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Supply Chain Graphic of the Week: Changing Patterns of Value-Add in Exports

Germany Actually Leads China in Total Export Value-Add, while Shift away from China could Boost Ocean Container Traffic.


July 24, 2019


When looking at global trade, one important dimension is "value-add" - where and by how much value is added at any stop in a product's supply chain journey.


Take for example the chart below, from the ocean container sector analysts at Drury Shipping. It shows total value-add in exports by leading countries, combining domestic value-add and foreign value-add.


In other words, if a widget is made from one foreign-based component that cost $50, and the widget is exported for $100, there would be $50 of both domestic and foreign value-add.


Value Added Share of Exports 2018 by Selected Countries (US$m)




Source: Drewry Shipping


As can be seen, it turns out Germany actually has a hgher level of total value-add in exports, exceeding number 2 China, but also has a higher percent (36%) of foreign value-added in that total number than does China, at 13%


That means Germany is buying a higher share of parts from outside the country to make its cars and other exports than does China.


In fact, the share of foreign value-add in Chinese exports has been falling steadily in recent years, as shown below.


What that means is the China is increasingly sourcing parts and components domestically, rather than importing them.


China’s Foreign Value Added Share in Gross Exports since 2000



Source: Drewry Shipping


An interesting twist on this: as US tariffs and other factors push companies to move sourcing from China to other low cost countries in Asia and elsewhere, it should actually increase ocean container traffic.


Why? Because these other countries have far less sophisticated and diverse supply bases than does China, meaning they will have to import more parts and components to support local assembly.


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