Trade in Value Added (TiVA)

Definition of 'Trade in Value Added (TiVA)'


A statistical method used to estimate the sources of value added when producing goods and services for export and import. “Trade in Value Added” (TiVA) traces the value added by each industry and country in the production chain to the final export, and allocates the value added to these source industries and countries. TiVA recognizes that exports in today’s globalized economy rely on global value chains (GVCs), which use intermediate items imported from various industries in a number of countries.

Investopedia explains 'Trade in Value Added (TiVA)'




Traditional trade statistics record gross flows of goods and services every single time they cross a border. This creates a “double counting” or “multiple counting” problem. For instance, a traded intermediate item used as an input for an export may be counted several times in trade figures. The TiVA approach avoids this double counting issue by accounting for the net trade flow between countries.

For example, a cellphone manufactured in China and exported from that nation may need several components such as memory chips, touch screen and camera from overseas companies located in Korea, Taiwan and the U.S. These overseas companies would in turn need intermediate inputs such as electronic components and integrated circuits imported from other nations to produce the cellphone components that will be exported to the Chinese manufacturer. The TiVA method would allocate the value added by each of these companies involved in the manufacture of the final export, the cellphone in this instance.

The TiVA approach can unearth value-added figures that are quite startling. For example, since Apple’s ubiquitous iPhone is manufactured in China, it would be logical to assume that every iPhone exported from China earns that nation a handsome profit. But that’s hardly the case. An analysis in 2010 revealed that while the iPhone 4 cost $187.51 at the factory gate in China, Korea contributed $80.05 worth of components, the U.S. $22.88, Chinese Taipei $20.75 and Germany $16.08. China’s contribution in assembling the final product was just $6.50, or only about 3.5% of the total cost.

According to the OECD and WTO, the new perspective provided by measuring TiVA may impact policy choices in a number of areas, including global trade imbalances, market access and trade disputes, trade and employment, and export competitiveness.



comments powered by Disqus
Hot Definitions
  1. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  2. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  3. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  4. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
  5. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  6. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
Trading Center