Commentary on World Development Report 2020: Trading for Development in the Age of Global Value Chains

TL;DR

The paper discusses the significance of trade and global value chains (GVCs) in economic development, emphasizing how GVCs enable developing countries to progress through market reforms and technological advancements.

Contribution

It analyzes the World Bank's 2020 report on GVCs, highlighting their role in development and the importance of tailored reforms for developing countries.

Findings

GVCs facilitate development in emerging economies.

Technological change has expanded the scope of GVCs.

Market-oriented reforms are crucial for benefiting from GVCs.

Abstract

The importance of trade to an economy needs no emphasis. You sell products or services that you are competitive at and buy those where you are not. Experience of countries such as South Korea and China demonstrate that resources required for development can be garnered through trade; thus, motivating many countries to embrace trade as a means for development. Simultaneously, emergence of 'Global Value Chain' or 'GVC' as they are popularly known has changed the way we trade. Though the concept of GVC was introduced in the early 2000s, there are examples of global value chains before the 1980s. However, the scale of the phenomenon and the way in which technological change, by lowering trade costs, has allowed fragmentation of production was not possible before (Hernandez et al., 2014). In this context, the World Bank has recently published its 'World Development Report 2020: Trading for Development in the Age of Global Value Chains' (WDR). The report prescribes that GVCs still offer developing countries a clear path to progress and that developing countries can achieve better outcomes by pursuing market-oriented reforms specific to their stage of development.