OECD promotes Global Value Chains

Governments that become more open to trade and investment and encourage innovation will help firms better integrate the global value chains (GVCs) that are driving growth in interconnected economies, new research has found.

The Organisation for Economic Co-operation and Development (OECD) has produced a report in collaboration with the World Trade Organisation (WTO) and United Nations Conference on Trade and Development (UNCTAD) discussing a new approach to globalisation and global value chains. The three organisations were asked to report to the G20 Summit in St Petersburg in September 2013 on the rising impact of global value chains; the results will provide substantial grounding for talks between leading economies.

OECD Secretary-General Angel Gurría said everyone can benefit from global value chains, but highlighted the biggest benefits will come when governments take steps to enhance the new business environment. He added: “It is essential to embrace freer trade and resist protectionism as countries seek out new investment, faster productivity enhancement and competitiveness. Encouraging the development and participation in global value chains is the road to more jobs and sustainable growth for our economies.”

The report points out that the extent to which countries take part in GVCs varies widely, with smaller countries such as Slovenia or Belgium relying heavily on foreign imports to make finished goods, whereas the US and Japan are more active in upstream activities. Services - such as information communications technology, transport and logistics - account for more than half of all value creation in GVCs in many OECD countries and more than 30% in China. Countries that  stimulate investment in innovation and intellectual capital, such as design, R&D and new business models will ensure their firms move up the value chain.

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