Session 3.3

Power, Trade, and Development Policies: Global Value Chain Analysis

One of the most striking features of the global economy in the last two decades has been the expansion of international trade. Between 1983 and 2000, the value of world merchandise exports has almost quadrupled. Trade is an important revenue base for developing countries, which are estimated to generate more than thirty times the revenue per capita from exports than they receive in aid. This is particularly relevant as aid flows decreased by almost one quarter between 1990 and 2000. Some developing countries have been able to increase their export flows of not only labour-intensive goods, but also high-technology. Yet, most low-income countries still depend heavily on exports of primary commodities and manufactures, which have lagged behind the growth of global income. As a result, low-income countries still account for only three percent of income generated through exports in the global economy.

The presenters of this session will examine how the new international trade regime under the WTO and a variety of bi-lateral trade agreements, combined with the changing structure of global value chains, determine entry barriers but also create new possibilities for developing country farms and firms to participate in international trade. In particular, this session will highlight: the key aspects of global value chain (GVC) analysis, its practical application in developing export strategies and trade policies, and its use in highlighting developmental options. A general discussion of the interaction between trade agreements and global value chains (and related poverty impact) will be integrated by a comparative analysis of case studies on exports of – among others – clothing, shoes, fresh fruit and vegetables, coffee, cocoa and cotton from developing countries.

A value chain is defined as the full range of activities that are required to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer. GVC analysts are particularly interested in gaining a better understanding of value chains in which activities are divided among multiple firms and spread across wide swaths of geographic space, hence the term “global value chain”. While many firms have had international operations and trading relationships for decades and a few for more than a century, in recent years we have seen the formation of global-scale economic systems which are tightly integrated and often managed on a day-to-day basis. Today, the process of economic development and the features of international trade cannot be isolated from these global systems.

GVC is not only an analytical approach for understanding the changing global economy from the point of view of developing countries, but also a practical tool for policy making. It has been used to bring together international organisations, NGOs, activists, industry associations, and government ministries to: share knowledge on the features and developments in specific value chains; promote a strategic approach to trade policy formulation in developing countries; and provide links between the world of production and trade in developing countries and the realities and demands of multinational corporations operating in key global markets.