Prof. Xiaolan Fu's published news article in the Financial times Chinese, draws on her latest research which has been published as a TMCD working paper. She argues for an updated framework for the measurement of global trade that accounts for trade-in-intangibles and trade-in-goods from the perspective of global value chains. Based on the new measurement. She details how the value of intangibles is captured in each of the modes- for example through royalty fees in the case of licensing, or through dividends in the case of FDI- and how these may be accurately recorded in a country’s exports and imports. While these flows are currently included in the balance of payments in different ways, for example as investment income, they are not directly attributed to the trade process.

Applying her proposed measurement approach to the available US data for example produces an interesting result where the overall US trade deficit would have been around $358 billion in 2016, as opposed to the official figure of $750 billion.

She concludes by encouraging policies to ensure that the benefits of trade in intangibles – which are currently in the hands of a few owners of the intangibles, along with a small community of skilled researchers and technicians are distributed more equitably.

Access the Financial Times China article here

Access the working paper here