WTO Sponsored Report
Finds Strong Expansion of Global Value Chains, Flags Concentration and Monopoly
in the Hands of a Few Countries
·
Increasing
risks from the dependence on a small number of economies for certain products
and highlights the vulnerability of GVCs
·
US-China
trade tensions and the COVID-19 pandemic have affected GVCs, with an in-depth
discussion of energy and semiconductor supply chains.
·
Export
value and share of potential bottleneck products — products that are exported
by very few economies — has more than doubled since 2000, from 9% to 19% of
total trade
·
US-China
trade tensions have led to an increase in the number of stages in GVCs
Global
value chains (GVCs) continued to expand in 2022, as indicated by the growing share
of foreign inputs in exports and the increasing participation rates of economies
worldwide. According to the GVC Development Report 2023 issued on 16 November. However,
the report also flags increasing risks from the dependence on a small number of
economies for certain products and highlights the vulnerability of GVCs to rising
trade tensions and global crises.
The
report, titled “GVC Development Report 2023: Resilient and Sustainable GVCs in Turbulent
Times”, is a joint publication by the Asian Development Bank (ADB), the Institute
of Developing Economies — Japan External Trade Organization (IDE-JETRO), the Research
Institute for Global Value Chains at the University of International Business and
Economics (UIBE) Beijing, and the World Trade Organization.
“Recent
pandemic-related disruptions have revealed long-standing vulnerabilities in GVCs,
especially those associated with over-concentration and over-dependence on a single
economy or region for the supply of critical products — a circumstance exacerbated
by recent geopolitical tensions. However, the current structure of GVCs is complex
and has led to significant benefits for firms and consumers globally,” ADB President
Masatsugu Asakawa, IDE-JETRO President Kyoji Fukao, UIBE President Zhongxiu Zhao,
and WTO Director-General Ngozi Okonjo-Iweala say in the joint foreword of the publication.
“Resilience
and sustainability cannot be achieved without inclusiveness,” they add. “To ensure
that GVCs support inclusive development, barriers to integration must continue to
be lowered and measures must be put in place that prevent firms from exploiting
their market power at the expense of small suppliers.”
The
report provides an update on trends in GVCs with new data extending until 2022,
highlighting that GVCs remain a central part of globalization despite mounting pressures.
Foreign inputs comprised 28% of global merchandise exports last year, a record level
according to the report. Moreover, GVC participation rates of almost all economies
were higher in 2022 compared to their pre-pandemic levels in 2018.
The
report looks into how US-China trade tensions and the COVID-19 pandemic have affected
GVCs, with an in-depth discussion of energy and semiconductor supply chains. The
report finds that the export value and share of potential bottleneck products —
products that are exported by very few economies — has more than doubled since 2000,
from 9% to 19% of total trade, contributing to the vulnerability of GVCs. Also,
there has been considerable concentration in sources of foreign inputs. Furthermore,
US-China trade tensions have led to an increase in the number of stages in GVCs
from 2018 to 2020. This could be due to economies sourcing products from new sources
as a result of the imposition of higher tariffs but in 2021 some of this lengthening
of GVCs reversed, likely due to the pandemic limiting the options available.
On
sustainability, the report provides a comprehensive carbon emissions accounting
framework that traces greenhouse gas emissions along GVCs and proposes a conceptual
framework for helping to make GVCs more environmentally friendly.
The
report emphasizes that GVCs can lead to positive outcomes for firms in developing
economies by improving productivity and alleviating constraints and can result in
higher wages and better working conditions. Policies for making GVCs more inclusive
should focus on facilitating entry into GVCs and increasing positive spillovers
into the domestic economy, the report states.