Group 6

DIMENSIONS OF INTERNATIONAL
PRODUCTION
Length of Value Chain

Steps Distance
The number of The average linear
production stages distance covered in
involved in a specific VC completing the
international production
process in a
VC, from the initial to
the initial stage.

Geographic distribution of value added Governance of Value Chain

NEM Intensity Relative FDI

Degree of Contribution
Intensity
concentration Speed
The degree to which
The ratio of the share of
The distribution of value The number of countries MNEs in an industry
FDI of an industry in
added in GVCs across for which a given GVC enhance control over
total FDI to the share of
countries constitutes an important GVCs through non-
trade of that industry
part of the economy equity
in total trade
modes of international
production
 DEGREE OF INTERNATIONALIZATION OVER THE LAST DECADE
 Fragmentation in international economic policymaking and  In the 2010s, the composition of international production
especially in trade and investment policy is reflected in a shift changed, with services playing an ever more important role,
away from multilateral cooperation towards regional and both through the internationalization of services industries
bilateral solutions and increased protectionism and through the servicification of manufacturing activities.

 It is compounded by systemic competition between economic  Over the past decade, we have seen a return of protectionist
powers, as well as by a general shift in national economic tendencies, declining returns on FDI, and increasing
policymaking in many countries towards more regulation and technology-enabled asset lightness.
intervention.

Transnationality Index of top 100 global MNEs The Transnationality Index (TNI) is a measure of
internationalization of a company based on its
shares of assets, sales and employees overseas

A plateauing of the TNI over the second half of

the last decade shows a real possibility of MNEs
reacting by reducing costs, a process that might
be further accelerated by the pandemic
 DEGREE OF INTERNATIONALIZATION ACROSS INDUSTRIES
 Degree of internationalization of industries is measured by  End products in the electronics industry crossing a border
export intensity i.e. exports as a share of total industry output. contain many components that have already crossed borders,
often more than once, before being assembled.
 The high degree of internationalization of the typical GVC
industries, is partly driven by double counting of value added  Some industries like Business Services may appear less
in GVCs. internationalized but maybe as important as GVC industries

Degree of Internalization of select industries

Electronics
Global Value Chain Machinery and Equipment
Industries Textiles and Apparel
Automotive
Extractive
Chemicals
Pharmaceuticals
Food and Beverage
Transportation and Logistics
Business Services
Domestic Agro-based

Industries Wholesale and Retail Trade

Source : UNCTAD analysis based on Eora26 database
Financial Services
 Key Determinants of Geographical Distribution:

Concentration of supply, demand and/ or know-how and technology:

• Geographical dispersion of upstream and downstream segments of value chains and knowledge-intensive segments is
determined by locations of demand, critical supply sources and technology/talent.

Trade costs

• Higher trade costs, including tariffs and costs of administrative procedures, make up a higher share of the costs of
products/components that cross borders multiple times. They primarily affect the length of value chains, as well as geographical
distribution of value added.

Transportation costs

• Transportation costs in­fluence the sourcing and location decisions of firms. They will affect both the physical length of value
chains and the geographical spread.

Degree of product differentiation/ customization

• The need for customization tends to lead to more decentralized value addition, i.e. higher geographical spread.
 Length & Geographical Distribution of International Production

I- Primary industries
a: Capital intensive
b: Less capital intensive
Geographical

II- GVC-intensive
Distribution

a: Low-tech
b: High-tech

III- Geographically distributed

a: Global hub and spokes
b: Regional processing

IV- Services industries

connected to GVCs
Length a: Higher value added
b: Lower value added