The presentation will highlight what Global Value Chain (GVCs) is and the forms in which countries participate in GVCs. In addition, the presentation show how technology has played a key role in the GVCs.

1. Trading for development in the age of
Global value Chains (GVCs)
Impact of Technology on Global Value
Chains (GVCs)
Caren Mutai,

2. Messages acquired at the end:
 Clear understanding of Global Value Chain
 The crucial role of GVC in production
 How technology harmonize GVC
 Challenges associated with GVC and the role of technology
 Covid19 implications on GVC
 Reference

3. Global Value Chain in brief

4.  Global Value Chain (GVCs) is
the series of stages in the
production of a product or
service for sale to consumers
where each stage adds value,
and at least two stages are in
different countries.
 Example is a bike assembled in Finland with parts from Italy, Japan, and
Malaysia and exported to the Arab Republic of Egypt. GVCs break up the
production process across countries, with firms specializing in specific
tasks and stage of production rather than producing the whole product.
Global Value Chain in brief

5. Global Value Chains are drivers of productivity due to their
features that distinguishes it from traditional trade; i.e. hyper
specialization and firm to firm relationship.
Hyper Specialization
 Is breaking up the
production process of
complex products like cars
and computers which allows
firms to specialize in simple
tasks and parts.
Firm to Firm Relationship
 Is the formal relationship
between firms which allows
access to capital, markets,
inputs and also promote
diffusion of technology
across firms and help them
raise their productivity and
income.
The crucial role of GVC in production

6.  Countries that participate in
global value chains have
increased and diversified their
exports, increased the level of
investment and access to new
technologies which increase
incomes and create jobs.
 This will also result in knowledge
spill overs where small firms
interact with foreign
multinationals, market access
where they can source a variety of
inputs.
Global Internet usage
The impact of Technology on GVC

7.  Supply chains are rapidly changing under the
pressure of digital innovation. Robotics, 3D
printing, big data, blockchain technologies, cloud
computing, the Internet of Things, and the rise of
platform firms are transforming production and
distribution processes in many industries.
 Internet promotes trade and job creation. A recent
study shows that the arrival of high speed internet
in Africa promoted exports and job creation at the
same time. Areas closer to submarine cables
witnessed faster employment growth than those
far away.

8.  Digital innovation promote trade by reducing transaction
cost and making it easier to connect. A recent study by
Lendl and others finds that the extent to which distance
impedes trade is 65% lower on eBay than for overall
trade. The online platforms such as Amazon, Alibaba and
Facebook are making it easier for firms from developing
countries to participate in global markets.
 Artificial intelligence applications are driving down trade
costs even further. The introduction of machine
translation from English to Spanish on eBay for instance
has promoted exports from the US to Latin America on
eBay.

9.  The use of industrial Robots are indeed
appearing very prominently especially in the
high income countries where there is a
strong correlation between automation and
per capita income. Labor costs are very high
in developed countries so they have a good
reason to automate and reduce production
costs.
 As robots reduce production cost, the
demand for parts and will increase, creating
new opportunities.

10. With the advancement in technology, there is a fair share of
challenges associated with it;
 With internet, it is easier to connect it is arguably harder to compete and as a
result we say exports increasingly being concentrated in a handful of firms. This
is majorly for platforms like E-commerce.
 If developed countries can produce everything at home using robots with very
low cost then why would they trade with developing countries? We are afraid
that if automation becomes widespread international trade and global value
chains participation may no longer be a viable path for development.
 Some developing countries still do not have internet penetration, hence may
hinder international trade and job creation.
 Workers are at risk of losing their jobs because countries decrease their imports
because of automation.
Challenges associated with GVC

11. Covid19 implications on GVC
• The pandemic has disrupted production
forcing a number of factories to close down.
• Disruption in global supply chain making cost
of construction inputs high.
• Job losses since most factories closed down
• Emergence of new industries

12.  World Development Report, 2020 by World Bank
 https://www.enterprisesurveys.org/en/enterprisesurveys
 https://blogs.worldbank.org/psd/foreign-direct-investment-and-global-value-
chains-wake-covid-19-lead-firms-gvc
 https://courses.edx.org/assets/courseware/v1/f93e4a700736e2f703403fcd543ed85
d/asset-v1:WBGx+WDR2001x+2T2020+type@asset+block/Does-Automation-in-
Rich.pdf
Reference