Essay Example on Global Value Chain: A Study of Global Trading Activities

Introduction

Global Value Chain 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.

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Implications of GVC on How Trade is Conventionally Measured

The trade gets conventionally measured by the ability of the GVC to provide 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 help 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 is well-talented. The GVC also has an implication for trade investment promotion. The trade promotion initiatives have involved import activities and not just 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 into the world economy. According to a report published by the World Trade Organization, it has significantly contributed to the development of people's living standards in developing nations. Initially, before the countries adopted the GVC used to export unprocessed raw materials, and they lacked established complementary industries to produce the fully 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 employment opportunities, improvement of the citizens living standards, and significant decline in poverty.

Conclusion

In contrast, the nations that involve themselves in GVC participation do not always result in positive outcomes. Some adverse outcomes are 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 find it difficult to import the skills required to meet the production of the standard of the products set by the GVC, and it becomes difficult to take part in international trade.

References

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.