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An UNCTAD report reveals that 80% of trade occurs in global value chains linked to transactional corporations.
Global trade is increasingly dominated by the complex and circuitous routes followed by goods and services as they are upgraded into finished products, a new UNCTAD report says. These "global value chains" (GVCs), orchestrated for the most part by transnational corporations (TNCs), offer opportunities for poor countries to gain access to international markets, just as they offer opportunities for statistical confusion to economists.
The ever-more complicated webs of investment and trade, by which raw materials extracted in one country may be exported to a second country for processing, then exported again to a manufacturing plant in a third country, which may then export to a fourth country for final consumption, are the topic of the UNCTAD report entitled GVCs and Development: Investment and Value Added Trade in the Global Economy.
The report says that the value chains administered in various ways by TNCs now account for 80% of the $20 trillion in trade each year.
It also says that the relentless zigzagging across borders of goods and services as they are upgraded means that some 28% of the value of this trade - or about $5 trillion - is overstated through double counting. The export value of copper ore extracted in one country, for example, counts once as a contribution to that nation's gross domestic product (GDP), but then is counted again - as many as several times - as it progresses from raw to upgraded to finished goods as it is exported after processing by other countries.
Among the key findings of the report:
- Global investment and trade are thoroughly entwined in international production networks. This is...