Trade and Global Value Chains
Leveraging international trade and global value chains for growth, development and resilience in an era of growing uncertainty
For over three decades, international trade and global value chains (GVCs) have driven growth and poverty reduction, significantly advancing low- and middle-income economies. Yet recent shocks—the COVID-19 pandemic, U.S.-China trade tensions, and Russia's invasion of Ukraine—have revealed vulnerabilities in trade-dependent economies. The pandemic underscored risks for countries reliant on trade for essentials like medicine, yet it also demonstrated the resilience of GVCs, which sustained flows and enabled a strong recovery. Russia's invasion of Ukraine exposed global interdependencies on resources like energy, food, and fertilizers, sparking inflation, food insecurity, and energy crises. It accelerated trends toward reshoring and regional supply chains to buffer against future shocks. The U.S.-China trade conflict showed the cost of politically motivated policies, shifting production patterns and deepening trade fragmentation, but it also prompted countries to diversify supply sources.
Together, these events underscore the need for balanced trade policies that build resilience while preserving the benefits of global integration. To explore how countries can leverage trade and GVCs in a world where multiple shocks and policy trends frame the global trading environment, this page brings together the main policy messages from World Bank research, including the World Development Report 2020: Trading for Development in the Age of Global Value Chains, and other reports and papers. It also provides additional resources for researchers and policymakers working on trade issues.
Download Report Executive Summary
Key Policy Messages
These are major themes and messages emerging from the latest World Bank research on international trade and global value chains (GVCs). Click on each card to learn more and access related publications.
GVCs remain key to growth and poverty reduction
GVCs remain key to growth and poverty reduction
GVCs-led growth boosts growth and poverty reduction, especially in developing countries with access to global markets and strong fundamentals:
- GVCs lifted millions out of poverty.
- A 1% increase in GVC participation correlates with more than a 1% increase in per capita GDP, highlighting long-term growth effects.
- Empirical evidence demonstrates the strong link between GVC participation and economic and social advancement.
Trade conflicts and lack of reform threaten GVCs’ role in promoting prosperity
Trade conflicts and lack of reform threaten GVCs’ role in promoting prosperity
Recent shocks stressed the need for stable trade policies to sustain GVC benefits:
- Preserve market openness to attract FDI and know-how, and to export.
- Invest in human capital, infrastructure and connectivity.
- Ensure sustainability and inclusivity, by supporting SMEs gender equity, and marginalized groups.
- Maintain predictable regulations and transparent customs for smooth operations.
The potential for inclusive and sustainable growth remains strong
The potential for inclusive and sustainable growth remains strong
GVCs can further drive inclusive and sustainable growth, better jobs, and poverty reduction if:
- Developing countries pursue deeper reforms.
- Advanced economies maintain open, predictable policies.
However, recent trends show strong deviations from this approach.
Policies should aim to ensure GVC benefits are environmentally sustainable
Policies should aim to ensure GVC benefits are environmentally sustainable
To ensure GVC participation becomes more sustainable, governments should focus on environmental regulations to:
- Price environmental degradation to prevent GVCs from magnifying resource misallocation.
- Support climate mitigation objectives and increase diversification in countries highly reliant on fossil fuels exports.
- Stimulate GVCs integration of less carbon-intensive commodities and support access to low-carbon technologies.
- Encourage sustainable logistics options to lessen the carbon footprint of supply chains.
International cooperation and open trade policies are ever more necessary and urgent
International cooperation and open trade policies are ever more necessary and urgent
Global shocks reveal how interconnected economies are through GVCs. To manage interdependencies and preserve growth, governments should expand international cooperation, not reduce it:
- Open trade policies remain vital for global stability and shared benefits from GVCs.
- Reducing trade-distorting policies helps keep markets open.
- Expanding cooperation on taxes, competition, and data flows is also essential to manage trade and GVC-related risks.
While open trade policies are vital, rising protectionism complicates their feasibility
While open trade policies are vital, rising protectionism complicates their feasibility
Trade and GVCs face new challenges but show resilience, adapting rather than collapsing under shocks. Lessons from the COVID-19 pandemic include:
- GVCs sustain trade relationships during crises, aiding recovery.
- Governments should monitor strategic goods through shared information.
- Diversifying exports, increasing access to overseas markets, and GVCs integration build resilience.
- Reducing tariffs aids recovery and lowers the cost of essential goods and services.
Multimedia
Policy Research Working Papers
A Metric of Global Maritime Supply Chain Disruptions: The Global Supply Chain Stress Index (GSCSI)
Global supply chains recently faced widespread disruptions. The COVID-19 pandemic caused major disruptions in 2021 and 2022, while in late 2023, geopolitical incidents in the Red Sea and water shortages in the Panama Canal disrupted global shipping routes. Regardless of the cause, delays, or rerouting mean that disruption diffuses at a global scale. To quantify and assess the magnitude of disruptions globally or locally, in 2021, the World Bank developed a proposed metric, the Global Supply Chain Stress Index.
Read more
Policy Research Working Papers
Trade Policies Mix and Match: Theory and Evidence
This paper studies the relationship between tariffs and non-tariff measures (NTMs) to understand the recent trade tensions with governments mixing trade policies, such as the European Union imposing NTMs on top of the tariffs on China’s electric vehicles. Results based on the latest bilateral-product-level NTMs show that overall tariffs and NTMs are policy substitutes. The substitutions are higher for high-income importing countries, low-income exporting countries, country pairs with deep trade agreements, and products with consumption externalities.
Read more
Policy Research Working Papers
Trade Effects of Industrial Policies: Are Preferential Agreements a Shield?
This paper explores the effects of industrial policy on trade, focusing on the role of preferential trade agreements. The analysis uses data for the period 2012–2022 on detailed product-level bilateral trade, industrial policy announcements, and rules on subsidies in different preferential trade agreements. The introduction of a new industrial policy measure in a destination market reduces export growth to that market on average by about 0.28 percent. However, exports from fellow members of preferential trade agreements are not adversely affected and may even be positively affected if the agreements have deep disciplines on subsidies. These findings suggest that preferential trade agreements have a shielding effect against the trade distorting effects of industrial policies.
Read more
Policy Research Working Papers
Bridging the Gap in Trade Reporting: Insights from the Discrepancy Index
Accurate trade data remain central for empirical investigations of international trade and informed formulation of trade policies. However, discrepancies in trade reporting, stemming from reasons such as logistics to deliberate misclassification, pose challenges to obtaining an accurate representation of trade activities. This paper provides a systematic examination of these discrepancies by using the Discrepancy Index, a measure of bilateral asymmetry in trade reporting.
Read more
Policy Research Working Papers
Barrier or Opportunity? How Trade Regulations Shape Colombian Firms’ Export Strategies
Firms increasingly must contend with trade regulations to access foreign markets. This paper quantifies the relative importance of trade regulations and their heterogeneous effects for Colombian firms exporting to Latin America between 2007 and 2017, focusing on specific types and channels.
Read more
Other Links