Trading for Development in the Age of Global Value Chains

1. COUNTRIES
PARTICIPATION
TO GVCS
All countries participate in GVCs – but not in the
same way. This is triggered mainly by the fact that
GVCs can boost growth, create better jobs,
reduce poverty.
The flip side of this participation is the fact that
participation is not distributed equally across and
within countries.

2. THREATS TO GVCs
• Growth of global value chains
has stalled amid trade conflicts
and emerging new technologies.
• Because of slower economic
growth and a maturing of
manufacturing in dynamic regions
such as China, trade conflicts
among large economies have
contributed to the decline and
could lead to a retrenchment or a
segmentation of GVCs.
• “If the trade conflict worsens
and causes a slump in investor
confidence, the effects on global
growth and poverty could be
significant - more than 30 million
people could be pushed into
poverty,” the World Bank said in
the report. “And global income
could fall by as much as $1.4
trillion.”

3. THREATS TO GVCs
(cont’d)
• Increased protection was likely to induce
the reshoring of global value chains or shift
them to new locations unless policy
predictability is restored, and uncertainty
was delaying investment plans.
• The stalling of global value chains is bad
news for emerging market countries that
participate in global value chains, because
those that do have seen the steepest
declines in poverty, including China,
Vietnam, and Bangladesh.
• New technologies such as 3-D printing
that could draw production closer to the
consumer is another threat to GVCs.

4. THE FUTURE OF GVCs
• Given the threats on GVCs,
any discussion on their future
in the context of globalisation
may seem overlooked.
• Digitalisation of production
may become the biggest game
changer. Reshoring of activities
will become increasingly
attractive if automated.
• The overall employment
impact of reshoring will be
limited.
• If 3D printing spread widely,
the effects of digitalisation on
GVC trade will be larger.

5. THE FUTURE OF GVCs
(CONT’D)
• Wage costs will rise especially in emerging
economies, but not very certain of the magnitude so
to influence decision on investment.
• Transport cost may also rise but again, not certain
of the magnitude.
• International trade of goods and services,
diversification, the hidden and extra costs of
offshoring will certainly be impacted.
• In addition to global hubs in GVCs, production may
become increasingly concentrated in regional/local
hubs closer to end markets both in developed and
emerging economies.
• Obviously, the future of GVCs may look quite
different from the past.