Expanding and Restructuring Global Value Chains for Sustainable and Inclusive Growth

Global value chains (GVCs), networks of firms through international trade of goods and services, investment, and research activities, had expanded in the world economy in the 1990s and early 2000s. GVCs generate benefits for both advanced and developing countries through efficiency gains, diversification, knowledge diffusion and job creation.

However, the expansion of GVCs has slowed down since the global financial crisis in 2007-2008 because of insufficient human capital and infrastructure, as well as regulatory and institutional barriers. In addition, the slowdown is triggered by GVCs’ adverse effect on some manufacturing firms in advanced countries due to competitive pressure from emerging countries that results in the rise of protectionist sentiments and policies.

To achieve sustainable and inclusive growth, GVCs should be expanded and restructured by (1) developing human capital and infrastructure, (2) promoting business matching, (3) removing regulatory and institutional barriers, (4) upgrading manufacturing sectors in advanced countries, and (5) reducing excessive protectionist sentiments.

＊This is an official T20 Japan Policy Brief.

This paper first appeared on the T20 Japan official website. Reproduced with permission.