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.

BREAKING DOWN '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.

  1. Globally-Capped Contract

    A type of option that guarantees a minimum return but puts a ...
  2. Global Depositary Receipt - GDR

    1. A bank certificate issued in more than one country for shares ...
  3. Global Macro Strategy

    A hedge fund strategy that bases its holdings - such as long ...
  4. Global Fund

    A type of mutual fund, closed-end fund or exchange-traded fund ...
  5. Global Bond

    This type of bond can be traded in a domestic or European market. ...
  6. Globalization

    The tendency of investment funds and businesses to move beyond ...
Related Articles
  1. Personal Finance

    Investment Misselling A Global Problem

    When banks and advisors focus on fees and commissions, it is investors and the market that take the hit.
  2. Home & Auto

    5 Investment Risks Created By Global Warming

    Climate-change deniers and believers alike would be wise to prepare for the worst.
  3. Fundamental Analysis

    A Guide To Global Investment Performance Standards

    Is your investment management firm GIPS compliant? Learn more here.
  4. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  5. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  6. Fundamental Analysis

    Stock Exchanges: A Global Tour

    Check out the history and inner workings of the world's six most well-known stock exchanges.
  7. Forex Education

    How Global Events Affect The Forex Market

    Learn how politics, war and natural disasters move the forex market, and how you should respond.
  8. Forex Education

    Global Trade And The Currency Market

    Learn how the Bretton Woods system got the ball rolling for world trade.
  9. Insurance

    The Globalization Of Financial Services

    The key to survival for many financial institutions will be to efficiently serve a global customer base.
  10. Trading Systems & Software

    The Global Electronic Stock Market

    The way trading is conducted is changing rapidly as exchanges turn toward automation.
  1. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  2. Marginal propensity to Consume (MPC) Vs. Save (MPS)

    Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important ... Read Full Answer >>
  3. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  4. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  5. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  6. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center