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World Investment Report 2013: Global Value Chains: Investment and Trade for Development122
About 60 per cent oglobal trade, which today
amounts to more than $20
trillion, consists o trade
in intermediate goods
and services that are
incorporated at various
stages in the production
process o goods and
services or fnal consumption. The ragmentation
o production processes and the international
dispersion o tasks and activities within them have
led to the emergence o borderless production
systems which may be sequential chains or
complex networks and which may be global,
regional or span only two countries. These systems
are commonly reerred to as global value chains
(GVCs).
GVCs are typically coordinated by transnational
corporations (TNCs), with cross-border trade o
production inputs and outputs taking place within
their networks o afliates, contractual partners
(in non-equity modes o international production,
or NEMs; see WIR11) and arms-length suppliers.
The phenomenon o international production
driven by TNCs engaging in efciency-seeking
FDI is not entirely new the theme o WIR93 was
integrated international production however,
since around 2000, global trade and FDI have
both grown exponentially, signifcantly outpacing
global GDP growth, reecting the rapid expansion
o international production in TNC-coordinated
networks.
GVCs lead to a signifcant amount o double
counting in global trade. Raw material extracted in
one country may be exported frst to an afliate in a
second country or processing, then exported again
to a manuacturing plant in a third country, which
may then export the manuactured product to a
ourth or fnal consumption. The value o the raw
material counts only once as a GDP contribution in
the original country but is counted several times in
world exports.1
Recent advances in trade statistics aim to identiy
the double counting in gross trade fgures andshow where value is created in global production
INTRODUCTION
Global trade and FDI havegrown exponentially over
the last decade as frms
expanded international
production networks,
trading inputs and outputs
between afliates and
partners in GVCs.
chains. Figure IV.1 shows a simplifed example ovalue added trade.
Value added trade statistics can lead to important
policy insights on GVCs, trade, investment and
development. For WIR13, in a collaborative eort
with the Eora project,2 UNCTAD built a value added
trade dataset: the UNCTAD-Eora GVC Database
(box IV.1).3 The database will be used in this chapter
to assess the patterns, drivers and determinants,
development impact and policy implications o
value added trade and investment.
GVCs are a concept taken up by dierent schools
o economic theory, development studies and
international business disciplines, with each
strand o scholars adopting dierent defnitions
and boundaries o analysis. Table IV.1 illustrates
a number o important contrasts. This chapter
will attempt to bring together the various schools
o thought, borrowing concepts rom dierent
disciplines and adding new cross-disciplinary
insights.
UNCTADs research objectives in this report areto demonstrate how GVCs constitute the nexus
between investment and trade, to show the
importance o GVCs in todays global economy and
especially their weight in developing countries, to
provide evidence or the impact o GVC participation
in developing countries, and to make concrete
recommendations to help policymakers maximize
the benefts o GVC participation or economic
growth and development while minimizing the
associated risks.
To this end, in the remainder o this chapter, SectionA describes GVC patterns at the global level and
in developing countries specifcally, and shows
how FDI and TNC activities shape such patterns
based on (and building on) value added trade data.
Section B borrows more rom other GVC disciplines
and international business theory to discuss
frm-level drivers o GVC activity and locational
determinants, which are important or policymakers
in understanding the actors inuencing country-
level GVC participation. Section C describes
the development impacts o GVC participation,including the GDP contribution o GVCs (direct
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