The global value chain behind imports

A new study on imported merchandise that NRF released today talks a lot about the “global value chain.” That’s a term well known to those of us who work in international trade. But it might be unfamiliar to some others, so it’s good to clear up any confusion.

The global value chain is a broader way of looking at what has traditionally been thought of as the “global supply chain.”

The supply chain generally looks at the parts or materials that go into a product, where a product is manufactured and the transportation logistics of getting it from the factory to the store.

But the global value chain looks at much more. It takes into consideration contributions such as product design, research and development, advertising and other marketing. Even the work of lawyers, bankers, accountants and IT experts who help make a product possible is taken into consideration. There is also recognition that the parts of materials in a product don’t necessarily come from the same place where it was manufactured.

All of those contributions have value – both in adding to what the product is worth to a consumer and the value that all of those jobs bring to the economy. That’s why it’s called a “value” chain rather than just a supply chain.

The focus of the study commissioned by NRF – “Rethinking Made in America in the 21st Century” – is that imported products sold in the United States contain a lot more U.S. value and support more U.S. jobs than consumers or policymakers realize. A product labeled “Made in China” might actually include parts made in America and virtually always represents a wide variety of U.S. jobs such as those mentioned above.

“Does ‘Made in America’ really mean what people think?” the study asks. “Imported goods with foreign labels often include significant but unrevealed amounts of U.S. content.”

The report takes a close look at three key categories – apparel, automobiles and electronics. It reveals that 70 percent of the value in a piece of clothing comes from the United States on average. Some “foreign” cars actually have more U.S. parts than “American” cars. And the Apple iPod contains about 40 times as much American content as Chinese content.

With policymakers often arguing that exports are good and imports are bad, this report tries to make it clear that millions of U.S. jobs rely on imported products, both in creating them and in selling them. It also asks policymakers to realize that it’s retailers who create the markets where manufacturers’ products are sold to consumers. Without that interface with the consumer, nothing would get sold and there would be no need to manufacture the product.

This report comes during Imports Work Week, and it builds on previous studies that have shown how imports support U.S. jobs such as last year’s Imports Work for America study.

So, the next time you think about the global supply chain behind a product, remember that it’s really a global value chain.