'Made in China' - How Does It Affect Our Understanding of Global Market Shares?

Abstract

We propose a comprehensive decomposition of changes in a country’s global market shares that accounts for the value added content of trade. We perform the analysis by combining two datasets – disaggregated trade data from UN Comtrade with internationally integrated Supply and Use Tables from the WIOD. The inclusion of international fragmentation alters the underlying story behind changes in market shares. The ongoing global outsourcing affects market shares directly by shifting production from G7 to BRIC countries. Moreover, accounting for the providers of the value added alters the balance between price and non-price drivers of market shares. Changes in relative quality of countries’ exports are often due to the use of intermediate inputs. For instance, the seemingly improved relative quality of BRIC export goods largely arose from intermediate inputs rather than from improvements in the quality of domestic production. In most cases, the dynamics of the value- added market shares is dominated by price factors.

Keywords: BRIC; China; fragmentation; G7; non-price factors; value added content of trade

JEL Classification: C43, F12, F15, L15, O47