Global factory: Policy implications from the emergence of global value chains

The last three decades have seen a dramatic change in the way firms organize their production processes. Previously processes for producing goods were previously completed entirely in one country. However, now these processes have become increasingly fractionalized into various stages and geographically dispersed to plants across the globe in what are known as global value chains (GVC). This trend has created profound changes in trade, investment, and knowledge flows across countries as well as in the way nations pursue industrialization—namely by participating in these chains rather than by building them entirely at home.

This shift towards global value chains raises new, tough questions for understanding trade and investment, namely, how do GVCs affect the global trade governance exercised by the World Trade Organization? How do GVCs impact the way countries formulate their trade and integration agendas? How do GVCs affect the way trade flows, trade balances or exchange rate misalignments are measured? How do value chains impact on development?

On April 16, the Brookings Global-CERES Economic and Social Policy in Latin America Initiative (ESPLA) and the Inter-American Development Bank hosted a discussion on these important issues and recommended policies for addressing the particular challenges and unique opportunities created by global value chains.