What it means
Traditional trade statistics record the full value of a product each time it crosses a border. This works for simple trade, but many goods now pass through several countries before reaching the final buyer, which is the idea behind global value chains.
Imagine a phone assembled in one country from parts made in three others. Gross trade statistics count the parts when they are sold to the assembler and then count the whole phone when it is exported, so the value of the parts is counted more than once.
TiVA solves this by tracing how much value each country adds along the chain, such as wages, profits and the cost of local materials and services. It then reports, for example, how much of a country's gross exports is domestic value added and how much is foreign value added embodied in imported inputs.
The picture can be very different from the headline numbers. A country that assembles electronics may report large exports and a large trade surplus with the final buyer, but its domestic value added in those exports can be small, and a large part of the benefit goes to the countries supplying the components.
Governments use TiVA to design trade and industrial policy and to understand how a tariff or disruption in one country spreads through supply chains. Companies and analysts use it to map where their suppliers are, to judge the exposure of a market to events elsewhere and to understand the real source of a country's competitiveness.
The data has limits. It is based on models and national input-output tables, it is published with a delay, it uses industry averages rather than company details, and the results depend on the assumptions, so it is best used for broad analysis and not as a precise count.
In practice
Real-world examples.
Example
A policy analyst finds that a country's gross exports of vehicles are $50,000,000,000, but 40% of their value comes from imported parts. She reports that the domestic benefit from the exports is much smaller than the headline suggests.
Example
A manufacturer uses TiVA data to see which countries supply the inputs to its main foreign customers. It finds that a key buyer's exports rely heavily on parts from one region, and so it adds that region to its risk map.
Example
A trade negotiator compares a bilateral trade deficit measured in gross terms with the same deficit measured in value added. The deficit is much smaller in value added terms because many of the goods contain inputs made in the partner's other trading partners.
Formula
Calculation
Domestic value added share = Domestic value added in exports / Gross exports
Foreign value added share = Foreign value added in exports / Gross exports
Suppose a country exports electronic assemblies with a gross value of $200,000,000, of which $60,000,000 is the value of imported components. Domestic value added = 200,000,000 - 60,000,000 = $140,000,000. Domestic value added share = 140,000,000 / 200,000,000 = 70%, and the foreign value added share = 60,000,000 / 200,000,000 = 30%.Case study
Seen in the real world.
Southern Crest is an illustrative, fictional country that assembles consumer electronics and reports exports of $10,000,000,000 a year. Politicians were proud of the figure, and proposed a tax break for the sector costing $300,000,000 a year.
An economist at the finance ministry used TiVA-style data and found that 55% of the value of the sector's exports was imported components, leaving domestic value added of only 10,000,000,000 x 0.45 = $4,500,000,000. She also showed that most domestic value added came from wages and local services.
The ministry redesigned the support to reward training and local sourcing instead. The illustrative lesson is that gross export figures overstate what a country gains, and policy based on value added can target the real contribution.
Watch out
Common mistakes.
- Reading gross export totals as the value a country earns, when much of the value may come from imported inputs.
- Treating TiVA as exact company-level data, when it is based on national tables and industry averages.
- Assuming that a high share of foreign value added is always bad, when it can mean the country is well integrated in global supply chains and specialising in what it does best.
Questions
People also ask.
Who produces TiVA data?
The OECD and the WTO publish the Trade in Value Added database, drawing on input-output tables from many countries.
Why does gross trade double count?
A component can be exported to an assembler and then be counted again inside the final product when that is exported, so the same value appears in the statistics more than once.
How can a company use TiVA?
To map supply chain exposure by country and sector, to understand how tariffs or disruptions may spread, and to support market-entry decisions.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related