trade policy brief
The persistence of global value chains in an uncertain world
March 2024
espite multiple shocks and debates on deglobalisation, world trade remains organised D in global value chains (GVCs). There is no trend towards reshoring or regionalisation at the aggregate level – but there is a reorganisation of GVCs, especially in Asia. GVCs have changed countries’ exposure and ability to cushion against shocks. Multinational enterprises continue to play a key role in the structure of GVCs and patterns of trade.
Global value chains continue to shape economic activity Over the past few decades, the world has experienced an unprecedented wave of economic integration. It is now common for the different stages of a production process (e.g. design, production, marketing, manufacturing, assembly, distribution) to be carried out in different countries. In 2020, as much as 60% of global trade was accounted for by intermediate products, that is products that are not destined to final users but are used as inputs by other firms. These intermediates consist of physical goods and services. In 2020, services represented about 38% of all trade in intermediates. Furthermore, about 12% of global trade is represented by capital products serving investment purposes. In effect, with production highly fragmented across national borders, economic activity is organised within GVCs.
A series of recent crises has called into question, however, the role of GVCs in the economic system. First, the disruptions caused by the COVID-19 pandemic placed supply chain resilience at the forefront of economic policy debate. Then, the Russian Federation’s invasion of Ukraine highlighted vulnerabilities occurring from overdependency of small numbers of suppliers critical sectors such as energy and cereals. Yet even before these events it had been suggested that a widespread tendency towards re-shoring or near-shoring production might be making value chains shorter and more regional. In fact, the data currently available on trade, investment, and multinational enterprises show that although the pace of globalisation has slowed in the last decade, GVCs remain a central feature of the world economy. In a scenario of increasing uncertainty, however, GVCs will require policies that carefully balance the benefits of trade and specialisation with emerging challenges.
There is no evidence of a general trend towards deglobalisation A good indicator to assess the extent to which deglobalisation is taking place is the import intensity of production.This measures the international fragmentation of production (i.e. globalisation) by adding together all gross imports of intermediate inputs along the value chain and expressing the result as a percentage of gross
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output. Computed from data in current prices, the import intensity of production suggests that although still high by historical standards, the international fragmentation of production at the global level has decreased over the past decade (Figure 1A, light blue line). This could be interpreted as evidence of a deglobalisation trend
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