specific but rather focus on the type of activities carried out, taking into account vertical integration of production within and across countries.

A second lesson is that comparative advantage is no longer only determined within borders. In the past goods were bundles of national inputs and the ultimate determinants of competitiveness were therefore national. Nowadays goods are bundles of many nations’ inputs interlocking competitiveness across countries as the costs of imported intermediate inputs will also drive the comparative advantage of the importing countries. Unbundling of production processes magnifies the importance of transaction, transport and trade costs and the potential for international spillovers. For example, the impact of bilateral trade agreements and tariffs will be more difficult to assess and might have unintended consequences due to tariff accumulation along the production chain (Yi, 2003). And through cost-linkages improvements in infrastructure in one region might generate positive spillovers to trading patterns as intermediates’ prices fall. Adjusting to ongoing globalization is then a task that requires multilateral assessment and coordination of policy measures in order to maximize regional competitiveness that includes these knock-on effects. Industrial and trade policies need to be well-aligned. Baldwin and Evenett (2012) provide an excellent and extensive discussion of these policy issues.

In order to make systematic use for economic policy of the new GVC measures presented, though, there is a need for a firmer statistical basis to quantify these. Although the WIOD database has been constructed making maximum use of official statistics, there is room for improvement. We therefore welcome the recent initiative of the OECD and WTO to continue this line of work and establish it firmer in the international statistical community.<sup>11</sup> We urge for a better and more complete data collection, in particular concerning statistics on trade in services, and the import and export propensity of industries at a deeper level of disaggregation to account for heterogeneous production patterns. This will allow the extension of the GVC analysis beyond manufactures GVC which are central in this paper, and also analyze the GVCs of final services. In addition, more information on the foreign ownership of firms and profits is needed to properly allocate capital income in order to analyze GVC income both on a domestic and a national basis. The latter is preferable when analyzing national competitiveness, rather than domestic as in this paper.

At the same time there is a need for other indicators based on micro analysis, besides the macro-indicators proposed here. Due to the industry-level nature of our data, we have to implicitly assume that each country-sector produces a single homogenous product with a production structure which is an average across all firms. But it has been found that for example exporting firms have a different input structure than non-exporters (Bernard et al., 2007). To take this heterogeneity into account a more disaggregate approach is required. Building upon the insights that firm-level performance is highly heterogeneous, Ottaviano et al. (2009) propose additional measures that are based on micro databases and can thus reflect distribution shapes of firm-level performance in international activities and its drivers.<sup>12</sup> Another important development is the initiative to open up the black box of a firm, by surveying the type of business functions that are carried out domestically and those that are offshored (Sturgeon and Gereffi, 2009). Eurostat and the US Bureau of Labor Statistics have already carried out pilot projects to investigate the possibilities for large-scale surveys and first results are described in

> 11 See e.g. speech by Paul Schreyer on “The OECD-WTO Trade in Value-Added Database”, WTO Trade Data Day Geneva, 16 January 2013.

> 12 See the recently released EFIGE dataset for a good example (Altomonte and Aquilante, 2012).

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