Accounting for Global Supply Chains: An Integrated Framework That Incorporates Foreign Invested Firms

This paper proposes a new unified accounting framework to measure Global Supply Chain (GSC) activities. It integrates decomposition frameworks on gross output, trade, and value added, and formally incorporates the role of Foreign Invested Enterprises (FIEs). Compared to the existing Global Value Chain (GVC) metrics that do not distinguish FIEs from domestic firms, the estimate of GSC activities in our approach is three times as large. The key contributions of our approach are: (1) distinguishing GSC activities based on their positions along production chains (upstream, downstream, or both) and mode of engagement (trade, FDI, or both); (2) extending Vertical Specialization (VS) measures to domestic supply chains, bridging trade-only and production-based analyses; and (3) reconciling net and gross decompositions to provide a comprehensive view of GSC participation and exposures.