International production, trade and investments are increasingly organised within so-called global value chains (GVCs) where the different stages of the production process are located across different countries. Globalisation motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.
Firms try to optimise their production processes by locating the various stages across different sites. The past decades have witnessed a strong trend towards the international dispersion of value chain activities such as design, production, marketing, distribution, etc.
This emergence of GVCs challenges conventional wisdom on how we look at economic globalisation and in particular, the policies that we develop around it.
The OECD provides a broad range of work to help policy makers understand the effects of GVCs on a number of different topics:
The goods and services we buy are composed of inputs from various countries around the world. However, the flows of goods and services within these global production chains are not always reflected in conventional measures of international trade. The joint OECD – WTO Trade in Value-Added (TiVA) initiative addresses this issue by considering the value added by each country in the production of goods and services that are consumed worldwide. TiVA indicators are designed to better inform policy makers by providing new insights into the commercial relations between nations
Trade policy and GVCs
Global value chains have become a dominant feature of world trade, encompassing developing, emerging, and developed economies. The whole process of producing goods, from raw materials to finished products, is increasingly carried out wherever the necessary skills and materials are available at competitive cost and quality. Similarly, trade in services is essential for the efficient functioning of GVCs, not only because services link activities across countries but also because they help companies to increase the value of their products. This fragmentation highlights the importance of an ambitious complementary policy agenda to leverage engagement in GVCs into more inclusive growth and employment and the OECD is currently undertaking comprehensive statistical and analytical work that aims to shed light on the scale, nature and consequences of international production sharing.
This OECD initiative is a platform for policy dialogue and knowledge sharing between OECD and non-OECD countries. It aims at improving evidence and identifying policy guidelines to promote development by fostering participation and upgrading in global value chains.