Good statistics lead to better policies

I think it was Mark Twain who said: “there are three kinds of lies: lies, damn lies and statistics”.

If I had to sum up the World Trade Organisation’s interest in this matter, it would be to ensure that trade statistics do not lie, or maybe, being a bit more modest, to ensure they lie as little as possible!

The WTO is a place better known for its administration of global trade rules, for the conduct of multilateral trade negotiations and for the settling of trade disputes.

However, in the last decade, we have increasingly observed that the patterns of global trade have changed, and the focuses of countries’ trade policies have also adjusted.

It is more and more difficult to explain global trade today with conventional trade theories or to understand welfare gains and distribution in a globalised world.

Traditional statistics failed to give a clear picture of today’s way of trading in manufactured products. They also failed in fully capturing the huge role played by services in manufacturing. But most importantly, they were not good enough in ensuring that trade policy is properly informed by what matters to people: jobs.

It is a fact that over the last two decades, global value chains have changed the old ways of organising international specialisation and understanding comparative advantages.

This is why in 2007, I asked our statisticians at the WTO to find a way of bridging this statistical gap. Since then, the 2008-2009 global crisis and its collateral “Great Trade Collapse” have concentrated the attention of the analysts on the importance of the issues at hand.

As I mentioned, besides OECD and the WTO, a large coalition of organisations, research institutes and statistical offices have joined their efforts together to close this statistical gap.

The release today of these first batches of data should be considered as a milestone in this long-term co-operation and endeavour of many players and stakeholders.

Let me mention three specific results that show how the measure of trade in value-added changes how we should understand trade and hence trade policy today.

First, the role of services. While services represent about 20 per cent of total trade, their share doubles when we consider their contribution to the value-added that is traded internationally.

The services that are incorporated into the value of the merchandise include most of the new business functions which have made possible the development of value chains themselves, such as research and development, and modern logistics.

The second result is the importance of imports of intermediate goods in improving the competitiveness of the exports.

Today, in order to be a successful exporter, you need to be an active importer. Put in a simple way: “Imports create exports”.

The third and last point refers to the re-definition of bilateral trade balances, when imports and exports are measured according to their true national content.

Individualistic policies, what political scientists call “beggar your neighbour” policies, are bound to have serious negative consequences not only for the neighbours, but for the country taking the measures itself.

Lamy is the director-general, World Trade Organisation