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Plugging into Global Value Chains: Roles of Trade and Investment Policy
The training workshop aims to equip policymakers with a solid understanding of global value chains (GVC) and their implications on economic development and how policy can best facilitate countries in capturing the gains from participating in GVC.
Trade organized through GVCs is a key engine of growth for countries in the Asia and Pacific region. Global production sharing splits the production process of a good or service into discrete tasks that can be located in countries where factor prices match the factor intensity of the particular task. This has opened up opportunities for countries to specialize in different aspects of the production process and allowed countries with limited technical prowess to participate in the global value chain. As a result, the Asia and Pacific region has gained a significant proportion of world trade in global network exports— in 2011 developing East Asia had 36.9% of parts and components, 35.9% of final assembly, and 36.2% of total network exports. East Asia's prominent role in GVC is due to its relative low wages and favorable business climate.
The GVC phenomenon requires a rethink of the issue of cooperation among economies and what it means for trade policy. About 60% of global trade consists of trade in intermediate goods and services between countries in the global value chain. Production processes have become more geographically diverse with companies locating different production stages across different countries. A 2009 OECD survey reported that for 300 global companies with sales over $1 billion, 51% of component manufacturing, 47% of final assembly, 46% of warehousing, 43% of customer service, and 39% of product development took place outside the home country. Although GVCs provide opportunities for developing countries to advance through export-led industrialization, this must be achieved through effective policies so the country can continue to participate in the GVC. Countries cannot participate in GVCs merely through lower wages but by increasing their productivity and lowering tariffs to promote investment.
GVCs will be essential for countries to industrialize in the 21st Century, but will require new approaches to trade policy to form an effective development strategy. GVC-related development strategies require more targeted policies focused on participating in producing intermediate goods and services to participate effectively in the global production chain. However, these policies will need to consider the risk of fragmentation of industries focusing only on low-value and low-skill work and reassess trade policies in light of the importance of regional production networks to development. Policymakers will also need to consider how to make their countries attractive to multinational corporations while ensuring that participation in GVCs results in domestic economic growth.
This activity will promote trade and investment in the region and support ADBI's strategy theme of regional cooperation and integration.
40 mid- to high-level policymakers from developing Asian countries.
How to Register
By Invitation only.
Actively participate in discussions and share views and experiences with others.
Office of Regional Economic Integration (OREI), Asian Development Bank (ADB)
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