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
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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Policy Research Working Papers
Are Global Value Chains Women Friendly in Developing Countries? Evidence from Firm-Level Data
Despite the efforts made to increase women’s inclusion in the economy, they are still underrepresented in trade in general and in global value chains in particular. Thus, this paper aims at examining the impact of global value chains on women’s trade participation as entrepreneurs and employees. The results indicate that global value chains can be perceived as a tool that boosts women’s empowerment in emerging economies, especially in the Middle East and North Africa region.
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Policy Research Working Papers
Trade, Outsourcing, and the Environment
This paper analyzes the effects of carbon taxation and border carbon adjustments in a setting where firms can choose to respond to taxation by abating or by outsourcing part of their production. The paper finds that border adjustments that cannot target scope 3 emissions can lead to outsourcing, and thus leakage, further down the value chain, but nevertheless induce higher abatement both in the countries that impose the border adjustment and in the ones affected by it.
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Policy Research Working Papers
Leveraging Trade for More and Better Job Opportunities in Developing Countries: A Framework for Policy
Trade and labor markets are intimately connected. This connection presents governments with a dual economic challenge that cannot be resolved without social compromise: maximizing aggregate gains but minimizing disaggregated costs, which can include losses to individuals and groups. This paper draws on recent research to develop a framework for thinking rigorously about these linkages.
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Policy Research Working Papers
The Trade-Growth Nexus: Evidence of Causality from Innovative Instruments for Trade
This study reexamines the role of international trade and openness in fostering economic growth. The findings suggest that international trade has a positive and significant effect on gross domestic product per capita. The study therefore provides an enhanced empirical foundation for the expectation that investments made to support trade are also good for economic growth, especially in emerging markets.
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