**Table 7:  Export intensity across sectors (2015, percentages)**

||Share of<br>GDP|Domestic s<br>|ales<br>||Exports<br>||
|---|---|---|---|---|---|---|
|||Intermediate<br>inputs|Final<br>demand|Total|Intermediate<br>inputs|Final<br>demand|
|Agriculture|.054|.605|.161|.233|.169|.065|
|Fishing|.003|.715|.184|.102|.081|.021|
|Mining and quarrying|.019|.425|.009|.566|.560|.006|
|Manufacturing|.123|.463|.455|.082|.055|.027|
|Utilities and construction|.074|.262|.716|.021|.015|.006|
|Trade|.140|.246|.710|.045|.029|.016|
|Business services|.393|.459|.509|.032|.024|.008|
|Social&household services|.193|.062|.918|.019|.013|.007|

Notes: Population weighted averages across 40 of the 45 countries (without ETH, SDS, SUD, TZA, ZWE out of precaution for potential data problems).

In terms of GDP, manufacturing accounts for 12% of the economy, but its share rises to 19% if we measured it in terms of gross output. Value added within the manufacturing sector is only around 25% of total output, while it averages between 40 and 65% for the other sectors. This is important because export shares are calculated as a fraction of gross output. Combining information on the value added share of each sector with its share of GDP and its total export share, we can calculate each sector’s importance for total exports. This ranking, averaging over all countries, is: (1) manufacturing 25%, (2) mining and quarrying (21%), (3) agriculture 20%, (4) business services (16%), and (5) trade 10%.

# **3.5 Domestic value added in gross exports**

The previous calculations illustrate what fraction of output is exported for each country and what fraction of national production that each country accounts for, but this only gives a partial view on the importance of trade in value creation. It only summarizes international trade linkages in the final production step. For example, when inputs are sourced domestically, not all of their value added will be added by domestic sectors.

Johnson and Noguera (2012) have argued that the usual trade statistics provide a misleading picture on the importance of international trade as countries’ relative or absolute trade exposure is influenced by the intermediate inputs that are often imported first and later leave the country embedded in exports. They proposed to calculate a value added in gross output (VAX) ratio which divides the domestic value added that is embedded in a country’s exports by the directly observed gross export flows. There are several reasons why this ratio could deviate from unity. Exports can contain imported intermediates, either directly or through the inputs sourced from other sectors in the country. Greater integration of production chains internationally is likely to raise export flows more rapidly than the amount of value added that crosses borders.

These embedded imported inputs give rise to two measurement problems: reflection and redirection. A fraction of a country’s exports will not be consumed abroad, but will return to that same country embedded in other imports. This phenomenon unambiguously lowers the VAX ratio. At the same time, some exports from country 1 to country 2, will be embedded in the exports of country 2 and be consumed in country 3. The good flows in this example lower 29