Final Project on Trading for Development in the age of Global Value Chains (Course by World Bank Group)

1. UNDERSTANDING
GLOBAL VALUE
CHAINS 01 01
SEPTEMBER 2020
lindaekeneokwunma@yahoo.com
By
Chioma Linda Ekene-Okwunma

2. WHAT ARE GVCS?
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Global Value Chains represent the principle DIVISION OF LABOUR extended
to international or global scale. In Global Value Chains, production of goods
and services takes place by breaking up the production process into small
parts each of which takes place in a different country.
Value Chain refer to the steps businesses take to produce a product or service
and deliver it to the consumer. Each stage adds value. A Global Chain is
created when these activities are distributer among different countries, rather
than undertaken by one single firm in one location.

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An example of a GVC is seen in
Bicycle production. Bicycles are
heavily traded. They are
assembled using parts and
components from all over the
world, especially Asia and Europe.
Assembling a bicycle from parts
and components made around
the world improves efficiency and
results in a cheaper and
higher-quality bicycle for the
consumer.
Source: bicycleretailer.com

4. DIFFERENT WAYS COUNTRIES
PARTICIPATE IN GVCs
A country sells raw
materials to other
countries, who then
incorporate these imports
into their own production
for exports
FORWARD
PARTICIPATION
Countries import parts
and components from
abroad to be used in
their own exports
BACKWARD
PARTICIPATION
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5. DRIVERS OF GVC
PARTICIPATION
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they are crucial in determining international
specialisation and may also shaped the positioning
of countries in GVC. three types of endownments
are natural resources, labour (low skilled, middle and
high skilled) and capital. having a bone dance natural
resources I driving Force for forward global value
chain participation.
FACTOR ENDOWMENTS
trade costs due to geography and distance can determine
which country to import products from and can shape a
country's position in a GVC
GEOGRAPHY
Larger countries have a larger structural capacity, which
reduces the use of imported inputs relative to domestical
sourced input and waste lower GVC participation.
MARKET SIZE
INSTUTUTIONAL EQUALITY

6. GAINS OF GVC PARTICIPATION
Global Value Chains greatly boosts productivity and incomes1
It leads to hyperspecialization.2
Firms that participate in GVC naturally tend to rely on imported
intermediate inputs for their production.
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There is greater access to variety of higher-quality or less-costly intermediate inputs.
GVCs also lead to flows of technology along the Value Chain
Global Value Chains promote development beyond what can be achieved
through standard trade, and how countries participate matters for that
impact.
GVCs facilitate the production of new environmentally friendly products6
Global value chains provide opportunities for developing countries to diversify
their exports and intensify their integration into the global economy.
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7. Challenges of GVCS in Nigeria
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Weak
Infrastructure
Weak regulatory and
institutional framework
Political instability/
uncertainty

8. WAYS GVCS CAN TRANSFORM NIGERIA
Existence of highly committed, competent and
innovative entrepreneurs has been identified as an
important condition for GVC development.
Technology upgrade:
It is widely acknowledged that learning and innovation
are important determinants of competitiveness and
growth of either firms or countries to improve
efficiency
Skills upgrade and access to global best practice:1
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Export diversification:
Effective GVC development and integration would
change the current highly concentrated export structure
in Nigeria.
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9. POLICIES NIGERIA CAN ADOPT TO ENHANCE GVCS
PARTICIPATION
- Eliminating restrictions on factor market, enables countries to exploit the
comparative advantage
Liberalizing trade, by reducing tariffs and eliminating non-tarrif measures,
expands access to Markets
-
Costs related delay and uncertainty can be reduced by customs reform,
introducing competition in transport services and improving port structure
and governance.
-
Avoiding overhauled exchange rates and restrictive regulations
ensure labour is competitvely priced.
-
Strengthening contract enforcement, protecting
intellectual property rights and improving standard
regimes.
-
Proactive policies like training domestic small and medium
enterprises and linking them to GVC lead firms.
-

10. CONCLUSION
Ensuring Global Value Chains benefit the poorest in Nigeria will come primarily from integrating
smallholders into agriculture value chains and home-based workers into manufacturing and services.
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To sustain beneficial trade openness, countries need to deepen traditional trade cooperation to
address remaining barriers to trade in goods and services, as well as other measures that distort
trade, such as subsidies and the activities of state-owned enterprises.