The World Bank Group published a new report on October 8, 2019 in Washington, D.C., USA. This World Development Report 2020 focuses on trade for development in an era of globalized value chains. It details strategies that will enable developing countries to improve their performance for the benefit of their populations by undertaking reforms that will stimulate their participation in global value chains.

The paper highlights that global value chains or GVCs can continue to stimulate growth, create better jobs and reduce poverty, provided that developing countries undertake deeper reforms and that industrialized countries implement open and predictable policies.

It clearly shows that in an era of globalization, companies can no longer do everything, they specialize and no longer have to produce the entirety of a good on their own.

This book assesses the contribution of VCMs to growth, employment and poverty reduction, but also to inequality and environmental degradation. It also explains how national policies can boost trade growth and ensure that VCMs participate in, rather than oppose, sustainable development. It identifies the shortcomings of the international trading system that have led to dissension between countries, and proposes a roadmap for addressing them through enhanced international cooperation.

This report reveals that it is no longer so obvious today that trade remains an engine of prosperity, this World Bank report points out. Since the 2008 global financial crisis, trade growth has been sluggish and VCM expansion has slowed. The last decade has not seen transformative events comparable to those of the 1990s. Here we are referring to the integration of China and Eastern Europe into the global economy. Two factors are at the root of this slowdown. First, the introduction of labour-saving technologies such as automation and 3D printing could bring production closer to the consumer and reduce the demand for labour both within and outside countries. Secondly, trade conflicts between large countries could lead to a contraction or segmentation of VCMs.

According to this report, global value chains have a positive impact on development.
First, they increase productivity and growth: a 1% increase in participation in global value chains is estimated to increase per capita income by more than 1%, almost twice as much as the gains induced by traditional trade. In Ethiopia, companies engaged in these globalized sectors are twice as productive as their counterparts operating in traditional trade.

Second, they reduce poverty: since the impact of the rise of global value chains on economic growth is greater than that of trade in finished products, their impact on poverty reduction is also greater. Countries such as Mexico and Viet Nam, which are more actively involved in global value chains, have achieved better results in the fight against poverty.

Third, they improve the quality of jobs: firms operating in global value chains attract labour to more productive activities in manufacturing and services, and generally employ more women, thus contributing to the structural transformation of developing countries.
In addition to these positive effects, however, it is noted that VCMs can also have negative effects on the environment. The main environmental costs for VCMs are related to the growth in trade in intermediate goods, and the increase in distances travelled, compared to traditional trade. Their effects include increased carbon dioxide (CO2) emissions associated with transportation (compared to traditional trade) and excess waste.

Nadine Fula