Interconnected Economies
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Interconnected Economies

Benefiting from Global Value Chains

Global Value Chains (GVCs) have exploded in the past decade and refer to the international dispersion of design, production, assembly, marketing and distribution of services, activities, and products. Different stages in the production process are increasingly located across different economies, and intermediate inputs like parts and components are produced in one country and then exported to other countries for further production and/or assembly into final products. The functional and spatial fragmentation that has occurred within GVCs has significantly reshaped the global economic landscape, thereby raising some new major policy challenges for OECD countries and emerging countries alike: trade policy, competitiveness, upgrading and innovation and the management of global systemic risk.

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Author(s):
OECD

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Today, "what you do" (the activities a firm or country is involved in) matters more for growth and employment than "what you sell" (the final product). Global value chains (GVCs) allow firms and economies to "do" the part of the process they are best at, using intermediate goods and services from elsewhere without having to develop a whole industry. They affect countries’ competitiveness and patterns of trade and investment, offer potential for development in less developed countries, but also imply risks.

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