Answer to Question #183958 in Economics for Alycia Muchenje

Question

Impact of global value chains on economic integration

Answer 1

Global value chains play an important role in economic growth by enabling companies in developing countries to dramatically increase their productivity and move from commodity exports to low-cost manufacturing. In the era of global value chains, all countries can benefit from accelerated reforms that boost trade and boost economic growth. To grow, countries need to trade, and openness and predictability are beneficial to all. To garner sustainable social support for trade, policymakers need to ensure that the benefits of global value chains are shared equally among diverse groups, especially the poor and women while protecting the environment.

Today, global value chains account for nearly 50 percent of world trade. However, as noted in the report, after the financial crisis of 2008, their growth has stalled. Trade friction created uncertainty in terms of market access, and so companies had to consider delaying investment plans. In addition, the benefits of participation in global value chains have been unevenly distributed across and within countries. Environmental costs are also rising, primarily due to increased carbon dioxide emissions from transporting intermediate products over longer distances.