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28 July 2014 | Will Green
Global value chains (GVCs) offer opportunities for growth and jobs but more needs to done to harness their potential for developing countries, according to a report.
Global Value Chains: Challenges, Opportunities and Implications for Policy said more than 70 per cent of international trade is in intermediate goods and services and economic success “depends as much on the capacity to import high-quality inputs as the capacity to export”.
The report, by the OECD, World Trade Organization (WTO) and World Bank Group, said trade barriers should be removed, services sectors improved to support manufacturing industries, and policies developed to help firms join international supply chains.
The report said G20 governments should implement the WTO Trade Facilitation Agreement - designed to ease customs procedures - “as quickly as possible”, while every 1 per cent reduction in trade costs would generate benefits of billions of dollars, the majority of which would go to developing countries.
The rise of GVCs has produced a “trade, investment, services, know-how nexus” covering trade in intermediate inputs, movement of capital and ideas and a growing demand for services to coordinate dispersed production locations, said the report.
The report said complementary policies, such as those around education and skills, which improve the ability of firms to participate and benefit from GVCs were particularly important for developing countries.
Angel Gurria, OECD secretary-general, said: “Trade, investment and the development of GVCs are constrained by barriers in the manufacturing and agriculture sectors, a lack of progress in opening service markets, a range of behind-the-border restrictions and the still-unfinished work on trade facilitation.
“Getting the policies right on GVCs is an essential step toward building a strong, balanced and sustainable framework for more inclusive growth, jobs and development.”