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The document outlines key definitions related to international trade and global value chains (GVCs), highlighting their historical growth and the factors driving trade expansion. It discusses vulnerabilities in GVCs, trade indicators, and strategic shifts in policy, emphasizing the need for resilience and diversification in response to global challenges. Case studies illustrate the complexities of GVCs, particularly for developing countries, which face both opportunities and risks in the global market.

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6 views3 pages

2 0

The document outlines key definitions related to international trade and global value chains (GVCs), highlighting their historical growth and the factors driving trade expansion. It discusses vulnerabilities in GVCs, trade indicators, and strategic shifts in policy, emphasizing the need for resilience and diversification in response to global challenges. Case studies illustrate the complexities of GVCs, particularly for developing countries, which face both opportunities and risks in the global market.

Uploaded by

bina.loupikice
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Summary with Definitions: International Trade and Global Value Chains

(GVCs)

1. Definitions
 International Trade: Exchange of goods and services between countries.
 Free Trade Agreements: Agreements reducing tariffs and trade barriers.
 Balance of Trade (BOT): Difference between a country's exports (X) and
imports (M).
 World Trade Formula: World trade=X+M2\text{World trade} = \frac{X +
M}{2}
 Global Value Chain (GVC): A series of production stages spread across
countries.
 Comparative Advantage: A country specializes in producing goods with
the lowest opportunity cost.
 Inter-Country Input-Output (ICIO) Tables: Maps economic links
between countries.
 Trade in Value Added (TiVA): Identifies where value is created along
GVCs.
 FDI (Foreign Direct Investment): When a firm invests in assets or
business in another country.

2. History and Growth of Global Trade


 Trade expanded by 4300% between 1950 and 2021.
 Key turning points: WTO creation (1995), China joining WTO (2001),
Subprime crisis (2008), COVID-19 (2020), and trade wars.

3. Drivers of Trade and GVCs


 Technology: ICT and transport improvements.
 Liberalization: Reduction in tariffs and barriers.
 Production Fragmentation: Global outsourcing for cost efficiency.

4. Case Study: Nutella


 Ingredients sourced globally: hazelnuts (Turkey), cocoa (Ivory Coast), sugar
(Europe), etc.
 Production: 10 factories worldwide, sold in over 100 countries.
5. Vulnerabilities in GVCs
 Subprime crisis: Revealed GVC exposure to financial instability.
 COVID-19: Demonstrated supply chain bottlenecks (e.g., PPE, chips).
 War in Ukraine: Triggered energy and food security debates.

6. Indicators of GVC Participation


 Backward Participation: Using foreign inputs in exports.
 Forward Participation: Supplying inputs that are later re-exported.
 Countries like Slovakia and Luxembourg show high GVC intensity.

7. Trade Indicators
 Balance of Payments: Records all transactions (current and financial
accounts).
 FDI Trends:
o U.S. and China are both investors and recipients.

o European FDI to China is concentrated in a few firms and sectors.

o China’s FDI in Europe is shifting toward tech startups.

8. Strategic Shifts and Policy Debates


 Industrial Sovereignty: Push to re-shore production (e.g., chips,
pharma).
 Energy Independence: Especially in response to Russia-Ukraine war.
 Diversification vs. Reshoring: A key debate for managing future
disruptions.

9. Case Studies
 Face Masks GVC: Critical shortages revealed limits of over-concentration.
 German-China Trade: Concerns over dependency on Chinese suppliers.
 US-China Trade War: Tariff escalations disrupted supply chains.
 BRI vs. B3W: Competing infrastructure initiatives.

10. Opportunities and Risks for Developing Countries


 Opportunities: Integration into production chains without mastering final
goods.
 Risks: Dependence on limited sectors (e.g., mining in Africa).

Conclusion
Trade and GVCs have transformed global economic integration. While they offer
efficiency and growth, they also expose countries to shocks. Strategic
independence, diversification, and better indicators are vital to balancing
resilience and openness.

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