Adding Value to Trade Measures: An Introduction to Value-Added Trade

The emergence of global value chains is greatly affecting today’s trade patterns, and a clear understanding of those patterns is necessary to make informed political and business decisions. However, conventional import-export data can distort the “real” trade picture when countries are involved in vertical trade. To address this problem in a Canadian context, the Conference Board explores the concept of value-added trade, a complementary measure to help understand today’s trade flows.

The purpose of this briefing is to set out the theoretical and methodological basis of the Board’s research on value-added trade. It outlines three striking results from the analysis that challenge conventional wisdom. These are that Canada is less trade-dependant, has a smaller trade relationship with the United States, and shows a larger trade contribution from services than conventionally thought. Two future briefings will provide more detail on what the analysis reveals about Canada’s trade mix and trade relationships and about the country’s comparative advantage and competitiveness.