|Essay type:||Definition essays|
|Categories:||Globalization Politics Macroeconomics International relations|
According to the report from the World Trade Organization (WTO), Fung Global Institute (FGI), and Nanyang Technical University (NTU), the idea of economic globalization has become outdated. Therefore, the trade policy analysis and decisions cannot be based on current trade statistics. They can only get based on the Global Value Chain (GVC). GVC refers to multinational production sharing across the entire world, where the production process gets broken down into various activities and tasks carried out in different nations. It involves the different functions assigned to varied nations on the production of goods and services, their supply, distribution, and sales activities that get coordinated across different countries. The GVC has significantly contributed to the growth and development of global trading activities. It has added to the changing landscape of the various nations' trade and investment in the world. The emergence of the GVC has diversified the operations of the enterprises, governments, and activities of the trade and investment promotion agencies. Enterprises can locate various stages and events across the world. Through the GVC, the process of business research, design, assembly, marketing, branding, and production of different parts of the product can be located in various nations across the globe.
Implications of GVC on How Trade is Conventionally Measured
In the last four decades, the government plays a central role in determining the economic transformation of a country. Still, the advancement in technology enables the environment to internalize its operations across different nations and locations to promote efficiency in their activities. The trade gets conventionally measured by the ability of the GVC to provide the enterprises across the different countries in the world with an opportunity to enhance efficiency and source the input in many countries investing in some particular activities where the surrounding factors are optimal for maximizing profit (Cabral, 2016). The applications of GVC helps in minimizing risks in business as there is a division of labor in the production and distribution of the product to the consumers, and every nation gets assigned to the best field that it was well talented. The GVC also has an implication trade investment promotion. The trade promotion initiatives have involved the import activities and no just only the exports. The nation's investment policies have taken into account measures of attracting more foreign investors to offer essential expertise on production, distribution, and research on the business development plan, which have facilitated the development of the different nations in the world.
The Implications of the GVC on Developing Nations
Application of the GVC in the developing nations has provided them with an opportunity to diversify their import and export, expanding their integration in the world economy. According to a report published by the World Trade Organization, it has significantly contributed to the development of the living standards of the people in the developing nations. Initially, before the countries adopted to the GVC used to export the unprocessed raw materials, and the lacked established complementary industries to produce the full manufactured product. Through the GVC, the developing nations have been able to take part in the chain of production of the manufactured product without necessarily having to produce the complete final product. Therefore, the developing nations that have involved themselves in the GVC have significantly benefited from the rapid growth of the economy, development of the employment opportunities, improvement of the citizens living standards, and significant decline in poverty.
In contrast, the nations that involve themselves in GVC participation do not always result in positive outcomes. Some adverse outcomes get encountered in the standards outlined by the GVC. For instance, there is a risk of a potential breakdown of social development, lack of proper labor welfare, and environmental pollution (Lee, 2018). The GVC in developing countries results in the dangers of widening the economic gaps between nations due to the division of labor. Some of the nations that are participating in the GVC may find themselves locked into low value-added activities due to their employee's expertise. Some of the governments in the world may use it difficult to import the skill required to meet the production of the standard of the products set by the GVC and that it becomes difficult to take part in the international trade.
Amador, J., & Cabral, S. (2016). Global value chains: A survey of drivers and measures. Journal of Economic Surveys, 30(2), 278-301.
Lee, W. (2018). Services liberalization and GVC participation: New evidence for heterogeneous effects by income level and provisions. The World Bank.
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