GLOBAL VALUE CHAİNS AND

INTERNATİONAL TRADE
02.12.2024
FATMA GÜRÇAY
2200005399
Global Value 02

Chains (GVC)
Global Value Chains (GVCs) represent the intricate
network of production activities dispersed across
multiple countries, where various stages of creating a
product or delivering a service occur in different
geographical locations. This fragmentation of
production aligns each country's participation with
its comparative advantages, such as lower labor costs,
advanced technology, or specialized skills.
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1. The Structure of GVCs
Stages of Production:

Raw Material Extraction: For instance, rare earth metals for electronics

Detailed Explanation
may be mined in Africa or Australia.
Intermediate Processing: These materials are refined and turned into
components in countries like China or Malaysia.
Assembly: Final assembly often occurs in nations with advanced
manufacturing infrastructure, such as China or Mexico.
of GVCs
Distribution and Marketing: Finished products are distributed globally,
often from major trade hubs like the U.S., EU, or Singapore.

2. Key Characteristics
Global Interdependence: Each stage relies on the seamless flow of goods, services, and
information across borders.
Added Value at Each Stage: Value is incrementally added, such as through innovation,
branding, or finishing processes. For example, Apple designs its products in the U.S., but the
components and assembly involve dozens of other nations.
Specialization: Countries participate based on their strengths. Vietnam focuses on textiles,
Germany on high-quality machinery, and India on IT services.
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3. Impact on International Trade 4. Benefits and Risks

Shift from Traditional Trade: In conventional trade, finished goods Benefits

were exchanged between nations. In GVCs, intermediate goods Economic Growth: Countries integrate into global markets, improving
dominate, accounting for nearly 70% of global trade. employment and GDP.
Regional Hubs: Countries are increasingly specializing as regional hubs. Technology Transfer: Participation often brings access to advanced
For example, ASEAN countries serve as a production base for technologies and processes.
electronics, while North America focuses on automobiles. Market Access: Firms gain access to international markets and
Cost Efficiency: By allocating production stages to the most efficient consumers.
location, GVCs reduce costs and enhance competitiveness. Risks
Supply Chain Disruptions: Events like the COVID-19 pandemic
highlighted vulnerabilities in GVCs.
Unequal Gains: Wealthier nations often capture a larger share of value
compared to developing countries involved in basic stages.
5. Examples of GVCs
Electronics Industry:
A smartphone might involve raw materials from Africa, semiconductors from Taiwan, and assembly in China.
Automotive Industry:
German car manufacturers source parts globally but conduct final assembly domestically or in key markets like the U.S.
Agriculture:
Coffee is grown in Brazil or Ethiopia, processed in Italy, and consumed worldwide.
Challenges in Global 05
Value Chains (GVCs)
Supply Chain Disruptions
Global value chains are highly sensitive to disruptions caused
by geopolitical tensions, natural disasters, pandemics, or
logistical bottlenecks. For example, the COVID-19 pandemic
exposed vulnerabilities in GVCs when factory shutdowns and
transportation restrictions led to delays and shortages in key
industries such as electronics and automotive. Additionally,
trade conflicts like the U.S.-China tariff disputes have
disrupted established supply networks, forcing firms to
reevaluate their dependencies.
Compliance and Standards
Operating within GVCs requires adherence to diverse
regulatory standards, environmental norms, and labor laws
across different countries. For small or emerging firms,
meeting these compliance requirements can be costly and
challenging. Moreover, mismatched regulations between
trading partners can lead to inefficiencies, as seen in sectors
like agriculture and pharmaceuticals.
 Supply Chain Disruptions
Global value chains are highly sensitive to disruptions caused by geopolitical
tensions, natural disasters, pandemics, or logistical bottlenecks. For example, the
COVID-19 pandemic exposed vulnerabilities in GVCs when factory shutdowns and
transportation restrictions led to delays and shortages in key industries such as
electronics and automotive. Additionally, trade conflicts like the U.S.-China tariff
disputes have disrupted established supply networks, forcing firms to reevaluate
their dependencies.
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Policies and Strategies in
Global Value Chains (GVCs)
Government Policies

Government policies play a crucial role in shaping the efficiency and resilience of GVCs. Trade agreements,
such as free trade areas or bilateral deals, reduce tariffs and barriers, enabling the smooth flow of goods
and services. For instance, agreements like the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and the European Union’s Single Market significantly enhance cross-border
production collaboration. Additionally, governments support GVC integration by investing in
infrastructure, providing financial incentives for technology adoption, and ensuring regulatory alignment
between trading partners.

Examples

Incentives for Innovation: Governments often encourage domestic firms to move up the value chain
through subsidies for research and development. For instance, South Korea’s investment in its
semiconductor industry has allowed it to dominate a critical stage in global electronics production.
Streamlined Customs Processes: Digital customs platforms and reduced paperwork foster faster
clearance, crucial for industries relying on just-in-time manufacturing.
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Turkey's Role in Global Value Chains (GVCs)
.Turkey plays a critical role in global value chains (GVCs), leveraging its strategic geographic
position at the crossroads of Europe, Asia, and the Middle East. This location facilitates
efficient trade routes and supply chain integration, particularly in sectors like automotive,
textiles, and electronics. The automotive industry is a notable example, with global
manufacturers such as Ford and Renault operating production facilities in Turkey, exporting
components and vehicles to European and global markets. In textiles, Turkey stands as a
leading supplier of fabrics and apparel to international fashion brands, benefiting from a
skilled labor force and proximity to the EU. Electronics manufacturing is another growing
sector, contributing essential components for consumer and industrial technologies.
Turkey's Customs Union agreement with the EU and its extensive network of free trade
agreements have further solidified its role in GVCs, enabling tariff-free access to key markets.
Despite challenges such as geopolitical tensions and economic volatility, Turkey continues
to invest in infrastructure, automation, and green technologies, aiming to ascend to higher-
value segments of global production networks and maintain its competitiveness in an
evolving trade landscape.
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Recommendations and
Strategic Approaches
Diversify Supply Chains Government Support
Spread risk by sourcing from multiple Governments should reduce trade
suppliers across regions to avoid barriers and invest in infrastructure,
dependence on one source. This ensures helping firms move up the value chain
continuity even during disruptions like with policies that promote innovation
natural disasters or trade tensions. and development.

Sustainability and Ethics Embrace Technology

Focus on sustainable practices and ethical Implement digital tools like AI and
standards in production. Green blockchain to enhance supply chain
technologies and transparent supply management. These technologies
chains not only reduce environmental improve efficiency, tracking, and
impacts but also align with consumer communication, making GVCs more
preferences for ethical products. resilient and competitive.
 Conclusion
Global Value Chains (GVCs) are like the world's ultimate collaborative
project, where every country contributes a unique piece to the puzzle.
From raw materials mined in one region to advanced design and
assembly in another, each step adds value and makes the final product
come to life. Imagine a smartphone: its parts might come from Africa,
Korea, and Germany, but it’s the blend of expertise and resources that
turns it into a global sensation. However, these chains aren’t without
challenges—supply disruptions, ethical concerns, and technological
gaps can sometimes cause hiccups. Still, with careful planning,
innovation, and a focus on sustainability, countries and companies can
work together to keep GVCs strong and evolving. It's the magic of
teamwork on a global scale!

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Thanks for
the
listening!