More on global value chains

Global value chains is the new buzzword now in international trade. I have blogged about some aspects of it here and here though I am no expert on it.

A new joint OECD-UNCTAD-WTO Report on Global Value Chains reiterates the growing importance of it in today's global economic scenario. the report is titled "Implications of Global Value Chains for Trade, Investment, Development and Jobs".

Some of the highlights of the report are:

 "The growth of global value chains (GVCs) has increased our interdependence: between 30% and 60% of G20    countries’ exports are comprised of imported inputs or are used as inputs by others.

Trade facilitating measures are vital to successful participation in GVCs; trade cost reductions from practical and relatively inexpensive actions could be as high as 16% for some developing countries. 

The role of efficient and competitive services sectors is also crucial: services account for 42% of exports (in value added terms) from G20 economies and more than 50% for some countries. 

 GVCs strengthen the case for multilateral market opening, as barriers between third countries, including various non-tariff measures, upstream or downstream can matter as much as barriers put in place by direct trade partners. 

 Open, transparent and predictable trade and investment policies need a range of flanking policies to ensure benefits from GVCs are inclusive and widespread. In some less developed economies there remains much work to be done to address specific obstacles to effective participation in GVCs.  

Overcoming obstacles to GVC participation can pay big dividends; developing economies with the fastest growing GVC participation have GDP per capita growth rates 2% above average.  

 Multinational Enterprise (MNE) coordinated GVCs account for 80% of global trade. But it is also estimated that the contribution of local firms is very significant (in the range of 40-50% of export value added).  

 GVCs can be an important avenue for developing countries to build productive capacity where local firms can capture a significant share of the value added: but technology dissemination, skill building and upgrading are not automatic and require significant investment.  

Individual countries will want to carefully weigh the costs and benefits of proactive policies, carefully tailored to the country’s specific situation and coherent with its overall development strategy. 

 A structured approach would include embedding GVCs in industrial development policies, in particular creating an environment conducive to trade and investment and building productive capacities in local firms and skills in the local workforce.  

Multilateral co-operation can contribute much to ensuring an overall trade and investment policy climate conducive to sustainable GVC growth, avoiding “beggar thy neighbour” policies, and addressing specific development policy concerns in today’s more interconnected world."

Some food for thought for those working on global value chains, the chalenges of integration and their  relevance to developing countries.