Lithuania in Global Value Chains: The Role of …...2017/06/30 · activities (H52), food...

Lithuania in Global Value Chains: The Role of Exports in Economic

Growth in 2000–2014

Final research report

Enterprise Lithuania

© Enterprise Lithuania 2017

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SANTRAUKA

Šiuolaikinės ekonomikos pasižymi gamybos procesų fragmentacija, kuri yra stebima tiek tarp sektorių, tiek ir tarp šalių. Tai yra viena iš ekonominės globalizacijos pasekmių. Dalyvavimas globaliose gamybos grandinėse ir įsitraukimas į eksportuojamąsias veiklas yra itin svarbus mažoms atviroms ekonomikoms, tokioms kaip Lietuva. Tai padeda Lietuvai konkuruoti globalioje rinkoje, leidžia pasinaudoti inovacijų ir technologijų perdavimo teikiama nauda ir skatina tvarų ekonomikos augimą.

Vis dėlto, tradicinė eksporto statistikos analizė, kuri įvertina eksporto apyvartą, negali visokeriopai atskleisti pagrindinių ekonominio augimo veiksnių ar konkurencingumo pokyčių. Tradiciškai eksporto įtaka eksportuojančios šalies ekonominiam aktyvumui yra vertinama pagal eksporto ir BVP santykį arba pagal rinkos dalių pokytį, bet dėl gamybos procesų fragmentacijos toks vertinimas gali būti nevisiškai tikslus. Didėjanti gamybos procesų fragmentacija tarp šalių ir ūkio sektorių, taip pat ir skirtinguose produkcijos gamybos etapuose didėjanti eksporto ir importo vertė, neleidžia tiksliai įvertinti globalizacijos įtakos šalies ekonominiam aktyvumui.

Taikant globalių vertės grandinių (angl. Global Value Chains) metodą, galima tiksliau įvertinti eksporto įtaką Lietuvos ūkio augimui. Šioje ataskaitoje pateikiama Lietuvos pozicija globaliose vertės grandinėse ir vertinama eksporto įtaka ekonominiam šalies augimui 2000–2014 m. Mūsų pagrindinės išvados yra:

► 2000 m. Lietuva eksportavo 19% savo sukurto BVP. Šis rodiklis padidėjo iki 27,9% 2004 m., iki 29,3% 2009 m. ir iki 40,3% 2014 m. Taigi, analizuojamu laikotarpiu eksporto įtaka Lietuvos ekonomikai nuolat didėjo. Vienas tokių tendencijų paaiškinimų būtų gilėjančios Lietuvos ekonomikos sąsajos su gamybos veiklomis užsienyje. Pridėtinė vertė, sukurta vietos rinkoje (angl. domestic value-added) bendrajame Lietuvos eksporte mažėjo – nuo 74,5% 2000 m. iki 59,9% 2014 m.

► Verslo paslaugų dalis pridėtinės vertės eksporto struktūroje 2014 m. buvo 55,5%. Apdirbamoji gamyba prisidėjo mažiau – jos dalis buvo 33,3%, o žemės ūkis – 5,2%. Likusiuosius 6% sudarė kiti šalies ūkio sektoriai.

► Taigi, verslo paslaugų dalis Lietuvos eksporte yra gerokai didesnė nei atskleidžia tradicinė eksporto statistika. Kita vertus, apdirbamosios gamybos svarba yra pervertinta pagal tradicinės eksporto statistikos duomenis.

► Vis dėlto, beveik trečdalis verslo paslaugų pridėtinės vertės eksporto 2014 m. buvo netiesioginis eksportas (19,8% iš 55,5%). Daugiausia verslo paslaugų netiesiogiai buvo eksportuota per apdirbamosios gamybos veiklas (9,8% iš 55,5%), taip pat per kitus verslo paslaugų sektorius (8,1% iš 55,5%). Tai rodo, kad Lietuvos ūkio sektoriai tarpusavyje yra glaudžiai susiję – eksportuojančios apdirbamosios gamybos veiklos netiesiogiai sukuria pridėtinę vertę verslo paslaugose. Tiesioginis verslo paslaugų eksportas, vis dėlto, yra gerokai didesnis nei pridėtinė vertė, sukurta verslo paslaugų veiklose per apdirbamosios gamybos eksporto veiklą.

► Didžiausią dalį pridėtinės vertės eksporto struktūroje 2014 m. sudarė didmeninė prekyba, sausumos transportas, sandėliavimo paslaugų veikla, maisto (perdirbimo), baldų ir tekstilės sektoriai.

► Lietuvos pridėtinės vertės eksporto struktūroje dominavo mažiau žinių reikalaujančios paslaugos ir žemųjų technologijų apdirbamoji gamyba. 2014 m. eksporto struktūroje mažiau žinių reikalaujančios paslaugos sudarė daugiau nei 80 procentų viso paslaugų sektoriaus pridėtinės vertės eksporto (45,8% iš 55,5%), o žemosios technologijos – 75% viso apdirbamosios gamybos pridėtinės vertės eksporto (24,7% iš 33,3%).

► Lietuvos pridėtinės vertės eksportuotojams ES šalys buvo svarbiausios prekybos partnerės. Daugiausia pridėtinės vertės buvo eksportuojama į Vokietiją, Latviją, Jungtinę Karalystę, Lenkiją, Prancūziją ir Švediją.

► Lietuvos pridėtinės vertės eksportas yra nukreiptas į namų ūkių vartojimą. 66,1% viso Lietuvos pridėtinės vertės eksporto buvo nukreiptas į šį galutinio vartojimo komponentą.

http://www.enterpriselithuania.com/


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SUMMARY

Modern economies are characterized by production processes that are highly fragmented both across countries and across sectors. This is one of the effects of globalization on economic activity. Participation in global production chains and involvement in exporting activities is a necessity for small open economies, such as Lithuania. It helps to maintain competitiveness, to benefit from technology transfers and to foster sustainable economic growth.

However, it is difficult to track down the main drivers of economic growth and changes in competitiveness patterns from traditional trade statistics that measure the turnover that is generated abroad. In the traditional view, the exporting country performance in other markets is evaluated either by the evolution of the exports to GDP ratio or by changes in export market shares, but due to the increased fragmentation of production such assessment might be misleading. The increased fragmentation of production across countries and across sectors within an economy and the growth in volumes of importing and exporting activities in different stages of the production process makes it hard to evaluate the real benefit of globalisation on the economic performance of an economy.

By applying the Global Value Chains (GVC) approach a more accurate evaluation of the impact of exports on the Lithuanian economy is provided in this report. The report evaluates the disposition of Lithuania in global production processes and assesses the impact of exports on economic growth in 2000–2014. Our main findings are:

► The share of value-added exports in GDP in 2000 was 19%. It increased to 27.9% in 2004, to 29.3% in 2009 and further to 40.3% in 2014. Exports have been growing in importance for the Lithuanian economy during the period under analysis. One of the explanations for this trend is the increased interconnectivity of the Lithuanian economy with activities abroad. The share of domestic value-added in Lithuanian exports decreased from 74.5% in 2000 to 59.9% in 2014.

► The share of business services in value-added exports in 2014 was 55.5%, manufacturing contributed less with 33.3% and agriculture 5.2%. The remaining 6% originated from other sectors in the economy.

► The role of business services in exports is therefore more important than traditional trade data reveals. On the other hand, the role of manufacturing is overestimated by traditional export statistics.

► Nevertheless, around one third of value-added exports in business services in 2014 were indirect exports (19.8% of 55.5%). Business services were mainly indirectly exported through manufacturing (9.8% of 55.5%) and also by other business service sectors (8.1% of 55.5%). This indicates that there exists interconnectivity between Lithuanian sectors in exporting activities. Exporting activities of the manufacturing industry indirectly creates added value in business services. Direct exports of business services, however, are still higher than the value-added that is generated by business services through export activities of the manufacturing industry.

► The sectors of the economy that generated the highest fractions of value-added exports in 2014 were wholesale trade, inland transport, warehousing activities, food (processing) industry, the furniture industry and the textiles industry.

► Lithuanian value-added exports were dominated by less knowledge intensive services and low-technology manufacturing products. In the export structure of 2014, less knowledge intensive services made up more than 80% (45.8% out of 55.5%) of total value-added exports of services, whereas low-technology and medium-low-technology manufacturing accounted for almost 75% of total value-added exports of manufacturing (24.7% out of 33.3%).

► In terms of value-added exports, the EU-28 economies were the most important trading partner for Lithuanian exporters. The highest shares were assigned to Germany, Latvia, the United Kingdom, Poland, France and Sweden.

► Lithuanian value-added exports is intense in household consumption. 66.1% of total value-added exports in 2014 was oriented towards this (final) demand component.



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1. INTRODUCTION

It is often argued that traditional intercountry trade statistics do not fully reflect how certain economies are interconnected to each other or how much of value-added is created by exports. Trade statistics say also very little about which sectors are the main drivers for economic growth and competitiveness, since part of the production is generated outside the country and imported in different phases of the production process. Nowadays production processes are very much fragmented internally and externally (i.e. across different sectors of an economy as well as across different countries) and many activities in the production process are processed by global production networks. Currently modern economies are not any longer specialising in the production of particular products. They rather specialise in particular stages of product development, such as R&D, manufacturing or logistics. Such specialization leads to increasing fragmentation with production processes carried out worldwide. For small open economies such as Lithuania, participation in global production processes is of particular importance for economic growth and it enhances international competitiveness.

The World Input-Output Database (WIOD)1 for the years 2000–2014 is used to access the role of Lithuania in Global Value Chains (GVCs). In this report the focus is geared towards exports growth analysis, in particular, it is analysed how much of total value-added is generated by exporting activities of Lithuanian firms. It is also evaluated which sectors contribute most to value-added exports. Changes in the export structure are assessed as well. This type of analysis is performed from several perspectives. First, it is investigated whether there is a movement of the economy towards goods and services that require more advanced (i.e. technology intensive) production techniques. Second, it is investigated which sectors of the economy contributed most to value-added export growth and whether the structure of value-added exports by sectors is changing throughout time. In this context, the impact of manufacturing, agriculture and business services on value-added export growth is assessed. Some attention is paid towards sectoral dynamics: it is investigated whether the largest Lithuanian sectors are becoming more export-oriented throughout time. Finally, this analysis identifies the countries or country blocks that are most important for Lithuanian enterprises in terms of value-added exports.

The main finding of this analysis is that value-added exports generate more than one third of total Gross Domestic Product (GDP). The impact of exports on economic growth is increasing throughout time. In 2014 value-added exports generated 40.3% of GDP, compared to 19.0% in the year 2000 and 27.9 % in 2004. The sectors of economy generating the highest fractions of value-added exports in 2014 were wholesale trade (NACE rev. 2 code G46), inland transport (H46), warehousing activities (H52), food (processing) industry (C10-C12), the furniture industry (C31-C32) and the textiles industry (C13-C15). The share of business services in total value-added exports in 2014 was 55.5%, followed by manufacturing with 33.3%, agriculture with 5.2%, other industries with 3.3% and construction with 2.1%. In terms of value-added exports, the EU-28 economies were the most important trading partner for Lithuanian exporters with the highest shares assigned to Germany, Latvia, the United Kingdom, Poland, France and. Such countries as Belarus, Ukraine, Kazakhstan, belonging to the rest of the world economies in accordance to the WIOD definition, are also important trading partners for Lithuanian enterprises in terms of value-added exports. Russia, Norway, the USA, China, even though usually in smaller magnitude, could also be positioned as important ones from the value-added exports perspective.

The remainder of this report is set out as following. Section 2 provides the theoretical motivation of the advantages of the GVC approach in trade analysis. Section 3 describes the dataset and its sources as well as the mathematical framework to derive the variables under consideration. Section 4 provides results for Lithuania and section 5 concludes.

2. THEORETICAL CONSIDERATIONS

One of the effects of globalisation on economic activity is that in modern economies production processes are highly fragmented both across countries and across sectors. Being part of the global 1 www.wiod.org.


http://www.wiod.org/


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production chain and being involved in exporting activities is very important for small open economies, such as Lithuania. Participation in global production processes helps to maintain competitiveness, to benefit from technology transfers and to foster sustainable economic growth. However, it is difficult to track down the main drivers of economic growth and changes in competitiveness patterns from traditional trade statistics that measure the turnover that is generated abroad. In the traditional view, the exporting country performance in other markets is evaluated either by the evolution of the exports-to-GDP ratio or by changes in export market shares, but due to the increased fragmentation of production such assessment might be misleading. The increased fragmentation of production across countries and across sectors within an economy and the growth in volumes of importing and exporting activities in different stages of the production process makes it hard to evaluate the real benefit of globalisation on the economic performance of an economy.

An illustrative example of the difficulties to interpret trade statistics is to look at the trends of Lithuania’s exports- and imports-to-GDP ratios. The exports-to-GDP ratio in Lithuania has been increasing over time from 38.5% in 2000 to 53.8% in 2005 and further to 75.9% in 2015 (see Fig. 1). A similar trend is observed in the imports-to-GDP ratio. This ratio increased from 44.7% in 2000 to 76.5% in 2015. The increase in the exports-to-GDP ratio throughout time was partly associated with the increase in exports of domestically produced goods as a share of GDP, but the re-exports-to-GDP ratio grew much faster (see Fig. 2). Re-exports, which are usually considered to be generating little value-added, is reasonably one of the reasons driving both the export- and import-to-GDP ratios up. However, this observation says little about the true performance of the Lithuanian economy in terms of exporting activities. As Lithuania joined the European Union in 2004, the increase in the export- and import-to-GDP ratios could be partly attributed to the elimination of trade barriers within the EU, but the increased integration of the Lithuanian economy into the global production chain is another reason that explains these tendencies.

Fig. 1. Export-to-GDP ratio and import-to-GDP ratio (goods and services), in 2000–2015, %.

Fig. 2. Decomposition of exports-to-GDP ratio (goods), in 2000-2015, %.

Source: Statistics Lithuania. Source: Statistics Lithuania.

Indeed, the integration of Lithuania into global production processes was remarkable, especially in the post-EU accession period. The share of domestic value-added in Lithuanian total exports declined from 74.5% in 2000 to 69.5% in 2004 and further to 59.0% in 2008 (see Fig. 3). This indicated growing interconnectivity of Lithuanian producers with activities abroad in the production of exports as the domestic value-added content of total exports has been growing at a slower rate than total exports (see Fig.4). The trends reversed somewhat during the period of economic crisis in 2009, but domestic value-added content of total exports stabilised at 58-60% in 2012–2014. The stabilization of this variable at a certain level suggests that further integration of Lithuania into global

0

10

20

30

40

50

60

70

80

90

100

2000 2002 2004 2006 2008 2010 2012 2014

Exports-to-GDP ratio

Imports-to-GDP ratio

0

10

20

30

40

50

60

70

80

2000 2002 2004 2006 2008 2010 2012 2014

Re-exports

Exports of domestic origin

Exports-to-GDP ratio



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production processes have actually halted, which is in line with findings for other EU-28 economies. For example, in the Netherlands, Sweden, Austria and Belgium, integration into GVCs was also remarkable from 1995 to 2008, but stabilised at particular levels in 2012–2014.2 Such trends usually show that either production fragmentation has been reached its maximum level or exporting activities of the particular country are moving towards services, whose production processes are usually less fragmented. Keeping in mind that the Lithuanian economy should have gained a lot from integration into the global production chain, these benefits are evaluated by focusing, in general, on the impact of exports on economic growth.

Fig. 3. Domestic value-added content of total exports, in 2000–2014, %.

Fig. 4. Growth in total exports, total value-added and domestic value-added content of total exports, in 2000-2014, % (normalized to 2000=1).

Source: Enterprise Lithuania estimations based on WIOD (2016). Source: Enterprise Lithuania estimations based on WIOD (2016).

3. DATA AND METHODOLOGICAL ASPECTS

As already noted, the evaluation of Lithuania’s involvement in GVCs and, in particular, the effect of exports on economic growth is made by using the World Input-Output Database (WIOD). The WIOD (2016 version) contains input-output tables for the world (WIOT) for the period of 2000–2014.The WIOT are constructed in a way that they integrate 56 industries over 43 countries plus the rest of the world. This system reflects how much of each industry product is produced and used by each industry in 43 countries as well as the rest of the world. The database covers 28 EU economies (EU-28), Switzerland, Norway and Turkey. It also includes NAFTA countries USA, Canada and Mexico, the BRIIC countries Brazil, Russia, India, Indonesia and China and other major economies such as Japan, Korea, Taiwan and Australia. The full list of countries in alphabetical order and industries in WIOD are presented in Tables 1 and 2 of the Appendix.

The WIOD was constructed on the basic of national accounts data. National supply and use tables (SUT) were used in combination with bilateral trade data as the core statistical sources from which WIOT were derived. However, as national SUTs, provided by national statistical authorities are usually available only for particular benchmark years, imputation procedures were applied to construct the national SUT for the years that are missing with the use of national statistical data. The national supply and use tables were also harmonized across countries in terms of concepts and classifications, in order to derive the WIOT for the years 2000–2014. These techniques resulted in WIOTs for 2000–2014 for 43 economies plus the rest of the world (N=44) and 56 industries or sectors (G=56) with an intermediate demand matrix of dimension 2464x2464 and a final demand matrix of dimension 2464x220. In the final demand matrix, columns represent disaggregated final

2 See Timmer M. and de Vries G. (2015).

50

55

60

65

70

75

80

2000 2002 2004 2006 2008 2010 2012 2014

Domestic value-added to total exports

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010 2012 2014

Total exports

Domestic value-added to total exports

Value-added



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demand components for all countries, whereas rows depict each sector of each economy (see simplified schematic representation in Table 1). The WIOTs will also be supplemented with additional data on socio-economic variables, but these datasets are expected to be published later this year.

Table 1. Simplified WIOT with two countries and one sector.

Intermediate use Final demand Total

consumption

Country 1 Country 2 Country 1 Country 2

Sector 1

Sector 1

by final demand components

by final demand components

Country 1

Sector

1

intermediate use of domestic inputs

intermediate use of foreign inputs

final use of

domestic output

final use of foreign output

total consumption

in country 1

Country

2

Sector

1

intermediate use of foreign inputs

intermediate use of domestic inputs

final use of foreign output

final use of domestic output

total consumption in country 2

Value-added value-added in country 1

value-added in country 1

Total output total output in country 1

total output in country 2

The calculation of various indicators from WIOD relies heavily on input-output techniques. Methodologically, WIOT data could be analysed by applying simple matrix algebra and this method allows tracing the position of economies in GVCs. It also allows tracking down the main drivers of economic growth and evaluates changes in patterns of competitiveness. The GVC methodology to derive the domestic value-added content of exports of a particular economy, the impact of exports on economic growth and other relevant indicators could be found, among others, in Timmer et al. (2013), Kwaak (2013), Dietzenbacher et al. (2013) and Javorsek & Camacho (2015).

The starting point would be to assume that total gross output in an economy equals demand for intermediate products and demand for final goods:

𝒒 = 𝑨 ∙ 𝒒 + 𝒇 = (𝑰 − 𝑨)−1 ∙ 𝒇 (1)

where 𝒒 denotes a vector (of dimension 2464x1) of total output for each country and each sector, 𝑨 is a global matrix (of dimension 2464x2464) of intermediate inputs per unit of output and 𝒇 is a vector (of dimension 2464x1) of final demand components (sum of household and government consumption as well as gross capital formation) for each country and each industry. The production of any final product requires many intermediates produced by other sectors and the sector itself. The Leontief inverse matrix (of dimension 2464x2464),(𝑰 − 𝑨)−1, highlights direct and indirect linkages across sectors and economies in the world, thereby, capturing links between sectors inside the national economy as well as between foreign sectors. The diagonal matrix 𝑰 in the Leontief inverse is an identity matrix (of dimension 2464x2464). The Leontief inverse matrix multiplied with the vector of final demand 𝒇 returns back to a vector of total output 𝒒.

Similarly, the Leontief inverse matrix pre-multiplied with the value-added matrix and post-multiplied with a vector of demand for final goods, yields a vector of value-added by each country and each sector:

𝒚 = �̂� ∙ 𝒒 = �̂� ∙ (𝑰 − 𝑨)−1 ∙ 𝒇 (2)



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where 𝒚 denotes a vector (of dimension 2464x1) of total value-added generated by each country and each sector, �̂� is a diagonal matrix (of dimension 2464x2464) of the value-added per unit of output, matrix (𝑰 − 𝑨)−1 as well as vector 𝒇 are as determined above. The basic identities appearing in equations (1) and (2) allow deriving plenty of other indicators that highlight the position of an economy in GVCs.

One of such matrixes is a matrix 𝒗 (of dimension 2464x220), that shows the distribution of value-added by all final demand components (in all stages of production processes) in all sectors of economies.3 Using global matrixes, the 𝒗 matrix includes 56 industries of 43 countries plus the rest of the world, and is derived as follows:

𝒗 = �̂� ∙ (𝑰 − 𝑨)−1 ∙ 𝑭 ∙ �̂� (3)

where 𝒗 denotes a matrix (of dimension 2464x220) of the value-added generated by each country

and each sector by final demand components. �̂� and (𝑰 − 𝑨)−1 are the matrices as defined above. 𝑭 is a coefficient matrix (of dimension 2464x220) showing the share of each sector in each economy

in all the final demand categories. �̂� is a diagonal matrix (of dimension 220x220) of final demand

levels by each country and each final demand component. In the global context, the 𝒗 matrix shows how value-added is distributed across the world.

Finally, matrix 𝒕 allows to make a distinction between direct and indirect exports. Matrix 𝒕 (of dimension 2464x2464) shows the distribution of value-added exports by all sectors of the economy.4 Using global matrixes, the 𝒕 matrix includes 56 industries of 43 countries plus the rest of the world, and is derived as follows:

𝒕 = �̂� ∙ (𝑰 − 𝑨)−1 ∙ 𝑬 (4)

where 𝒕 denotes a matrix (of dimension 2464x2464) of the value-added exports generated by each country and each industry. �̂� and (𝑰 − 𝑨)−1 are the matrixes as defined above and 𝑬 is a diagonal export matrix (of dimension 2464x2464) with total exports values of each country and sector.5 Figures derived in matrixes (3)-(4) are the ones that are used to analyse the Lithuanian economy.

4. RESULTS

4.1 LITHUANIAN TOTAL VALUE-ADDED STRUCTURE BY SECTOR

The largest sector in Lithuania’s economy in 2014 was business services (sectors G-N and R-U in accordance to NACE rev. 2 classification). It accounted for 52.0% of total value-added. The share of manufacturing (sector C) was considerably lower with 19.3%, public sector services (sectors O, P, and Q) with 14.0%, construction (sector F) 7.5%, agriculture (sector A) 3.4% and other industries (sectors B, D and E) 3.8% (see Fig. 5).

The structure of the economy has changed considerably since 2000. The share of business services, manufacturing and construction increased at the expense of the shares of agriculture, public services and other industries. Even though business services was the largest sector in the economy even in the year 2000, the share of this sector was only 46.6%. It increased to 47.6% in 2004, to 51.9% in 2009 and further to 52.0% in 2014. The share of manufacturing grew correspondingly from 18.9% in 2000 to 20.1% in 2004, but decreased by 2014 to 19.3%. The construction sector accounted for 6.0% in total value-added in 2000 and 7.5% in 2014. The most significant decline in shares were observed in agriculture (decreased by 2.8 percentage points since 2000) and in public sector services (decreased by 3.5 percentage points). Stronger growth rates in

3 In the literature this matrix is known as the CPS (Cumulative production structure) matrix. For more information, see Kwaak (2013). 4 See Javorsek & Camacho (2015) for more information. 5 Variables plotted in Fig.3 and Fig. 4 are derived from this global value-added export matrix. Direct and indirect value-added exports, analysed in chapter 4.7.8, is also derived from this matrix.



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value-added of business services, manufacturing and construction in comparison to the remaining sectors of the economy caused these shifts in the structure of Lithuania’s economy (see Fig. 6).

Disaggregating the Lithuanian economy into smaller sectors, the highest shares of total value-added in 2014 were generated by wholesale trade, except of motor vehicles and motorcycles (G46) with 8.7%, retail trade except of motor vehicles and motorcycles (G47) with 7.7%, land transport and transport via pipelines (H49) with 7.7%, construction (F) 7.5%, real estate activities (L68) – 6.5%, public administration, defence and compulsory social security (O84) 6.0% and manufacture of food products, beverages and tobacco products (C10-C12) 4.6% (see Fig. 7).6 All these sectors were the largest in the structure of total value-added, but not all of them were important from a value-added exports perspective.

6 The full list of industries in WIOD is presented in Table 2 in Appendix.

Fig. 5. Structure of total value-added by aggregated sectors in 2000–2014, %.

Fig. 6. Growth in total value-added by aggregated sectors in 2001–2014, %.

Source: Enterprise Lithuania estimations based on WIOD (2016). (2016).

Source: Enterprise Lithuania estimations based on WIOD (2016). (2016).

0 50 100

2000

2004

2009

2014

Agriculture Manufacturing

Other industries Construction

Business services Public services

-30

-20

-10

0

10

20

30

40

2001 2003 2005 2007 2009 2011 2013

Public servicesOther industriesBusiness servicesConstructionManufacturingAgriculture



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4.2 THE SHARE OF EXPORTS IN VALUE-ADDED

Exporting activities of Lithuanian sectors are generating a substantial fraction of value-added and the impact of exports on economic growth is increasing throughout time. In 2014, 44.7% of Lithuanian value-added was exported (see Table 2). The share of value-added exports in total value-added in 2000 was 22.9%, whereas in 2004 it increased substantially (by 7.9 percentage points) to 30.8%. The accession of Lithuania to the EU in May 2004 also had a remarkable effect on the increase of the share of value-added exports. Between 2004 and 2005 the increase was 2.5 percentage points thereby reaching a share of 33.3%. In the next decade (between 2005 and 2014) the share of value-added exports was constantly growing and in 2014 it reached 44.7%.

However, the increase in value-added exports in the last decade was uneven. During the 2006-2008 period, the share of value-added exports somewhat declined (by 1.7 percentage points from 33.3% in 2005 to 31.5% in 2007). One of the main reasons for this trend was the overheating of Lithuania’s economy, causing, among others things, a substantial increase in domestic prices for products and services and a re-direction of exported goods and services towards the domestic market. In the beginning of the economic crisis, starting from the second half of 2008, the trend reversed. Already in 2008, the share of value-added exports increased to 32.1% and the economic recovery of 2010-2011 was to a large extent export-driven. The share of exports between 2008 and 2011 increased by 8.9 percentage points until 41.0%. In general, the post-crisis period, except for 2014, was determined by an increase in the share of value-added exports in total value-added. It grew by 3.7 percentage points between 2011 and 2014 forming 44.7% in 2014. In 2014, the share of value-added exports from Lithuania decreased by 0.6 percentage points per year. This development was to mainly driven by strong growth in domestic demand and weak export growth (partly as a result of the Russian import ban on EU agricultural and food products, see also sections 4.3 and 4.7.1).

Fig. 7. Structure of value-added in Lithuania’s economy in 2014, %.

Source: Enterprise Lithuania estimations based on WIOD (2016).

0

1

2

3

4

5

6

7

8

9

10

G46

G47

H49 F

L68

O84

C10-C

12

P8

5H

52 Q

A0

1C

31_C

32

D35 N

G45

R_S

M6

9_M

70

C20

C13-C

15

J61

K6

4 IC

16

J62

_J63

C22

C19

C25

C23

M7

1M

73

C33

E3

7-E

39

C28

C17

A0

2C

18

C26 B

C27

K6

5C

21

C30

E3

6H

50

J58

M7

4_M

75

C29

H53

J59

_J60

M7

2C

24

K6

6 TH

51

A0

3 U

2014 2009 2004



page 11 of 35

Table 2. Share of value–added exports in Lithuania in 2000–2014, %.

Year Value-added exports as a share of total value-added, %

Percentage change, y-o-y

Value-added export to GDP ratio*, %

Percentage change, y-o-y

2000 22.9 19.0

2001 26.1 3.2 22.3 3.4

2002 29.3 3.3 26.1 3.8

2003 30.1 0.7 27.0 0.9

2004 30.8 0.8 27.9 0.9

2005 33.3 2.4 30.1 2.2

2006 33.1 -0.1 29.9 -0.2

2007 31.5 -1.6 28.3 -1.6

2008 32.1 0.6 28.9 0.6

2009 32.4 0.3 29.3 0.4

2010 37.9 5.5 34.1 4.8

2011 41.0 3.1 37.0 2.8

2012 44.7 3.7 40.4 3.5

2013 45.3 0.6 41.0 0.6

2014 44.7 -0.6 40.3 -0.8

* GDP denotes nominal GDP in US dollars (National accounts). Source: Enterprise Lithuania estimations based on WIOD (2016).

4.3 GROWTH IN VALUE-ADDED IN 2000-2014

The increase of value-added exports in total value-added between 2000 and 2014 was driven by fast growing exports and slower increase in domestic demand. Value-added exports increased by 8 percentage points between 2000 and 2004 and by almost 14 percentage points between 2004 and 2014. This signals a faster increase in value-added exports than domestically consumed value-added of Lithuanian origin. Indeed, between 2000 and 2014, total value-added in Lithuania increased more than four times (on average by 11% annually). Exports was growing on average by 16.4% on an annual basis whereas domestic demand by 8.3% per year. These trends resulted in an increase in the share of value-added exports in total value-added throughout time. This result, however, is very general and in different sub-periods trends differed substantially.

The pre-EU accession period in Lithuania was already characterized by strong growing domestic demand, but even stronger growing value-added exports. Between 2000 and 2004, value-added exports tripled, whereas domestic demand increased less than twice. That caused a significant increase (by 7.9 percentage points) in the share of value-added exports in total value-added of Lithuania’s economy. A somewhat different trend was observed between 2004 and 2009. Even though exports grew faster than domestically consumed value-added, differences in growth rates were much smaller (exports in this period increased by 11.7% per year on average, whereas domestic demand grew by 10.0% on average per year). That led to an increase in the exports share of only 1.6 percentage points during this time period. The period of 2009–2013 was again denoted by a remarkable increase in the value-added export share. Economic recovery in Lithuania was driven primarily by growth in exports (grew on average by 14.8% per year), whereas domestically consumed value-added of Lithuanian origin in 2013 just recovered to the level of 2009. The year of 2014 was an exception and differed completely from the trends observed in previous periods. That year it a rather strong growth in domestic demand was recorded (5.1% between 2013 and 2014) while growth in exports halted (increased by 2.6% per year). That caused a small, but not foreseeable, decrease (by 0.6 percentage points) in the share value-added exports in total value added in Lithuania’s economy.



page 12 of 35

4.4 GROWTH IN DOMESTICALLY CONSUMED VALUE-ADDED

Growth in value-added domestic demand in 2000-2014 was driven mainly by household consumption, but other final demand components contributed positively as well (see Fig. 8). A decomposition of value-added domestic demand gives some additional insights about the structure of Lithuania’s economy. As a result of the high share of household consumption in total domestic demand (61.4% in 2014), growth in value-added domestic demand was largely driven by this final demand consumption component. The average annual growth rate of household consumption between 2000 and 2014 was 7.1%. Although government consumption grew somewhat stronger (on average 8.3% per year), the smaller share of this component in total value-added domestic demand did not cause any drastic increase in the share throughout time (27.7% in 2000 and 27.5% in 2014). In the pre-crisis period of 2006-2008, however, increases in government consumption contributed considerably to the surge in domestic demand. Gross capital formation growth rates were also outstanding (increasing on average by 31.2% per year during 2000–2014), including strong growth in recent years (on average by 10.2% annually between 2010 and 2014). These trends caused the share of gross capital formation in terms of Lithuanian value-added to increase substantially from 0.8% in 2000 to 11.1% in 2014 at the expense of a decrease in the share of the household consumption component. Gross capital formation, however, expectedly shows high volatility and sensitivity to cyclical fluctuations. The share of capital goods in domestic demand increases in economic upturns and decreases during economic crises (see Fig. 9).

Fig. 8. Growth in value-added domestic demand by its components in 2001–2014, %.

Fig. 9. Decomposition of value-added domestic demand in 2000–2014, %.



4.5 GROWTH IN VALUE-ADDED EXPORTS DRIVEN BY HOUSEHOLD

CONSUMPTION AND GROSS CAPITAL FORMATION

The structure of value-added exports differed somewhat from domestic demand. Growth in value-added exports was driven by household consumption and gross capital formation (see Fig. 10 and 11). The share of goods and services in value-added exports oriented towards household consumption decreased from 69.6% in 2000 to 66.1% in 2014. The share of value-added gross capital formation in total exports was around 25% in 2014, increasing from 21.4% in 2000 to 24.1% in 2014. This is an indication of quite strong growth in exports of capital goods throughout time. Indeed, exports of value-added capital goods grew on average by 17.4% per year, which was a faster than household consumption which grew 15.9% annually. As a result, the share of value-added capital goods in total exports increased. The gross capital formation component in value-

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page 13 of 35

added exports also exhibited less volatility than the same final demand component oriented towards the domestic market. The share of value-added government consumption to total exports was small (less than 10%). This result is not surprising taking into account (among other factors) that not all goods and services can be traded across borders.

Fig. 10. Growth in value-added exports by final demand components in 2001–2014, %.

Fig. 11. Decomposition of value-added exports by final demand component in 2000–2014, %.


4.6 MAIN TRADE PARTNERS

4.6.1 MAIN EXPORT PARTNERS IN TERMS OF VALUE-ADDED EXPORTS

In terms of value-added exports, the EU-28 economies were the most important trade partners for Lithuania. The share of this country block in total exports was around 40% in 2014 (see Fig. 12 and Table 3 in Appendix for a full list of countries). The share of the EU-28 economies, however, tended to decrease throughout time from 49.1% in 2004 to 40.4% in 2009 and further to 37.2% in 2014. Contrarily, the share of countries belonging to the rest of the world (such as Ukraine, Belarus, Kazakhstan and many others) increased from 28.6% in 2004 to 38.1% in 2009 and further to 38.9% in 2014. It implies that value-added exports to countries belonging to the rest of the world in accordance to the WIOD definition grew faster (on average by 17.5% annually between 2000 and 2014) than to EU-28 economies (14.7%).

The share of value-added exports to the EU-28 increased substantially in the period of 2000-2004 and rose strongly (on average by 18.6% per year) in the period of 2004-2008 up to the beginning of the global financial crisis. Negative export growth in 2009 and subdued growth in 2009-2014 (the period of the Eurozone debt crisis and weak economic recovery in the EU) led to average export growth rates of approximately 10% per year. The reversed export trend was observed to countries belonging to the rest of the world. In 2004–2008 value-added exports increased by more than 25% annually. In 2009–2014 exports grew on average by almost 13% per year and that led to the increased importance of these countries in Lithuania’s export structure. The two country blocks EU-28 and the rest of the world account for more than 75% of total value-added exports of Lithuanian enterprises.

The most important trading partners in terms of value-added exports within the EU in 2014 were Germany (20% of total exports to the EU-28 in 2014), Latvia (9.4%), the United Kingdom (8.9%), Poland (8.5%), France (8.2%), Sweden (7.5%), Italy (6.4%) and Denmark (4.6%) (see Fig. 13). This

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page 14 of 35

suggests that Lithuanian exports are quite diversified across EU economies. Throughout time the importance of such trading partners as Poland, Italy, Austria, Finland and Belgium increased at the expense of other trade partners within the EU such as Latvia, the United Kingdom and Sweden, but the ranking of Lithuania’s most important export partners within the EU did not change substantially.

Fig. 12. Share in total value-added exports by trade partner 2000–2014, % (sorted by 2014).

Fig. 13. Share in value-added exports to the EU-28 by trade partner 2000–2014, % (sorted by 2014).


4.6.2 MAIN EXPORT PARTNERS IN TRADITIONAL TRADE STATISTICS

Trade statistics reveal a somewhat different picture, especially in terms of the shares of main exports partners. In terms of value-added exports, the EU-28 economies, followed by Russia, the USA, Norway, China, Japan, etc. are the most important for Lithuanian exporters. Traditional trade statistics of goods and services (which measure turnover) shows that the ordering of countries in total exports slightly differs, whereas the share of each trading partner in total exports of goods and services diverges a lot in comparison to value-added exports by countries.

By traditional trade statistics (sourced from balance of payment data) the EU-28 economies are the main export partner for Lithuania. In 2014 the share of the EU-28 in total exports of goods and services was 54.6% (see Fig. 14). In 2004 this share was 62.9% growing to 64.1% in 2009. In value-added export terms, the share of EU-28 economies was much lower (37.2% in 2014). Within the EU, the most important trading partners in 2014 by balance of payment statistics were Latvia (15.4% of total exports to the EU-28), Germany (14.4%), Poland (13.9%), Estonia (7.8%) and the Netherlands (7.7%) (see Fig. 15).

Countries belonging to the rest of the world in trade statistics make a share of 15.8% in 2014. This figure is considerably lower than exports evaluated in terms of value-added (38.9% in 2014). The export share to Russia in trade statistics is, on the other hand, considerably higher (21.2% in 2014) compared to the value-added exports (9.0% in 2014). The USA is of much higher importance for Lithuanian exporters (the share was 4.1% in 2014) in terms of value-added exports than in traditional trade statistics (3.2% in 2014).

0 50 100

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2004

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CHN

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DEU

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page 15 of 35

Fig. 14. Structure of total exports of goods and services by trade partner 2004–2014, % (sorted by 2014).

Fig. 15. Total exports of goods and services by the share of trade partners in the EU in 2004–2014, % (sorted by 2014).

Source: Eurostat. Source: Eurostat.

4.7 VALUE-ADDED EXPORT STRUCTURE BY SECTOR

The largest exporting sectors in Lithuania’s economy in terms of value-added are business services and manufacturing. They account for almost 90% of total value-added exports. The share of value-added exports of business services is the highest. And between 2000 and 2014 this share increased at the expense of other sectors of the economy (see Fig. 16 and 17).

Looking deeper into the export structure and its dynamics, several facts about sectors should be provided first. Starting with agriculture (sector A in accordance with NACE2 classification), this sector generated 5.2% of total value-added exports in 2014, which was similar as in 2000. In 2000 the share of agriculture in total Lithuanian value-added exports was 5.0%, decreasing to 3.8% in 2004, reversing to a share of 4.0% in 2009 and growing further until 5.2% in 2014.Within agriculture, the majority of value-added exports was recorded in crop and animal production (A01), followed by forestry and logging (A02) and fishing and aquaculture (A03).7

In 2014, the share of manufacturing (sector C in accordance to NACE2 classification) in total value-added exports was about 33.3%. Looking at the dynamics, the share of this sector increased in the pre-EU accession period from 36.6% in 2000 to 39.0% in 2004, but afterwards, in the 2004-2009 period it decreased substantially by 8 percentage points (to 31.0% percent in 2009). Such developments were mainly associated with an exceptional strong growth in exports of business services (value-added exports of this sector grew on average by 23.9% per year in 2004–2008 compared to 17.1% annual growth in manufacturing. The share of manufacturing started to increase again onwards and, as noted above, reached 33.3% in 2014. In general, exporting activities of this sector grew by 15.6% per year during the 2000-2014 period. Most value-added exports were generated in the food, beverages and tobacco production (C10-C12), the furniture industry (C31-C32), the textile sector (C13-C15) and the chemical industry (C20) (see Fig. 18).

7 All sectors in WIOD are listed in Table 2 in the Appendix.

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ROW

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USA

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CAN

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AUS

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TWN

IDN0 50 100

2004

2009

2014

LVA

DEU

POL

EST

NLD

GBR

SWE

FRA

DNK

ITA

BEL

FIN

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CZE

AUT

Other EU-28



page 16 of 35

The share of business services (sectors G-N and R-U in accordance to NACE2 classification) in total value-added exports in 2014 was 55.5%, compared to 50.5% in 2000. From 2000, the share of business services increased to 51.2% in 2004, to 58.0% in 2009 and decreased slightly afterwards to 55.5% in 2014. Exports of this sector increased by 17.2% per year in the 2000-2014 period. The strongest growth was observed in the period of 2004–2008. The greatest share of value-added exports in 2014 was generated by such service activities as wholesale trade (G46), inland transport (H49) and warehousing and support activities for transportation (H52). These services amounted for more than one third (38% in 2014) of total Lithuanian value-added exports (see Fig. 16). Although considerably smaller, real estate activities (L68) and retail trade (G47) also contributed to value-added exports in business services with shares of 2% each. All these activities were not only dominant in the value-added export structure of Lithuania, but a majority of them were also among the largest in the structure of Lithuania’s economy.

Construction (sector F in accordance to NACE2 classification), other industries (sectors B,D and E in accordance to NACE2 classification) and public services (sectors O-Q in accordance to NACE2 classification) generated small fractions of total value-added exports (altogether 6% in 2014). In particular, the construction sector and public services are usually considered as non-tradeable sectors of the economy, therefore their effect on value-added export growth is small.

Some changes in value-added exports by activities could also be observed throughout time. The most remarkable shifts were observed in the textile industry (C13-C15), in wood production (C16) and in retail trade (G47). In 2014, compared to the year of 2004, the share of these sectors in total value-added exports strongly decreased. During the same decade the shares in value-added exports of food manufacturing (C10-C12), manufacture of furniture (C31-C32), chemicals and chemical products (C20), rubber and plastics (C22), as well as land transportation services (H49) and warehousing and support activities for transportation activities (H52) increased substantially. This trend shows a movement towards an increase in the share of services, but there are, however, no obvious signs that Lithuania’s economy is moving towards exports of higher value-added goods and services.

Fig. 16. Structure of value-added exports by aggregated sectors in 2000–2014, %.

Fig. 17. Growth in value-added exports by aggregated sectors in 2001–2014, %.

Source: Enterprise Lithuania estimations based on WIOD. (2016).

Source: Enterprise Lithuania estimations based on WIOD. (2016).

0 20 40 60 80 100

2000

2004

2009

2014

Agriculture Manufacturing

Other industries Construction

Business services Public services

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page 17 of 35

4.7.1 THE MANUFACTURING SECTOR GENERATED APPROXIMATELY ONE THIRD

OF TOTAL VALUE ADDED EXPORTS

The manufacturing sector (C) in Lithuania generated about one third of total value-added exports (33.3% in 2014). The highest shares within manufacturing were taken by the food, furniture and clothing industries. Given that manufacturing in the WIOD accounts for 19 separate industries in total, more extensive information about the most important manufacturing sectors, in terms of value-added exports, is provided in this section.

The manufacturing sector is, in general, very much directed towards exports. In 2014 the export intensity of manufacturing was 77.3%, comparing to 44.4% in 2000, 59.7% in 2004, 60.1% in 2009 and 77.5% in 2014. In other industries (mining and quarrying (B), electricity, gas steam and air conditioning supply (D) and water collection, treatment and supply plus others (E)) exports makes much smaller fractions in total value-added. In 2014 the export intensity in these sectors (sum of B, D and E) was 39.2%.

Turning back to manufacturing, the sector in 2014 with the highest value-added exports was the food, beverages and tobacco industry (C10-C12). In 2014, the share of value-added exports generated by this sector was 5.1%. The share of this manufacturing activity decreased from 3.6% in 2000 to 2.9% in 2004 and increased again onwards to 5.1% in 2009 and 2014.

The food industry operates equally in both domestic and foreign markets (see Fig. 19). The output of this sector is geared towards household consumption. Changes in domestic and export market shares throughout time strongly suggest that this sector is becoming more export oriented. In 2000, domestically consumed value-added made over 80%, but in 2004 it decreased to 77.6%. In the post EU-accession period this share decreased further to 63.2% in 2009 and to 50.4% in 2014. This development shows that the growth of value-added has been exceptionally strong in export markets, especially in the post-EU accession period. Export markets are in general very important for the food, beverages and tobacco industry. From 2000 to 2014 domestically consumed value-added of this industry increased more than twice, whereas value-added exports grew almost twelve times.

However, it is noteworthy that the share of value-added geared towards the domestic market continuously declined since 2000, but slightly increased in 2014 (from 49.6% in 2013 to 50.4% in 2014). The reason for this development was a stronger growth in domestic consumption (4.8% per year in 2014) compared to the growth of household consumption in exports markets (1.4% per year). The most remarkable decline in exports in 2014 was observed in the EU-28 block and Russia (as a result of the Russian ban on food products), but some other exports markets (such as for

Fig. 18. Structure of value-added exports by sectors of economy in 2014, %.


02468

101214161820

G46

H49

H52

C10-C

12

C31_C

32

A0

1C

13-C

15

C20

L68

G47

C22

C16 F

M6

9_M

70

G45

C25

C19 N

C28

D35

K6

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17

E3

7-E

39

M7

3C

26

C27

C23

J62

_J63 I

C29

J61

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C21 B

A0

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71

C30

H50

C18

R_S

O84

J58

M7

4_M

75

C24

H53

E3

6K

65

J59

_J60

P8

5 QH

51

A0

3M

72

K6

6 T U

2014 2009 2004



page 18 of 35

instance the block of countries belonging to the rest of the world) compensated the decline in sales in former markets.

Fig. 19. Value-added in the food industry by origin in 2000–2014, %.

Fig. 20. Structure of value-added exports in food industry by export partners in 2000–2014, %.

Source: Enterprise Lithuania estimations based on WIOD. (2016). Source: Enterprise Lithuania estimations based on WIOD (2016).

Identifying the most important exports partners, the food industry is oriented towards the EU-28 market. The share of the EU-28 block in value-added exports in 2014 was 59.4%. Exports was also intense towards Russia (12.5%), Norway (2.3%), the USA (1.4%) and Japan (1.0%) (see Fig. 20). The export share to the rest of the world block in 2014 was 21.2%.

In recent years there is some decrease in the share of EU-28 countries (from 64.6% in 2013 to 59.4% in 2014) and Russia (13.3% in 2013 to 12.5% in 2014). Meanwhile, the shares of the USA (from 1.1% in 2013 to 1.4% in 2014) and Japan (0.8% percent in 2013 respectively) increased. A strong increase in the share for the rest of the world economies (from 13.7% in 2013 to 21.1% in 2014) was also recorded. These trends suggest that food producers are quite flexible in redirecting their exports towards export markets with better economic conditions (and even to the domestic market) in case of necessity.

From the EU-28 market, such countries as Germany and Latvia are the most important from a value-added exports perspective for food producers. In 2014 the share of Germany in total food exports was 10.4% percent and of Latvia 9.8%. Smaller shares were attributed to Poland (5.4%), Italy (5.2%), the United Kingdom (4.3%), Estonia (4.2%) and Sweden (3.9%). There are also strong tendencies showing that countries such as Poland, the United Kingdom and Sweden are showing a stronger interest for Lithuanian food products. Meanwhile, the share of the Latvian market is decreasing, suggesting that a strong growth in exports was recorded towards the earlier mentioned countries in recent years.

Lithuanian furniture and other manufacturing (C31-C32) is also performing well in terms of value-added exports. In 2014, this sector generated 4.8% of total Lithuanian value-added exports. The share of the furniture industry in total value-added exports gradually increased from 2.0% in 2000 to 4.8% in 2014. These developments suggest a strong growth of this sector in foreign markets. Indeed, domestically consumed value-added increased twice between 2000 and 2014, whereas value-added exports in the same period grew almost twenty times. These trends caused a gradual redirection of this industry from domestic to foreign markets: its export intensity increased from 47.8% in 2000 to 88.1% in 2014 (see Fig. 21).

In terms of value-added exports, the most important countries for the Lithuanian furniture industry are the EU-28 economies. In 2014, the share of this block in total value-added exports of the furniture industry was 56.4% (see Fig. 22), 8.4% of value-added exports went to Norway, 6.1% to Russia, 6.0% to the USA and 4.3% to China. Economies belonging to the rest of the world took a

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page 19 of 35

share of 12.7%. From the EU-28 trading partners Germany, Sweden, the United Kingdom and France were the countries to which Lithuanian furniture producers exported most in value-added terms. The share of Germany in total value-added exports was almost 14%, Sweden 8.7%, the United Kingdom 7.3% and France 4.4%. In 2014, the most notable export growth (on annual basis) was recorded to the United States, China and economies belonging to the rest of the world, whereas the highest decrease (in absolute terms) was reported to the EU-28 economies (especially to Denmark, the Netherlands and France).

Fig. 21. Value-added in the furniture industry by direction of realization in 2000–2014, %.

Fig. 22. Structure of value-added exports in the furniture industry by export partner in 2000–2014, %.


The third largest sector in manufacturing measured by value-added exports is the manufacturing of textiles, wearing apparel and leather products (C13-C15). This sector generated 3.6% of total value-added exports in 2014, although, the share of this sector decreased by 4.3 percentage points since 2004. The Lithuanian textile and clothing producing sector is characterised by a very high export intensity and the share of exports in total value-added has been gradually increasing over time. In recent years the textile and clothing industry operates mainly on exports markets (see Fig. 23). Products of this sector are mainly geared toward the household consumption demand component.

The most important export market for the textile and clothing sector in 2014 was Russia with a share in value-added exports of 49.0%. EU-28 countries followed with a share of 28.3%, Norway took 4.3% and 11.7% of total value-added exports of this sector went to the rest of the world country block (see Fig. 24). Value-added exports of the Lithuanian textile and clothing industry to EU-28 economies mainly had Germany, the United Kingdom and Sweden as final destination. The share of Germany in 2014 was 6.3%, the United Kingdom 4.3% and Sweden 3.3%.

Although exports of this sector has been increasing in recent years (from 2010 to 2014), trade with the EU-28 market decreased since 2012. This caused the share of the EU-28 economies to drop substantially (by 6.1 percentage points) from 2012 to 2014. Exports was redirected primarily towards the Russian market and to the rest of the world. The decrease in the EU-28 market share was caused by a drop in value-added exports towards Germany, the United Kingdom and France.

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Fig. 23. Growth in value-added in textile and clothing industry by direction of realization in 2001–2014, %.

Fig. 24. Structure of value-added exports in textile and clothing industry by export partners in 2000–2014, %.


4.7.2 THE SHARE OF HIGH-TECHNOLOGY MANUFACTURING SECTORS IN VALUE-

ADDED EXPORTS IS SMALL

Value-added exports in manufacturing are dominated by low-technology sectors and the share of high-technology sectors was small (see also chapter 4.7.7). High-tech value-added exports are dominated by the manufacturing of computer, electronic and optical products (C26) sector.

In Lithuania, manufacturing of computer, electronic and optical products generated only 1.0% of total value-added exports in 2014 (see Fig. 17 above), but it is a very export intensive sector. Exports of this industry was, to a high extent, oriented towards gross capital formation. In 2014, around half of value-added exports of computer, electronic and optical product sector was generated by gross capital formation (compared to 24.2% in 2000).

In terms of value-added exports, the EU-28 market was the most important for the computer, electronic and optical product industry. The share of exports to this country block in 2014 was 40.6% (see Fig. 25). The share of the EU-28 economies increased in the early post-EU accession period, but decreased onwards. In 2000 the EU-28 market made 55.9% of total value-added exports, in 2004 60.0% and in 2007 63.5%. The trend reversed drastically starting from the global financial and economic crisis. From 2007 to 2014, the share of EU-28 countries in total value-added exports decreased by 22.9 percentage points to 40.6% in 2014. These trends were mainly driven by a drop in exports to Latvia and Estonia, although, to other EU-28 economies, especially to Germany and Poland, exports somewhat increased. However, in 2014 Estonia and Latvia remained the main export markets among EU-28 countries for Lithuanian manufacturing of computer, electronic and optical products. A slightly lower share of total value-added exports in 2014 was taken by countries belonging to the rest of the word (in accordance to WIOD definition) with a share of 38.2%.

Manufacturing of machinery and equipment (C28) is the other high-tech goods producing sector in the Lithuanian economy. The sector is rather small with a share in value-added below 1% and a share of 1.4% in total value-added exports (see Fig. 18 above). Its export intensity is also very high and mainly supplies to the gross capital formation final demand component (around 60% in 2014).

In terms of value-added exports, the most important trade partners for this industry were the EU-28 economies with a share of 26.9% and Russia 25.4%, 2.4% were taken by the United States and Norway each, 2.1% by China and the rest of the world country block took a share of 36.4% (see Fig. 26). Among EU-28 economies, the highest shares were taken by Germany (4.9% of total value-

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page 21 of 35

added exports in 2014), followed by Latvia (3.5%), Sweden (2.4%), Poland (2.3%), the United Kingdom (2.0%), Estonia (1.7%) and France (1.5%).

Dynamics in the shares of trading partners reveal that exports to Russia (also to the rest of the world) has been growing since 2009 (except for 2013). This led to an increase in importance of this trading partner for this sector. Export growth to EU-28 economies, on the contrary, was usually positive (except for 2012 and 2014), but more moderate and not stable. Therefore the share of the EU-28 block tended to decrease, especially in 2014. In 2014 the most notable decrease in exports towards EU-28 market was recorded in Latvia, Germany, Denmark and Sweden.

Fig. 25. Structure of value-added exports in computer, electronic and optical industry by export partners in 2000–2014, %.

Fig. 26. Structure of value-added exports in machinery by export partners in 2000–2014, %.


4.7.3 THE MAJORITY OF VALUE-ADDED EXPORTS IS GENERATED BY BUSINESS

SERVICE ACTIVITIES

The Business services sector (G45-U, except O,P,Q) generated more than half of total value-added exports (55.5% in 2014), with the highest shares for land transport, wholesale and warehousing activities. A total of 26 very different activities are included in business services in WIOD and some additional insights on the most important sectors in terms of value-added exports is provided in this section.

Considering all business services activities, it is noteworthy, that this sector of the economy generated more than half of total value-added exports in 2014. The result is striking, considering that, in general, many service activities are considered to be non-tradable. The share of business services in total exports was increasing from 2000 to 2009 – from 50.5% to 58.0%, but this trend reversed in the highlight of the global financial and economic crisis. From 2010 to 2012 the share of business services declined to 52.9% at the expense of an increase in the share of manufacturing in total value-added exports. The trend reversed backwards again in 2013 and in 2014 the share of business services in total value-added exports was 55.5%.

The export intensity of business services is high, but considerably lower than in manufacturing. In 2014, almost half of total value-added (47.7%) created in business services was exported (in manufacturing this was 77.3%). The export intensity in this sector tended to increase in the period of 2000–2014, although at a slower pace than in manufacturing. In 2000, 24.8% of total value-added was exported by business services, in 2004 already 33.2%, in 2009 it was 36.2% and in 2014 it grew to 47.7%. The rise in export intensity was determined by very fast growth rates (except for 2009) of business services in export markets and more moderate domestic growth rates.

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The highest contributions to value-added exports were by wholesale trade, except of motor vehicles and motorcycles (G46), land transport and transport via pipelines (H49) and warehousing and support activities for transportation (H52) (see Fig. 17 above). The share of these sectors in total value-added exports of Lithuania in 2014 was 16.3%, 13.8% and 7.8% respectively. Other business services sectors such as real estate activities (L68), retail trade, except of motor vehicles and motorcycles (G47) and legal and accounting activities (M74-M75) contributed considerably less to total Lithuanian value-added exports.

The Lithuanian land transport sector (H49) along with warehousing and support activities for transportation (H52) contributed considerably to total value-added exports of Lithuania (in total 21.6% in 2014). The share of the land transport sector in exports in 2014 was 13.8% and of warehousing activities 7.8%. The shares of both sectors in total value-added exports of Lithuania also tended to increase throughout time. The dynamics of these two sectors were very similar as well, considering the close interconnection of these two activities. Directions of value-added exports, although, somewhat differed.

Considering the land transport sector (H49), the export share in total value-added of this sector was increasing throughout time. It grew from 38.9% in 2000 to 80.8% in 2014, suggesting a very high export intensity and a gradual redirection of this activity from domestic towards foreign markets. Indeed, the value of domestically consumed services increased twice from 2000 to 2014, whereas value-added exports grew more than fourteen times. Growth in value-added exports was positive each year in the period of 2000–2014 (except for 2009), whereas value-added growth rates on domestic market in recent years (in 2009-2014) were very volatile (see Fig. 27).

The land transport sector mainly operates on the EU-28 transport market. The share of the EU-28 block in 2014 was 32.6%, followed by Russia with 10.9% (see Fig. 28). From the EU-28 countries, the most important trading partners in 2014 were Germany (7.7% of total value-added exports of inland transport), France (5.0%), Poland (3.5%), Italy (2.4%), Austria (2.1%), the United Kingdom (1.9%), Belgium (1.6%), Sweden (1.5%), Latvia (1.3%) and Denmark (1.2%). The rest of the world country block in 2014 took a share of 44.6%. Looking at export dynamics to all these markets in recent years, it is noticeable that exports to Russia decreased substantially between 2013 and 2014. A slight decrease was also recorded to EU-28 countries. Exports were redirected towards other markets (or the rest of the world economies in accordance to WIOD), causing a considerable contribution of other markets in the value-added exports growth of transporting activities.

Fig. 27. Growth in value-added in land transport sector by direction of realization in 2001–2014, %.

Fig. 28. Structure of value-added exports in land transport sector by export partners in 2000–2014, %.


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The export intensity in the warehousing and support activities for transportation (H52) was also increasing throughout time. It grew from 45.3% in 2000, to 65.2% in 2004, further to 68.9% in 2009 and 83.5% in 2014. These trends were driven by strong exports growth with a twelve time increase since the year 2000, whereas domestic demand in the same period only doubled. Growth in value-added exports was positive each year in the period of 2000–2014 (except for 2009), whereas value-added growth rates in the domestic market were unstable, especially in 2009-2014, similar as in the land transport sector (see Fig. 29).

Compared to land transport services, the EU-28 economies are much more important trading partners for warehousing activities. The share of EU-28 economies in total value-added exports in 2014 was 43.2% and this share was exceptionally stable throughout time (see Fig. 30). From the EU-28 countries, the highest shares in 2014 were for Germany (13.2% of total value-added exports of warehousing activities), Italy (4.3%), France (4.1%), Sweden (3.1%), Belgium (2.7%), the United Kingdom (2.6%), Denmark (2.1%), Poland (2.0%), Austria (1.8%) and Latvia (1.4%). Russia’s share in value-added exports in 2014 was 5.9%. The rest of the world country block in 2014 took a share of 36.0% in total value-added exports in this sector. Looking at the trends, the share of Russia tended to decline since 2012, whereas the share of Norway increased since 2011.

Fig. 29. Growth in value-added in warehousing sector by direction of realization in 2001–2014, %.

Fig. 30. Structure of value-added exports in warehousing sector by export partners in 2000–2014, %.


Wholesale trade, except of motor vehicles and motorcycles (G46) was the biggest sector in Lithuania’s economy in 2014. This sector was the biggest one in terms of total value-added and in terms of value-added exports. The share of this sector in total value-added was increasing in the economy since 2006 and in 2014 it reached 8.7%. In terms of value-added exports, the share of these activities in 2014 was 16.3% (see Fig. 18).

Growth in value-added exports was exceptionally high between 2000 and 2014. During this period exports increased eight times, while in the domestic market it grew only twice. This development led to an increase in export intensity to 84.5% in 2014. Positive export growth rates were recorded almost all the years (except for 2009), whereas growth in the domestic market, being positive until 2008, were grinded to a halt in the 2009-2013 period and recovered only in 2014 (see Fig. 31).

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By exports markets in 2014, wholesalers were operating mainly in the EU-28 market with a share of 18.3%, followed by the US market with 4.3%, Russia with 3.1% (see Fig. 32). By the EU-28 countries, the highest value-added exports share were for Germany (3.0%), followed by the United Kingdom (2.0%), Latvia (1.8%), Poland (1.5%), France (1.4%), Denmark (1.4%), and Italy and Sweden (with 1.3% each). Economies, belonging to the rest of the world (in accordance to WIOD definition) took a share of 65.3%. The share of EU-28 countries has been decreasing since 2012, at the expense of the share of the rest of the world country block. This was caused by negative value-added exports growth rates in the former and strongly positive growth rates in the latter market.

4.7.4 THE SHARE OF KNOWLEDGE INTENSIVE SERVICE SECTORS IN VALUE-

ADDED EXPORTS IS SMALL

The most important sectors in business services in terms of value-added exports were less knowledge intensive sectors of economy. The share of knowledge intensive services in total exports was much lower (see also chapter 4.7.7). Computer programming, consultancy and related activities and information service activities (J62-J63) differs quite a lot from the sectors mentioned above. Although this sector is not very export intense, it is growing fast. Between 2000 and 2014 this sector grew more than fifteen times, leading to an increased share of this sector in total value-added from 0.3% in 2000, to 0.8% in 2009 and further to 1.2% in 2014 (see Fig. 18). Exporting activities increased substantially throughout time, but this sector remained more domestically oriented. Its export intensity increased from 11.0% in 2004 to 34.2% in 2014 (see Fig. 33).

The most important export market for computer programming, consultancy and related activities and information service activities were the EU-28 economies with a share of 21.0%, followed by the USA with a share of 3.2% (see Fig. 34). Among the EU-28 economies the highest share in 2014 was for Sweden with 3.6%, followed by Germany and the Netherlands with 2.7% each, the United Kingdom and Latvia with 1.4% each, Poland with 1.2% and Denmark, Estonia and France with 1.1% each. In 2014, 66.2% of total value-added exports by this sector were directed towards the rest of the world country block. Since 2008 the increase in exports to the EU-28 economies was less strong than towards the rest of the world economies, causing a gradual increase in the share of the latter at the expense of the former.

Fig. 31. Growth in value-added of the wholesale trade sector by direction of realization in 2001–2014, %.

Fig. 32. Structure of value-added exports of the wholesale trade sector by export partners in 2000–2014, %.


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Fig. 33. Value-added in information and communication technology sector by direction of realization in 2000–2014, %.

Fig. 34. Structure of value-added exports in information and communication technology sector by export partners in 2000–2014, %.


4.7.5 THE EXPORT INTENSITY OF AGRICULTURE, FORESTRY AND FISHING

ACTIVITIES HAS STRONGLY INCREASED

The export intensity of agricultural, forestry and fishing activities (A01-A03) is increasing throughout time. The share of these sectors in total value-added exports in 2014 was 5.2%. In 2014 agricultural, forestry and fishing sectors (A01-A03) were exporting two thirds of their total value-added. Export intensity of these activities was constantly increasing throughout 2000-2014 (except for some years). In 2000, the share of exports in total value-added was 18.2%, in 2005 it grew to 25.1%, in 2010 it was 54.8% and in 2013 it reached 71.5%. In 2014 there was some drop in export intensity to 67.9%.

Part of the drop in export intensity in 2014 was driven by the largest sector which was crop and animal production (A01). In 2014, the export intensity in this activity declined from 74.5% in 2013 to 70.3% in 2014 (see Fig. 35). This sector accounts for more than 80% of total value-added in the agricultural, forestry and fishing activities (total of A01-A03 sectors). This sector also generates the majority of value-added exports in agricultural, forestry and fishing activities (A01-A03) with 4.5% out of 5.2% (see Fig. 18). Between 2000 and 2014, value-added exports of the crop and animal production sector increased almost nine times, whereas value-added domestic consumption decreased, which explains the strong increase in export intensity of this sector throughout time.

The countries that are most important for agricultural activities (A01) in terms of value-added exports are the EU-28 economies. The share of this market in 2014 was 43.0% (see Fig. 36). The share of Russia in total value-added exports was 9.1%, followed by the USA and Turkey (2.2% each) as well as China (1.6%) and Norway (1.4%). In the EU-28 economies value-added exports of agricultural products went mainly to Latvia (with a share of 7.1% of total exports), Germany (7.1%), Poland (4.1%) and Sweden and the United Kingdom (2.6% each). Countries belonging to the rest of the word (according to the WIOD definition) had a share of 36.7% in 2014.

The shares of the majority of trade partners are highly volatile. The share of the EU-28 market tends to decrease throughout time. In 2004 the share of this country block was 63.1%, compared to 43.0% in 2014. Rather constant shares in recent years are taken by such countries as Australia, Brazil, Canada and Switzerland (with shares ranging from 0.4–0.5%), China (between 1.6-1.8%) and some others, thereby showing that value-added exports to these economies usually grow in line with total production of agricultural goods.

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It is also noteworthy that the decline in export intensity in 2014 (in comparison to 2013), was caused by a strong decrease in value-added exports to EU-28 markets. In 2014 total value-added exports of agricultural products decreased by almost 15%. The largest drop of value-added exports was recorded to Germany, Poland, Latvia, Sweden, Finland, the Netherlands and France. The decrease of value-added exports to the EU-28 market was slightly compensated by value-added export growth to the country block belonging to the rest of the word. A part of agricultural production was also redirected towards the domestic market, which, differently from exports, in exhibited positive growth rates in 2014.

Fig. 35. Value-added in agricultural sector by direction of realization in 2000–2014, %.

Fig. 36. Structure of value-added exports in agricultural sector by export partners in 2000–2014, %.


4.7.6 THE MAJORITY OF VALUE-ADDED IN CONSTRUCTION IS GENERATED IN

THE DOMESTIC MARKET

The Construction sector (F) mainly operates on the domestic market and construction services are mostly geared towards gross capital formation. Construction services are exported, but export intensity is low. In 2014 only 12.3% of the value-added created by the Lithuanian construction sector was generated by exporting activities (see Fig. 37-38) and the share of this sector in total value-added exports was only 2.1% (see Fig. 18 above). The Lithuanian construction sector became more export oriented throughout time. In 2004 export activities generated only 6.5% of total value-added of construction services, but in 2014 this had doubled to 12.3%. This trend has been driven by stronger growing value-added exports than value=added creation in the domestic market, especially in recent years (from 2012 to 2014).

Comparing the structure of value-added in domestic and in exports markets, there are some differences which are worth mentioning. The most remarkable one was that domestic value-added of this sector was more geared towards gross capital formation than value-added creation by exporting activities. In 2014, 42.5% of total exported value-added was intense in gross capital formation. In domestic markets this share was much higher with 83.3%. Yet, the share of gross capital formation in value-added exports of the construction sector tends to increase throughout time (up from 34.5% in 2000) and an identical tendency occurred in the domestic market.

Most exports in the construction sector are directed towards neighbouring countries and towards the EU-28 market in particular. The share of the EU-28 block in 2014 was 29.6%, followed by Russia with 5.5%. From the EU-28 economies, countries such as Latvia (with a share of 5.4% in total value-added exports of the construction sector), Germany (4.2%), the United Kingdom (2.5%), Poland (2.3%), the Netherlands (2.1%), France (1.8%) and Sweden (1.7%) are important for the

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Lithuanian construction sector from a value-added exports perspective. The rest of the world economies in 2014 took a share of 46.6% of total value-added exports. In the rest of the world countries, the Lithuanian construction sector is more geared towards gross capital formation, whereas in the EU-28 market towards household consumption.

Fig. 37. Value-added in construction sector by final demand component in 2000–2014, %.

Fig. 38. Value-added in construction sector by direction of realization in 2000–2014, %.


4.7.7 VALUE-ADDED EXPORT STRUCTURE BY TECHNOLOGICAL INTENSITY

Lithuanian value-added exports of services are dominated by less knowledge intensive activities and low technology products dominate value-added exports in manufacturing. The structure of exports by its technological intensity is an additional perspective from which Lithuanian exports could be analysed. The highest shares in value-added exports of services were taken by wholesale (G46), inland transport (H49) and warehousing and support activities for transportation (H52). These sectors are categorised as less knowledge intensive sectors according to the Eurostat definition.8 Similarly, the highest shares in value-added exports of manufacturing are taken by food, beverages and tobacco (C10-C12), furniture (C31-C32), and textiles, wearing apparel and leather products (C13-C15) and all these sectors are listed as low technology sectors. In 2014, less knowledge intensive services made up 45.8% out of 55.5% of value-added exports of services (see Table 3), whereas low-tech and medium-low-tech manufacturing represented 24.7% out of 33.3% of value-added exports of manufacturing. The dominance of low-tech manufacturing and less knowledge intensive services in value-added exports corresponds to the general structure of Lithuania’s economy.

Looking at the dynamics of value-added exports structure by technological intensity, it is noteworthy, that the share of high-technology and medium-high-technology manufacturing tended to increase in economic downturns and decrease in times of economic upturns. For example, in 2008-2009 the share of high-technology and medium-high-technology manufacturing was close to one third of total manufacturing value-added exports. In 2013-2014 the share decreased to around one fourth. Similar trends were observed in services. In 2009, the share of knowledge intensive business services was more than one fifth, whereas in 2014 only slightly higher than one sixth of total value-added services exports.

8 See Eurostat http://ec.europa.eu/eurostat/cache/metadata/Annexes/htec_esms_an3.pdf (2016) for more information about division of sectors by their technological intensity.

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Table 3. Structure of Lithuanian value–added exports in 2014 by technological intensity, %.

Business services 55.5

Knowledge intensive services 9.6

Knowledge intensive financial services (K64-K66) 1.3

Knowledge intensive market services (H50-H51; M69-M71;M73-M74; N78;N80) 4.3

High-tech knowledge intensive services (J59-J63;M72) 1.9

Other knowledge intensive services (J58;M75;O84-R93) 2.1

Less knowledge intensive services 45.8

Less knowledge-intensive market services (G45-G47;H49; H52; I55-I56;L68;N77;N79;N81;N82;S95) 45.6

Other less knowledge-intensive services (H53;S94;S96; T97-U99) 0.2

Manufacturing 33.3

High-technology (C21;C26) 1.7

Medium-high-technology (C20,C27-C30) 6.9

Medium-low-technology (C19; C22-C25; C33) 7.6

Low technology (C10-C18; C31-C32) 17.1


4.7.7 MANUFACTURING AS A GATEWAY FOR SERVICES EXPORTS?

The Lithuanian manufacturing sector is usually exporting directly. Business service activities, on the other hand, are more often exported indirectly through other sectors of the economy. With direct exports is meant that the producing sector exports its value-added (products or services) by itself, while indirect exports means that value-added was exported through another Lithuanian sector. For example, the Lithuanian agricultural sector supplies raw materials to the Lithuanian food industry, which directly exports its products to foreign markets. Part of the value added contained in the exported food product is generated by the Lithuanian agricultural sector, which means that added-value generated by agriculture is indirectly exported through the food industry.

Manufacturing was usually exporting its products directly (29.9% out of 33.3%). Regarding business services, around two thirds (35.5% out of 55.5%) of value-added in 2014 was exported directly and one third (19.9% out of 55.5%) indirectly (see Fig. 38).9 These results could indicate that manufacturing sectors export a considerable amount of business services indirectly and are a gateway for exports of business services, but results support this statement only partly.

Even though a notable fraction of value-added of business services (around one third) was exported indirectly by other sectors of the economy, direct exports are still considerably higher. Direct exports of services are also higher than in manufacturing. This confirms the relative importance of business services in Lithuania’s structure of value-added exports. Manufacturing and other business services sector were almost equally involved in indirect exports of business services, with shares of 9.8% and 8.0% respectively (see Fig. 39). This suggests that service exporters are to a high extend involved in self-exporting activities, while there is some interconnection with manufacturing and other business service sectors.

For other sectors of the economy, it is noteworthy, that indirect manufacturing exports, even though small in magnitude, occurred more often through other manufacturing activities than through business services. The importance of business services in exports of manufacturing products is, thereby, limited. The value-added of the agricultural sector was also, to a high extent, exported directly, yet, some fraction was exported indirectly through manufacturing sectors.

9 Direct and indirect exports of value-added is derived from the value-added exports matrix, appearing in equation (4).



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A deeper look into the structure of value-added exports in business services provides some additional insights. The largest sectors in value-added terms, such as wholesale (G46), land transport (H49) and warehousing activities (H52), were exporting a high share of their value-added directly. Taking all these three sectors altogether, almost 80% of their value-added exports were direct exports. Other business service sectors (not G46, H49 and H52) had a higher fraction of their value-added exported indirectly through other sectors of the economy (almost 36%). Manufacturing, as already mentioned above, usually was involved in direct exports of value-added. In agriculture, almost 30% of value-added was exported indirectly by manufacturing sectors. Crop and animal production (A01) and fishing (A03) was exported indirectly mainly through the food industry (C10-C12), and forestry (A02) mainly through the wood processing industry (C16).

Looking at the dynamics of value-added exports of business services, it is noteworthy that growth in direct exports outperformed the growth of indirect exports during the majority of years during 2000-2014 (see Fig. 40). This was caused by a gradual increase in the share of direct exports of business services, especially in 2011–2014. In 2011 direct exports made up 59% of total value-added exports of services, whereas in 2014 this grew to 64%. On the other hand, the role of manufacturing as a gateway for indirect exports of business services tended to decrease. In 2011 manufacturing indirectly exported one fifth of value-added exports of business services, in 2014 this share decreased to one-sixth. From the foregoing can be concluded that business services have become more dependent on direct exporting of its value-added over time.

Fig. 39. Sectoral value-added exports by exporting sector in 2014, %.

Fig. 40. Growth in exports of business services value-added by exporting sector in 2001–2014, %.


5. CONCLUSIONS

Traditional export statistics alone cannot provide a sufficient explanation for assessing the impact of internationalization on economic growth. As a result of improving information and communication technologies, production processes have become fragmented among countries and firms. This means that traditional export statistics depicting turnover reveal only part of the story. Therefore a value-added perspective of trade is used to analyse the impact of exports on economic growth in Lithuania. The main findings are as following:

► The share of domestic value-added in Lithuanian exports decreased from 74.5% in 2000 to 59.9% in 2014. This indicates increasing connectivity with activities abroad in the production of exports.

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► Value-added exports generate more than two fifth of total GDP and the impact of exports on economic growth increased throughout time. In 2014 value-added exports generated 40.3% of GDP, compared to 19.0% in the year 2000 and 27.9% in 2004. This evolution did not occur evenly. In the years preceding the 2008-2009 crisis, the share of value-added exports in total value-added declined because of strong growth in the domestic market, but the post-crisis recovery was mainly export driven and increased from 28.3% in 2007 to 40.3% in 2014.

► Growth in value-added domestic demand in 2000-2014 was mainly geared towards demand arising from household consumption with a share of 61.4%, followed by government consumption with 27,5% and a relatively small share for gross capital formation with only 11,1%. On the other hand, value-added exports were mainly geared towards demand by household consumption and gross capital formation in foreign markets with shares of 66.1% and 24.1% respectively. Demand from government consumption abroad had a much smaller share in Lithuanian value-added exports with only 9.8%.

► In terms of value-added exports, the EU-28 economies were the most important trading partners for Lithuanian exporters with the highest shares assigned to Germany, Latvia, the United Kingdom, Poland, France and Sweden.

► The share of business services in total value-added exports in 2014 was 55.5%, followed by manufacturing with 33.3%, agriculture with 5.2%, other industries with 3.3% and construction with 2.1%. The role of manufacturing is therefore less important than can be gauged simply from traditional export statistics.

► Within manufacturing, the largest contributions were by traditional industries, such as the food, beverages and tobacco industry, the textiles and clothing industry and the furniture industry. High-tech industries, only have a small contribution in value-added exports with a miniscule share of only 1.7%.

► Among business services, the largest shares were for wholesale trade services, inland (road) transport services and warehousing activities. Knowledge-intensive services took a share of 9.8% in total value-added exports, mainly through information and communication technology services.

► The Lithuanian manufacturing sector is usually exporting directly. Business service activities, on the other hand, are both directly exported and indirectly exported through other sectors of the economy of which manufacturing is the foremost. In addition, a considerable share of agricultural value-added is exported through the manufacturing industry.



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References

Timmer, M.,Dietzenbacher, E., Los, B., Stehrer, R. and de Vries G. (2015), “Downward Nominal and Real Wage Rigidity. Survey Evidence from European Firms”. ECB Working Paper Series No. 1105.

Dietzenbacher E., Los B., Stehrer R., Timmer M. and de Vries G. (2013), “The Construction of World Input-Output Tables in the WIOD Project”. Economic Systems Research , 2013, Vol.25, No.1, pp.71-98.

Javorsek M. and Camacho I. (2015), “Trade in Value Added: Concepts, Estimation and Analysis”. ARTNet Working Paper No. 150, 2015.

Jones Lin, Powers W. and Ubee R. (2013) “Making Global Value Chain Research More Accessible”. Office of Economic Working Paper. US International Trade Commission. No.2013-10A.

Kwaak T. (2013) “A Cumulative Production Structure Matrix for Dutch SMEs. Methodology and summary results.” EIM Research Reports No. H201311.

Timmer, M. and de Vries G. (2015), “Dutch Manufacturing Competing in Global Value Chains”. Final report for Ministry of Economic Affairs and VNO/NCW. University of Groningen.



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Appendix. List of countries and industries in WIOT for 2000-2014

Table 1. List of countries in WIOT.

Country code Country

1 AUS Australia

2 AUT Austria

3 BEL Belgium

4 BGR Bulgaria

5 BRA Brazil

6 CAN Canada

7 CHE Switzerland

8 CHN China

9 CYP Cyprus

10 CZE Czech Republic

11 DEU Germany

12 DNK Denmark

13 ESP Spain

14 EST Estonia

15 FIN Finland

16 FRA France

17 GBR United Kingdom

18 GRC Greece

19 HRV Croatia

20 HUN Hungary

21 IDN Indonesia

22 IND India

23 IRL Ireland

24 ITA Italy

25 JPN Japan

26 KOR Korea

27 LTU Lithuania

28 LUX Luxemburg

29 LVA Latvia

30 MEX Mexico

31 MLT Malta

32 NLD Netherlands

33 NOR Norway

34 POL Poland

35 PRT Portugal

36 ROU Romania

37 RUS Russia

38 SVK Slovakia

39 SVN Slovenia

40 SWE Sweden

41 USA USA

42 TUR Turkey

43 TWN Taiwan

44 ROW Rest of the World

Source: WIOD (2016).



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Table 2. List of industries in WIOT.

Industry code Industry description

Agriculture, forestry and fishing

A01

Crop and animal production, hunting and related service activities

A02

Forestry and logging

A03

Fishing and aquaculture

Manufacturing and other industries

B

Mining and quarrying

Manufacture of food products, beverages and tobacco products

C10-C12

Manufacture of food products, beverages and tobacco products

C13-C15

Manufacture of textiles, wearing apparel and leather products

C16

Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials

C17

Manufacture of paper and paper products

C18

Printing and reproduction of recorded media

C19

Manufacture of coke and refined petroleum products

C20 Manufacture of chemicals and chemical products

C21 Manufacture of basic pharmaceutical products and pharmaceutical preparations

C22 Manufacture of rubber and plastic products

C23 Manufacture of other non-metallic mineral products

C24 Manufacture of basic metals

C25 Manufacture of fabricated metal products, except machinery and equipment

C26 Manufacture of computer, electronic and optical products

C27 Manufacture of electrical equipment

C28 Manufacture of machinery and equipment n.e.c.

C29 Manufacture of motor vehicles, trailers and semi-trailers

C30 Manufacture of other transport equipment

C31_C32

Manufacture of furniture; other manufacturing

C33 Repair and installation of machinery and equipment

D35

Electricity, gas, steam and air conditioning supply

E36

Water collection, treatment and supply

E37-E39

Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services

Construction

F

Construction

Business services and public sector services

G45 Wholesale and retail trade and repair of motor vehicles and motorcycles

G46 Wholesale trade, except of motor vehicles and motorcycles

G47 Retail trade, except of motor vehicles and motorcycles

H49

Land transport and transport via pipelines

H50 Water transport

H51 Air transport

H52 Warehousing and support activities for transportation

H53 Postal and courier activities

I Accommodation and food service activities

J58

Publishing activities

J59_J60

Motion picture, video and television programme production, sound recording and music publishing activities; programming and broadcasting activities

J61

Telecommunications

J62_J63

Computer programming, consultancy and related activities; information service activities

K64

Financial service activities, except insurance and pension funding

K65

Insurance, reinsurance and pension funding, except compulsory social security

K66

Activities auxiliary to financial services and insurance activities

L68

Real estate activities

M69_M70

Legal and accounting activities; activities of head offices; management consultancy activities

M71

Architectural and engineering activities; technical testing and analysis

M72

Scientific research and development

M73

Advertising and market research

M74_M75

Other professional, scientific and technical activities; veterinary activities

N

Administrative and support service activities

O84

Public administration and defence; compulsory social security

P85

Education



page 34 of 35

Q

Human health and social work activities

R_S

Other service activities

T

Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use

U

Activities of extraterritorial organizations and bodies

Source: WIOD (2016).



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Table 3. Shares of countries in WIOD in terms of value-added exports.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

AUS 0.3 0.3 0.3 0.3 0.4 0.4 0.6 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6

AUT 0.6 0.6 0.6 0.8 0.8 0.8 0.8 0.8 0.8 0.9 1.0 1.0 0.9 1.0 0.9

BEL 1.1 1.0 0.9 1.3 1.6 1.3 1.0 1.0 1.1 1.1 1.3 1.3 1.4 1.4 1.4

BGR 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.1

BRA 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.3 0.4 0.3 0.5 0.5 0.5 0.5 0.5

CAN 0.6 0.7 0.8 0.7 0.8 1.3 1.1 0.6 0.8 0.6 0.9 0.9 0.6 0.6 0.6

CHE 0.7 0.7 0.6 0.7 0.8 0.9 0.7 0.6 0.6 0.7 0.7 0.9 0.8 0.8 0.7

CHN 1.0 0.9 1.1 1.1 1.3 1.1 1.1 1.3 1.4 1.7 2.0 2.4 2.4 2.5 2.6

CYP 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0

CZE 0.4 0.3 0.3 0.4 0.4 0.5 0.5 0.6 0.4 0.4 0.4 0.4 0.4 0.5 0.4

DEU 10.8 9.7 8.9 10.8 9.0 8.5 7.7 8.1 7.1 7.9 7.9 8.1 7.4 8.3 7.4

DNK 3.2 3.0 2.7 2.8 3.0 2.2 2.2 2.5 2.6 2.2 2.2 1.8 2.1 2.0 1.7

ESP 1.6 2.1 1.8 1.8 1.9 2.2 2.0 1.8 1.9 1.6 1.4 1.4 1.3 1.1 1.1

EST 1.0 1.2 1.4 1.6 2.0 2.1 2.0 2.2 2.0 1.7 1.7 1.8 1.8 1.8 1.5

FIN 0.8 1.2 0.9 1.2 1.1 1.2 1.0 1.3 1.4 1.3 1.2 1.3 1.2 1.5 1.0

FRA 3.4 3.5 3.6 4.5 5.0 5.0 3.6 3.4 4.0 3.2 4.6 4.0 3.5 3.3 3.1

GBR 5.2 6.5 7.5 6.0 5.7 5.3 4.6 4.4 3.6 3.3 3.7 3.5 4.6 3.3 3.3

GRC 0.3 0.2 0.2 0.2 0.3 0.4 0.5 0.5 0.3 0.3 0.3 0.3 0.3 0.2 0.2

HRV 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

HUN 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

IDN 0.2 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.3 0.3 0.3 0.3 0.3

IND 0.6 0.3 0.6 0.4 0.5 0.5 0.6 0.6 1.1 0.8 0.9 0.8 0.6 0.5 0.5

IRL 0.2 0.2 0.2 0.3 0.3 0.4 0.5 0.6 0.6 0.5 0.3 0.3 0.4 0.4 0.2

ITA 2.1 2.1 2.5 2.8 2.7 2.5 2.9 3.1 2.5 2.6 2.7 2.7 2.3 2.3 2.4

JPN 1.8 1.6 1.5 1.4 1.4 1.2 1.1 1.1 1.1 1.0 1.0 1.1 1.2 1.0 1.1

KOR 0.4 0.4 0.4 0.3 0.4 0.3 0.4 0.4 0.4 0.3 0.4 0.4 0.4 0.4 0.5

LUX 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

LVA 4.7 4.5 3.8 4.4 5.4 5.6 6.4 7.0 6.0 4.2 4.1 4.3 4.3 4.2 3.5

MEX 0.3 0.2 0.3 0.2 0.3 0.2 0.2 0.2 0.3 0.2 0.3 0.3 0.2 0.2 0.2

MLT 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NLD 1.8 2.0 1.6 1.6 1.9 1.9 2.1 1.8 1.6 1.7 1.8 2.0 1.8 1.7 1.5

NOR 1.0 1.2 1.8 1.8 1.8 1.9 2.0 2.3 2.2 2.4 2.6 2.5 2.6 2.7 2.6

POL 3.5 3.2 2.1 2.6 2.7 3.0 3.4 3.9 4.1 3.3 3.5 3.6 3.0 3.3 3.2

PRT 0.3 0.6 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2

ROU 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.2 0.2 0.3 0.3 0.3 0.2

RUS 5.4 4.7 4.8 8.2 6.8 6.8 7.3 7.7 8.4 8.0 8.4 9.2 9.8 9.7 9.0

SVK 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.2

SVN 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2

SWE 4.2 3.4 3.4 4.4 3.8 3.1 3.3 2.9 2.7 2.5 2.9 3.0 2.9 3.1 2.8

TUR 0.9 0.8 0.9 0.9 0.8 0.6 0.5 0.5 0.7 0.5 0.8 0.9 0.8 0.6 0.6

TWN 0.3 0.3 0.3 0.2 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

USA 6.5 5.8 6.3 6.0 6.3 6.3 5.5 4.7 4.8 4.0 4.3 4.6 4.1 3.9 4.1

ROW 33.8 35.9 36.1 28.3 28.6 30.0 32.4 31.1 32.5 38.1 33.6 32.0 33.5 34.8 38.8

Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100



Lithuania in Global Value Chains: The Role of …...2017/06/30 · activities (H52), food...

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