Global Value Chains

International trade and global production are increasingly organised into global value chains (GVC) in which transnational corporations divide up the production process and start producing on a global scale. The integration into and the improvement of a company’s position in GVCs has become a significant policy goal in various national development strategies. In this context, the concept of “economic/industrial upgrading” describes the movement in GVCs from lower to higher value-added activities, which is generally associated with a successful development path of enterprises and economies. Yet economic upgrading processes are contested and the high competitive pressure on suppliers as well as asymmetric market and power structures in GVCs make it difficult to achieve sustainable development effects. Public and in particular industrial policies play a vital role in enabling economic upgrading, structural change and greater development effects (see Private sector development and industrial policy).

From a development perspective it is of particular relevance, what effects the increasing integration into GVCs has on economic development, employment and poverty reduction in countries of the Global South, how their position in the international trading system could be improved in a sustainable manner and what regulations, institutional contexts and national policies would be needed to do so.

In addition, ÖFSE is concerned with the resilience and sustainability of global value chains. Particularly against the backdrop of the COVID-19 crisis, the question of supply security for critical products, e.g. for medical and pharmaceutical products, has risen. In this context, measures to increase the resilience (e.g. diversification of supplier companies and regions) of GVC but also re- and nearshoring (i.e. bringing back previously outsourced production to or near the "original" production location) are increasingly being discussed.

Furthermore, the growing climate crisis is increasingly calling current production structures into question. GVC must therefore be made more sustainable, but increasing regionalisation could also restructure them. Measures such as the European Green Deal (keyword: circular economy) play a special role in this context.

With regard to this subject area, ÖFSE focuses on the following aspects:

  • How should the resilience of GVCs be assessed and how can security of supply, e.g. of critical medical and pharmaceutical products, be increased? Is the geographical diversification of suppliers and regions sufficient, or is stockpiling and reshoring needed?
  • How can (global) value chains be made more sustainable in the context of the climate crisis and other sustainability challenges? What impact does the promotion of the circular economy have on the Global South? To what extent does increasing regionalisation make sense in some sectors?
  • What policies are needed that would enable greater and more sustainable effects on development, economic upgrading, structural change, as well as employment and poverty reduction?
  • What opportunities do export-oriented development strategies offer for the economic development process of Global South countries, particularly in Sub-Saharan Africa?
  • What role does industrial policy play and how should industrial policy interventions within the context of GVCs be adapted?
  • What opportunities do new end markets in “emerging economies” (south-south trade) and the production for local and regional markets offer in terms of alternatives to export-oriented strategies?
  • How can higher local value creation and the development of local and regional value chains (for instance from cotton to textile and then to clothing in Sub-Saharan Africa) be facilitated?

For more information contact:

Dr. Jan Grumiller
Researcher
Tel.: +43 1 317 40 10 – 114
E-Mail: j.grumiller@oefse.at
1090 Vienna, Sensengasse 3

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