More than 75% of world trade is through global value chains

More than two-thirds of world trade occurs through global value chains (GVCs), in which production crosses at least one border, and usually many borders, before final assembly, highlights an analysis by several organizations linked to the International Trade.

This analysis is part of the Global value chain development report 2019: Technological innovation, supply chain trade, and workers in a globalized world, prepared by the WTO, the OECD, Ide-Jetro, UIBE and the World Bank.

The phenomenal growth of trade related to global value chains has translated into significant economic growth in many countries around the world over the past two decades, driven by reductions in transport and communication costs and lower barriers. commercial.

But, at the same time, it has contributed to the distributional effects that mean that the benefits of trade have not always accrued for all, which, at least in part, has been an engine of the reaction against globalization and the rise of protectionism. and threats to global and regional trade agreements.

In addition, the report adds, new technological developments such as robotics, big data and the Internet of Things (IoT) are beginning to reshape and transform GVCs even more.

The growth of global value chains has slowed since the global financial crisis.

Value chains

The GDP (value added) of a country can be decomposed into purely national traditional trade, in which a product is manufactured in one country and consumed in another, simple value chain trade, in which a good produced in one country it crosses a border and is used in production in the partner country before consumption there, and in complex value chain trading, where production crosses multiple borders.

Between 2000 and 2007, GVCs, especially complex ones, expanded at a faster rate than other components of GDP.

During the global financial crisis, of course, there was some reduction in global value chains, followed by a rapid recovery (2010-2011), but since then, with the exception of 2017, growth has generally slowed, according to the same analysis.

Economy and integration

In 2017, the expansion of complex global value chains was faster than GDP growth, but it is too early to tell whether this is a new trend or just a one-year change.

With respect to which sectors are particularly susceptible to GVCs, over a long period of time it has been found that the higher the technological intensity (knowledge) of a sector, the more significant the increase in complex GVC activities.

Decomposition of production activities

Therefore, GVCs linkages are especially important for high-tech sectors and it is in these areas that highly complex value chains involving many countries are seen.