What does USA import to make what it exports, and who controls those inputs?

For HS Section XVI (machinery and electrical equipment), we combine OECD TiVA’s foreign value-added share of gross exports (Koopman, Wang & Wei 2014; Johnson & Noguera 2012) with CEPII BACI bilateral import flows to size backward linkages and the concentration of foreign input suppliers. This is the backward-GVC view that Baldwin (2016, The Great Convergence) argued replaced traditional comparative-advantage analysis: a country’s competitiveness in a sector is as much about who it buys from as what it sells.

How import-reliant is the export basket

The foreign value-added (FVA) share of gross exports is the share of every dollar of sector exports that originally came from imported inputs, traced through the full input-output matrix. Koopman, Wang & Wei (AER, 2014) formalised the decomposition; Johnson & Noguera (JIE, 2012) earlier showed that the gap between gross exports and value-added exports grew 10–15 percentage points across advanced economies between 1970 and 2009. We compare USA against income peers with GNI per capita PPP within ±30% of its latest reading (World Bank WDI, indicator NY.GNP.PCAP.PP.CD), using OECD TiVA EXGR_FVA (MAINSH release, % of gross exports) for 2020.

Who supplies USA’s input basket

Decomposition of USA’s gross imports in HS Section XVI by source country in 2024. True foreign value-added by partner requires a bilateral input-output table with partner-resolved flows, which the OECD 2023 TiVA release does not publish at the country × partner × ISIC level we’d need here (partner dimension is collapsed to World in the EXGR_FVA series we load). The gross-import ranking below is the best proxy the BACI bilateral archive permits and is what the Hausmann-Klinger (2007, “The Structure of the Product Space”, CID WP 146) literature uses for dependency mapping in the absence of firm-level I-O tracing.

Dependency concentration, by HS2 chapter

Within HS Section XVI, each two-digit chapter has its own supplier HHI on the 0–10,000 DOJ scale (Hirschman 1945; Herfindahl 1950; US DOJ/FTC 2023, Horizontal Merger Guidelines §2). Chapters above the 2,500 red-zone threshold are markets where one or two exporters hold pricing power; for a CPO, these are the sub-sectors where second-source qualification is the mandate. Arjona, Connell & Pisu (2023, OECD ECO/WKP 1775) show that above this threshold the probability of a single-origin disruption passing through to the importer’s output price jumps sharply.

Single-supplier exposure: where one origin dominates the input

For each HS2 chapter in the section, the estimated share of USA’s imports coming from its single largest bilateral supplier. Chapters above the 40% single-source threshold (Arjona, Connell & Pisu 2023, OECD ECO/WKP 1775) are where a procurement board should be asked the qualification-of-second-source question. Note the construction caveat: bilateral HS-level attribution uses each exporter’s share of world exports in the chapter to apportion USA’s total imports from that partner, because the BACI bilateral × HS6 raw archive is not part of this build. The proxy converges to the true bilateral only where partner composition at HS6 is roughly proportional to world composition; published comparisons (CEPII BACI 2024 methodology note) suggest this is an acceptable first pass at HS2 granularity.

How far upstream does world trade run? A BEC-stage decomposition

A backward linkage is only a concern if the input flows through many production steps before reaching final demand. Antràs & Chor (2013, Econometrica 81:4) formalise upstreamness as the weighted average steps-to-final-demand implied by the Leontief inverse of the input-output matrix. A coarser but internationally comparable cut is the UN Broad Economic Categories (BEC) mapping of every HS6 line to one of five stages: primary, semi-finished, parts & components, capital goods, consumption goods. Leontief (1941, Structure of the American Economy) introduced the input-output accounting behind both measures; WIOD and OECD TiVA extend it with global bilateral coverage. Baqaee & Farhi (2019, Econometrica 87:4) show that shocks propagate super-linearly through the upstream layers, which is why the stage mix matters for procurement stress tests.

Chapter-level unbundling depth: 2000 → 2024 world-trade growth

Section-level BEC-stage decomposition requires an HS6 → BEC mapping not present in this workbench, so we read chapter-level upstreamness off the observed Baldwin (2013, Global Supply Chains: Why They Emerged) second-unbundling trace: chapters pulled deeper into cross-border production fragmentation grew world exports faster than chapters whose trade just tracked commodity prices or final-demand income. For HS Section XVI, we plot each HS2 chapter’s compound multiple of world-export value between 2000 and 2024. The intermediate share of world trade (primary + semi-finished + parts) itself rose from 59% in 2000 to 61% in 2023 (Figure 5), so a chapter with a multiple clearly above the section median is likely sitting in the intermediate-stage pull.

Global single-source HS6 lines: where one country controls > 70% of world exports

The within-section HS2 exposure in Figure 4 is one face of dependence; the other face is the HS6 line where a single country controls most of world trade everywhere, not just for one importer. Arjona, Connell & Pisu (2023, OECD ECO/WKP 1775) operationalise single-source concentration at CR₁ > 50%; Chowdhry & Felbermayr (2023) set a stricter 70% cut to isolate the lines where second-source qualification is effectively impossible within a 2-3 year horizon. We apply the stricter cut to every HS6 line in BACI 2024 with world exports above US$50M and rank the top 20 by trade value. These are the lines where the EU CRMA’s 65% single-origin ceiling (Regulation (EU) 2024/1252 Art. 5) would bite hardest if extended from strategic raw materials to the full HS6 catalogue.

Demand-side concentration: HS6 lines where one buyer commands > 50% of world imports

Figure 7 reads the supply side. The mirror of that is the demand side: HS6 lines where a single country buys more than half of world imports. Chowdhry & Felbermayr (2023, Trade in Times of Uncertainty, Kiel Working Paper) define strategic dependence symmetrically: concentration on either side of the ledger is a fragility because the losing side cannot reallocate within a commercially relevant horizon. A single dominant buyer is also the leverage channel of record for import-side policy tools — the US Section 301 tariffs, the EU Carbon Border Adjustment Mechanism (Regulation (EU) 2023/956), and China’s 2023 MOFCOM critical-mineral buying quotas all operate through the top-1-importer role.

The income-FVA “smile”: where USA sits in the cross-section

Figure 1 ranks USA against narrow income peers; Figure 9 steps back and plots every TIVA-covered economy at (log GNI per capita PPP, FVA share). The expected shape is an inverted U: low-income economies trade primary goods (low FVA); middle-income economies specialise in assembly stages of global value chains (high FVA); advanced economies move into services and intangible content (FVA falls back). Baldwin (2016, The Great Convergence, ch. 5) and Johnson & Noguera (2012, JIE 86:2) document this for the manufacturing-trade FVA series. USA’s position relative to the cross-sectional fit is the cleanest single test of whether the country is over-integrated, under-integrated, or on-trend in HS Section XVI for its income level.

How procurement teams use this

• Backward-linkage budget. Figure 1 sizes the sector’s FVA share and locates it against income peers. A reading materially above the peer median means the sector will not survive an import shock without a landed-cost spike.
• Second-source qualification queue. Figure 3 flags chapters above HHI 2,500 and Figure 4 flags chapters above 40% single-supplier share. These are the audit lines for a supply-chain review; each should be paired with a named alternate buyer.
• CBAM, sanctions and export-control scenarios. Figures 2 and 4 together let you re-run the country’s input basket under a named-origin exclusion (for instance, remove China or Russia from the supplier mix) and read the share of imports that would need to be reallocated.

Policy read: IRA, CHIPS, CRMA, dual circulation

These four figures assemble the sourcing-dependency case that the latest wave of industrial policy is explicitly responding to. The US Inflation Reduction Act (H.R. 5376, 16 Aug 2022) Section 45X advanced-manufacturing credit and domestic-content bonus codify a preference for FVA moving toward North America and free-trade partners; the CHIPS and Science Act (P.L. 117-167) adds foreign-entity-of-concern rules to deny the credit when a targeted input chapter is >40% from a concern entity. The EU Critical Raw Materials Act (Regulation (EU) 2024/1252, adopted 11 April 2024) directly targets Figure 4’s red zone with a 65% ceiling on any single third-country origin for strategic raw materials. China’s dual-circulation strategy (14th Five-Year Plan, 2021) and the parallel “2+N” import-substitution guidance work the same dependency matrix from the opposite direction, aiming to cap inward FVA share in strategic ISIC divisions. Used as a triptych, Figures 1 + 4 + 5 tell you whether a given sector in a given country is a candidate for any of these instruments.

References

• Antràs, P., & Chor, D. (2013). “Organizing the Global Value Chain.” Econometrica 81(6): 2127–2204.
• Arjona, R., Connell, W., & Pisu, M. (2023). “An analysis of international trade interdependencies.” OECD Economics Department Working Paper ECO/WKP 1775.
• Baldwin, R. (2016). The Great Convergence: Information Technology and the New Globalization. Harvard University Press.
• Hausmann, R., & Klinger, B. (2007). “The Structure of the Product Space and the Evolution of Comparative Advantage.” CID Working Paper 146, Harvard University.
• Herfindahl, O. C. (1950). Concentration in the U.S. Steel Industry. PhD thesis, Columbia University.
• Hirschman, A. O. (1945). National Power and the Structure of Foreign Trade. University of California Press.
• Baldwin, R. (2013). “Global Supply Chains: Why They Emerged, Why They Matter, and Where They Are Going.” In Elms & Low (eds.) Global Value Chains in a Changing World. WTO / Fung Global Institute.
• Baqaee, D., & Farhi, E. (2019). “The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten’s Theorem.” Econometrica 87(4): 1155–1203.
• Johnson, R. C., & Noguera, G. (2012). “Accounting for Intermediates: Production Sharing and Trade in Value Added.” Journal of International Economics 86(2): 224–236.
• Leontief, W. (1941). The Structure of the American Economy, 1919–1929. Harvard University Press.
• Koopman, R., Wang, Z., & Wei, S.-J. (2014). “Tracing Value-Added and Double Counting in Gross Exports.” American Economic Review 104(2): 459–494.
• OECD (2023). Trade in Value Added (TiVA) Indicators: Release Notes, December 2023. OECD Directorate for Science, Technology and Innovation.
• US Department of Justice & Federal Trade Commission (2023). Horizontal Merger Guidelines.