The next World Development Report (WDR) on Global Value Chains: Trading for Development is well under way. Check out our website for a sneak preview.
Since the Bank’s last report more than thirty years ago on Industrialization and Foreign Trade, the world has been transformed, mostly in positive terms from a development perspective. Several low and middle income countries can now participate globally thanks to global value chains (GVCs).
Trade flows increasingly through them, with parts and components crossing borders from one country to another to be sold before final assembly. But the playing field isn’t level and the growth of GVCs is patchy. For countries that are not yet part of GVCs, is there a development path through trade when technologies are changing, and openness can no longer be taken for granted? And if this path is available to countries, what can they do to gain from trade and GVCs on their own and by working together?
The WDR will seek to answer three big questions:
Are GVCs an opportunity or an obstacle to development for low income countries? They enable countries to specialize in producing specific parts or completing certain tasks and help to deliver capital and know-how. But more sophisticated tasks in value chains need skills and capabilities that many developing countries lack.
How do GVCs affect income growth and the distribution of gains? There is always the danger that some countries could remain stuck in performing dead-end tasks. In competitive markets the gains from participating in this kind of production and distribution could be broadly shared - but they could also be unequally distributed if buyers or sellers have too much market power. That matters for poverty reduction.
Will technology be a boon or a curse for development? Falling trade costs boost trade. So does the creation of new tradable products, especially services. The rapid expansion of digital platform firms makes it easier for small firms to access new markets, encouraging participation in GVCs. Yet the market power of these platforms also erodes some of the benefits. Automation and 3D printing encourages countries to produce closer to home, but higher productivity might increase demand for imported inputs from developing countries and boost trade.
We also intend to explore policy ideas to help countries benefit more from GVCs, through trade and investment climate reforms as well as safety nets and retraining. It is because production has become fragmented across countries that international cooperation is needed to support inclusive growth.
We have put together a stellar team. Pol Antras, Caroline Freund and Aaditya Mattoo are co-directors. Daria Taglioni is the report’s task team leader. Pol is the Robert G. Ory Professor of Economics at Harvard University, where he has taught since 2003. His research is primarily focused on international trade and multinational activity. Caroline is Director of Trade, Regional Integration and Investment Climate. Aaditya is Research Manager, Trade and Integration, at the World Bank. Daria is a lead economist in the Trade and Competitiveness Global Practice of The World Bank Group and the Global Solutions Lead for Global Value Chains.
We will be publishing drafts of the report online in order to contribute to as transparent a consultation process as possible. I’d like to encourage you to follow our work and to get involved by reading it as we make progress towards publication in October. Other members of the team will also be blogging on aspects of their research in the weeks and months to come. Please stay tuned!
You can view the 2020 World Development Report (WDR) on Global Value Chains: Trading for Development website here.