Sourcing supplies and manufacturing has got a lot more complicated and fragmented with globalization. In many cases, countries are just partial providers or stops for goods or services before they end up with the final consumer. But appreciation of the more complex creation of wealth and trade flows is only beginning to be pieced together by international and national policy makers.
Trade relations have got a lot more complicated over the recent decades. The era when certain raw materials might be imported from many countries but processing and manufacturing was largely concentrated in one place is long gone. Instead, a much more complex flow of materials, components, goods and services has developed.
The new model of manufacturing involves components being sourced from all over the world with goods sometimes partly manufactured or assembled at one site before being sent off to other countries for final finishing or further work before completion. Some final finishing in more developed countries might be encouraged as a means to get a country of origin stamp from that country or preferential access to a regional trade area. Whatever, the reasons, it’s a lot more difficult to determine where goods are coming from or even, finally, where they end up.
The blurring of trade patterns represents a headache for governments and policy makers which they have been struggling to get to grips with. The so-called club of rich countries, the 34-strong Organisation for Economic Development and Cooperation (OECD) and the World Trade Organisation (WTO) have both been trying to get to grips with more complex processes of adding value in production and services and the more fragmented trade flows.
Some of the initial results were digested by the annual meeting of the OECD’s council in Paris this week, an event attended by Czech Minister of Trade and Industry Jan Mládek.
Minister Mládek says the OECD analysis of countries, including the Czech Republic, of where and when value is added during the manufacturing and trade process looks a lot more favourable for the country than the usual more simplified picture of output and exports.
One factor highlighted for the Czech Republic is that more goods exported to fellow EU countries have a final destination outside the 28-strong trade and political bloc than has hitherto been suspected. Another is that the Czech Republic, compared with its OECD peers, does not create excessive obstacles for foreign companies operating in the country.
In one sense, the new light shone on Czech trade is positive for a country which is trying to diversify its exports outside the EU, currently the target for around four-fifths of Czech goods sold abroad. The Ministry says that it still underlines the extra efforts needed to strengthen ties with promising non-EU export markets.
Countries which can position themselves as attractively as possible as locations on the global supply chain with minimum barriers for importing goods and maximum efficiency in adding value are expected to get an even greater slice of world trade in the future, according to both the WTO and OECD.