the volume of trade, countries became more interdependent to each other. Especially, various factors, such as reduced transportation costs and free trade agreements, have led the development and expansion of Global Value Chain. Accordingly, production process is more verticalized and fragmented.

Along with this change, there has been increased interest toward the concept of Value-Added. Series of researches highlight the importance in considering the value-added by presenting overstatement of trade data and revealing the indirect trade relationships between countries. In this sense, analyzing the value-added trade enables complementary view that could not be fully captured by traditional gross statistics.

On this ground, the foregoing discussion in this paper is to approach the trade of Korea in value-added perspective. Based on the Trade in Value-Added Database that OECD and WTO jointly provide, the present study attempts to explore the export and import of Korea in various perspective. Decomposition of export and foreign final demand, revisited trade balance and comparison of them with gross trade data would provide new implications on trade of Korea. Given the above, the significance of the value-added approach to trade would be emphasized.