Developing world’s trade role doubled since 1990

The UN Conference on Trade and Development (UNCTAD) said that such countries’ share in global value-added trade increased from 20 percent in 1990 to 30 percent in 2000 and was now over 40 percent.

Overall, so-called global value chains involving transnational corporations account for 80 percent of the total $20 trillion (15.3 billion) of international commerce, said UNCTAD in a report based on data from 2010.

The term global value chain — or GVC in trade jargon — sums up the globe’s ever-more complicated webs of investment and trade.

For example, raw materials extracted in one country may be exported to a second country for processing, then sent to a third country to be turned onto manufactured goods, and finally be exported to a fourth country, or beyond, for final consumption.

“The success of Asia in linking themselves to the chain and lifting themselves up could be a template for other countries,” said UNCTAD’s director general Supachai Panitchpakdi.

“GVCs can generate both benefits and risks,” Supachai told reporters.

“They facilitate access to the global market. And once you are in the chain, you can always climb up the chain. But it’s climbing up the chain that makes the chain useful. It doesn’t just happen. The good things are not always automatic,” he underlined.

“Sometimes you can see developing countries being locked into part of the chain and staying there. Chains can be footloose. The owner-operators of the chain can always move things elsewhere. It depends on a range of factors, on the cost of labour, wages, the productivity, on the skill of the people.”

“You also have to look into the social and environmental impact of the chain, and also the labour market,” he added.

The UNCTAD report noted that GVCs can play an important role in economic growth.

Domestic value-added — the improved capacity of an economy to produce a broader variety of goods, and goods of greater complexity — resulting from GVC trade can have major significance relative to the size of a local economy.

Value-added trade contributes average 28 percent of gross domestic product (GDP) in developing economies, compared with 18 percent in developed economies.

There also appears to be a positive correlation between participation on GVCs and per capita GDP growth rates, UNCTAD said.