GLOBAL VALUE

CHAIN
Shikha Gupta
What is Global Value Chain?
A global value chain breaks up the production process across countries. Firms specialize in a
specific task and do not produce the whole product.
 Where does a Bianchi Cycle comes from ?
Saddle exports
China , Italy , Spain
Wheel exports
China , Italy , France
Frame exports Designing
China , Italy , Vietnam Italy

Spring exports
Japan, Singapore , Malaysia

Assembling
China , Taiwan
Pedal Crank exports
China , Japan ,
Singapore
 Apple’s Smiling Curve and GVC fo
Linking Global Chains and Local Clusters
iPhones

G
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The New Global Economy

Old World of Trade ( Pre 1980) New World of Trade

● Countries trade finished goods; in the pre 1980 era ● Countries trade intermediate goods; imports
needed to export
● Build national industries (ISI)
● Join global industries (EOI)

Trends

● GVCs : 80% of world trade (UNCTAD, WIR 2013)

● Rise of intermediate goods trade(import content of
exports): 20% in 1990; 40% in 2010; 60% in 2030
(P. Lamy, WTO)
● Consolidation within GVCs in fewer, larger
suppliers
● Concentration of production and consumption in
relatively few large emerging economies
 Poverty

Trade Globalisation

Education GVC Employment

Economic
Industry 4.0
Growth

Foreign
Capital
How do GVCs work?

● Economic fundamentals drive countries’

participation in GVCs. But policies matter
—to enhance participation and broaden
benefits.

● Interactions between firms typically involve

durable relationships.

● Policies are drafted to mitigate the costs

and enhance the benefits that come along
the GVCs
Drivers and Outcomes

Drivers Outcomes
How countries participate in global value GVCs deliver more productive jobs, primarily
chains (GVCs) matters for the impact on through scale effects that result from
development. Countries experience the increased productivity and expanded output.
biggest growth spurt during the transition Because they boost income and productive
out of employment, participation in GVCs is
commodities into basic manufacturing associated with reduced poverty.
activities.

Drivers of Participation

The gains from GVC participation are not

distributed equally across and within
countries.Inequalities arise in the The expansion of GVCs has magnified the
distribution of firm markups across challenges facing the international tax
countries; in the distribution of capital and system.The tax revenue losses from profit
labor, between skilled and unskilled workers shifting and tax competition are substantial,
as well as between male and female particularly for lower-income countries.
workers; and geographically within
countries.
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Vietnam’s Success Story Vietnam is the second-largest smartphone
exporter, producing 40 percent of Samsung’s
Factor
endowm
global mobile phone products and employing
ent 35 percent of its global staff. Vietnam’s
success can be attributed to a combination of
factors.
Trade liberalization—driven by World Trade
Organization (WTO) accession and an agreement with
Market
the United States—a favorable investment climate,
Size
and a large pool of low-cost labor determined
Vietnam’s attractiveness as a global value chain
(GVC) location.
Improved connectivity enabled Vietnam to
import and export in a timely manner. The result
Geography was large foreign direct investment (FDI)
inflows, including from Samsung.

Vietnam’s geographical proximity to regional

suppliers of electronics parts and components Institution
such as China, Japan, the Republic of Korea, and al Quality
Thailand helped foreign investors gain access to
high-quality inputs from abroad.
In 1988 Bangladesh’s exports of apparel and footwear were Bangladesh Structural transformation
negligible, accounting for less than 1 % of the global total.

The business of exporting apparel made from imported textiles

has grown on average by nearly 18 % a year.
GVCs support Production linkages
Bangladesh now exports 7% of the world’s apparel and productivity Gains are associated with
footwear— third only to China (which increasingly sources and Income growth greater synchrony of
because of : long-term economic activity
from Bangladesh) and Vietnam. firm-to-firm across countries.
relationships and
The sector accounts for 89% of the country’s exports and 14 hyperspecialization in
percent of GDP, and it employs 3.6 million workers, 55% of specific tasks.
them women. Diversification is also under way.

The plastics sector has benefited from complementarities with

the ready-made garment sector because garments are enclosed By boosting income
in plastic packaging. Leather goods and footwear are growing GVCs deliver more and employment
and better jobs. growth , GVC
rapidly (second-largest export category).
Though man power participation also
required to produce reduces poverty,
Agriculture’s share of GDP fell from 70% in 1988 to 38% in one unit decreases but improves the
2018, and the share of people in extreme poverty from 44% to with the increase in livelihood of the
scale of production , population.
15 % in 2016. more man power is
required.
All Countries participate in GVCs but in
different ways
Country
transitions
between
different
types of
GVCs
 Some important Links

Why is it important for India to participate in GVCs

A discussion on Regional Value Chains Viz-a-Viz Global Value Chains

Reference Text
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