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Global Value Chains

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Global Value Chains

Challenges, Opportunities, and Implications for Policy

OECD,

15 min read
10 take-aways
Audio & text

What's inside?

Global value chains increasingly shape trade, economic growth and foreign direct investment.

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Editorial Rating

7

Qualities

  • Comprehensive
  • Analytical
  • Innovative

Recommendation

In a joint report, the OECD, the World Trade Organization and the World Bank Group explain that global value chains (GVCs) have made dramatic changes in the nature of international trade. Yet for GVCs to function effectively, the commercial environment – which includes government – must provide a whole range of supportive elements, including infrastructure and jobs training. Therefore, policy makers must consider GVCs’ linked functions as a whole process, not as fragments. getAbstract recommends this comprehensive report to those who deal with international trade, including government officials, corporate managers and research analysts.

Summary

Transforming Trade and Production

New production patterns have boosted the growth of global value chains (GVCs), which coordinate the spread of capital and knowledge through manufacturing and distributing goods and services. Technological changes in communication and transportation have dramatically reduced costs, allowing businesses to divide different functions among various countries. As a result, the composition of international trade has changed: Now more than 70% of global trade is in “intermediate goods and services and in capital goods.”

Global value chains require governments to adjust their mind-sets and expand their trade policies to account for interconnectivity, which constitutes “a new ‘trade-investment-services-know-how nexus’.” To maintain healthy GVCs, governments must not overemphasize exports to the detriment of imports, which are vital to companies’ production: Firms bring in raw materials or intermediate goods, add value in some way and then export them. Some parts and materials go through this process several times as they move through a GVC to become finished goods.

Trade in intermediate goods has increased in nearly all G20 countries, ...

About the Authors

The OECD promotes global economic advancement. The World Trade Organization seeks to ensure free trade among nations. The World Bank provides financial and technical assistance to developing countries.

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