Global value chains in the current trade slowdown
Michael J Ferrantino, Daria Taglioni 06 April 2014
Recent growth in trade has decelerated significantly since its sharp recovery in 2010. This column discusses the role of global value chains in international trade and their contribution to the trade slowdown. Trade in complex products organised by global value chains, in particular motor vehicles, has been more sensitive to global downturn than has trade in simple products. Thus, either focusing on simpler products less dependent on global value chains, or diversifying the export folios, could be useful in reducing the risk of a slowdown in global merchandise.
Global value chains (GVCs) involve trade in goods that have multiple production stages that take place in many different countries (that is, ‘production fragmentation’ or ‘slicing up the value chain’), and in which multiple imports and exports of intermediate goods are necessary to produce a final good, which may also be exported. Since the emergence of the North American GVC in automobiles in the 1960s and the East Asian electronics GVC in the 1970s, the role of GVCs in international trade has become more important and has attracted increasing attention.
great trade collapse, global value chains, trade slowdown