Global value chains in the world economy

Global value or supply chains are not new. For decades companies have been importing parts and components for the finished goods they manufacture. Technology has reduced the cost of distance spurring multilocalization. What is new is how pervasive they have become and the degree of complexity they have attained.

What is also new is the public debate about what these intricate systems mean for the world economy, for individual economies and for development. This debate takes place against a backdrop of constantly shifting circumstances and evolving technology which raise challenges for policymakers who must ensure that any conclusions drawn or actions contemplated are in line with the realities on the ground.

This means viewing trade from a different perspective. Measuring trade in gross value terms no longer makes sense in a world where trade in intermediate goods - a reasonable proxy for global value chain activity - constitutes more than half of world merchandise trade. Trade flows must be measured today in terms of the value added by each production link along a supply chain to the final value of goods and services.