Seminar Discusses Global Value Chains And Development

Participation in global value chains contributes to economic growth, while trade and trade-related policies, such as foreign direct investment, intellectual property protection, trade facilitation, infrastructure and institutions, together with deeper regional integration have important impacts on global value chain integration in developing countries. This was the view of speakers at a recent event in Geneva.

The 23 April seminar, entitled “Trade Policies, Value Chains and Development,” was organised by the International Centre for Trade and Sustainable Development (ICTSD) and the Organisation for Economic Co-operation and Development (OECD). It aimed to explore what fragmentation of production at the international level means and what it means for developing countries, in particular.

The seminar discussed the recent empirical work to advance understanding on global and regional value chains and the potential implications for pursuing such objectives through trade-related policies.

“How value chains integrate into the global economy and how to generate the kind of dynamics that would be necessary to incorporate the SMEs [small and medium enterprises] and small farmers into this fragmentation of production both at the sub-regional level as well as a larger international geography is central to every policymaker and to the business community,” Ricardo Meléndez-Ortiz, co-founder and chief executive officer at ICTSD, said in his opening statement.

“There is both a fear that with value chains, as it happens with all other economic policies, that people will lose, but also there is a great expectation on the opportunities that will come from this fragmentation,” he said.

Przemyslaw Kowalski, senior trade economist at the OECD, presented a recent OECD study entitled, “Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies.”

The purpose of the study was to explore “the determining factors, economic effects and policy implications of global value chain participation across developing countries.” It examined five sub-regions in Asia, Africa and the Middle East covering various sectors, such as agriculture, processed foods, plastics, textiles, and motor vehicles.

According to Kowalski, the study found that many developing countries increasingly participate in global value chains.

Also, according to the study, participation in global value chains generates economic benefits in terms of productivity, sophistication and diversification of exports, although the benefits do not accrue evenly across countries.

While the size and geographical location of a country is an important determinant in global value chain participation (larger countries, for example, tend to have lower participation rates), policy-related factors can also influence the degree and type of integration into global value chains, the study says.

In terms of drivers of developing countries’ participation in value chains, “what we find the most important factors for developing countries are the logistics performance, IPR protection, infrastructure and institutions,” Kowalski observed.

“The question of participation in value chains has excited people in the developing world not least because of its capacity to help firms innovate and acquire capabilities and participate in innovation,” Meléndez-Ortiz said.

Sherry Stephenson, a senior fellow at ICTSD, observed that trade-related policies, such as investment regime, labour mobility, competition regime and intellectual property regime, affect the flows of capital and people as well as the credibility and strength of institutions. Such policies together with trade policies and domestic policies interact with each other to create environment for global value chains, she added.

“Greater participation in global value chains is very valuable and holds really intangible benefits for developing countries across the globe and across different regions,” said Stephan Amarasinha, counsellor at Permanent Mission of the European Union to the World Trade Organization.

A four-page summary of the OECD study can be found here.

Elena Bourtchouladze (LLB, DEA) holds a PhD degree in Public International Law from the Graduate Institute (Geneva) with focus on the WTO TRIPS Agreement and WIPO Conventions. She is a researcher at IP-Watch, and has experience in regulatory and litigation at a multinational company and an international organisation.