International trade has for centuries mainly represented an exchange of goods, but now it can be regarded as a trade in tasks (Grossman & Rossi-Hansberg (2008)). Simply, value is added in many different locations across the globe and countries are more specializing in specific business functions than in specific industries (Backer & Miroudot, 2013). The rapid expansion in offshoring of manufacturing and other business tasks in countries where some production factors may be hired at much lower prices than at home (the emergence of global value chains), called into question the traditional Ricardian and Heckscher-Ohlin models (i.e., 'old trade theory'), where each country specializes in types of products with a comparative advantage (Escaith, Lindenberg, & Miroudot, 2010). The phenomenon of global value chains highlighted the issue of domestic value-added in exports (DVA) and led to the development of alternative trade measures in value-added terms. These, inter alia, enabled an estimation that shows that New EU countries from Central and Eastern Europe (NMS-10) experience an approximately 5 percentage points lower DVA share as compared to old EU countries (EU-15). The lag is on average the highest in knowledge-intensive manufacturing sectors (8 percentage points) and the lowest in knowledge-intensive services (0.3 percentage points). However, this paper follows the assumption that NMS-10 have acquired new knowledge by participating in Global Value Chains (GVCs), and thus gradually started increasing their DVA. Based on the empirical application of the EU trade data, I found that convergence in terms of DVA in exports can be observed in manufacturing, and especially in the services sectors. Additionally, I find that for NMS-10 countries negative relationship between participation in GVCs and DVA in exports is slightly decreasing over time in both sectors.
