Earlier in the year, the World Trade Organization (WTO) published the 2019 edition of its Global Value Chain Development Report entitled Technological Innovation, Supply Chain Trade, and Workers in a Globalized World.
This report assesses the global economy through the prism of global value chains (GVCs) which can be defined as the complex network flows of goods, services, capital and technology across national borders.
According to the Report, more than two-thirds of world trade occurs through global value chains. This means that the production of a final good involves crossing many national borders for the components and final assembly. This is especially evident in the high-tech sector which is comprised of highly complex value chains involving many countries.
The report highlights two megatrends underway. First, developing countries are experiencing economic growth including an expanding middle classes and a growing share of global purchasing power. Second, economies are increasingly moving towards digital foundation which, by implication, impacts digital technology, global value chains and trade. According to the report, the digital economy can provide new opportunities to small and medium-sized enterprises (SMEs) which have traditionally been under-represented in global value chains.
Importance of standards and conformity assessment
Standards and their conformity assessment play an essential role in global value chains. They ensure the quality, performance and safety of products and their components as they move from one country to the next. And, they can help developing countries integrate into the global economy by building trust into the products and components that they produce as well as lowering the cost of participation into the global value chain.
According to the WTO report, “standardization through breaking production into modules with high degree of functional autonomy can dramatically reduce the amount of R&D, learning by doing, and the number of complementary skills needed to produce a good. This greatly increases opportunities for developing country firms to participate in formerly capital-intensive industries through reducing entry costs in to global value chains”.
Countries no longer need to master the production of a whole product in order to export it. Instead, global value chains, supported by standards that reduce the barriers to trade, allow countries to specialize in a particular activity and join the global production network.