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.
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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.
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Policy Research Working Papers
Linking Export Activities to Productivity and Wage Rate Growth
This paper examines the relationship between trade and job quality, using productivity and wage rate data for export and non-export activities in a sample of 60 countries across all income levels and 45 sectors spanning the whole economy from 1995–2019. First, the analysis finds that workers involved in export activities are more productive and better paid than those in non-export activities. Second, this study finds a positive relationship between exports and labor productivity at the country-sector level. Finally, productivity and wage rate growth decompositions suggest that growth within rather than between activities was the driving force.
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Policy Research Working Papers
Did the 2022 Global Energy Crisis Accelerate the Diffusion of Low-Carbon Technologies?
This paper develops measures of the diffusion of a comprehensive range of low-carbon technologies in 35 countries from 2019 to 2022 using text analysis of job postings and earnings calls transcripts. It documents a rapid acceleration in the diffusion of low-carbon technologies in 2022, driven by technologies related to renewable energy, vehicles, thermal performance, and electrical generation and storage.
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Policy Research Working Papers
The Quality and Price of Africa’s Imports of Digital Goods
Imported digital goods are critical for productivity growth in low-income countries. Using detailed data on international trade flows and tariffs, this paper finds that African nations tend to import relatively low quality, low price digital goods. Unilateral tariff liberalization toward all countries would significantly increase the imports of digital goods in Africa.
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Policy Research Working Papers
Turning Risks into Reward: Diversifying the Global Value Chains of Decarbonization Technologies
Reaching net-zero emissions by 2050 requires unprecedented scaling up in the global deployment of critical decarbonization technologies. This paper lays out an evidence-based strategy to help diversify the global value chains of decarbonization technologies across countries with latent production capabilities and resource endowments. Taken together, the evidence supports the idea that there is plenty of opportunity to diversify these value chains across a larger number of countries to avoid the risks associated with reliance on only a few countries.
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Policy Research Working Papers
Stages of Diversification Redux
This paper studies the stages of countries’ economic diversification across three dimensions, namely employment, value-added, and exports. Patterns of diversification are mainly driven by between-country rather than within-country variation, a finding that had been ignored in the existing literature. Diversification patterns also differ across resource-rich and resource-poor countries.
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