Future Fragmentation Processes: Effectively Engaging with the Ascendancy of Global Value Chains

Leveraging the power of trade to expand formal employment opportunities, generate greater value addition, assist diversification processes and develop productive capabilities is an aspiration of all Commonwealth governments. These objectives were conveyed clearly at the Commonwealth Trade Ministers Meeting convened in March 2017.

There are areas of mutual interest and where enhanced co-ordination between member countries could enhance trade gains. Because the ability to transmit tacit knowledge through Commonwealth trade, finance and investment networks is inherent in the trade cost advantage shared by members - which exists without formal collaboration - it suggests the sharing of already known best practice could further enhance the gains from more concerted action. In order to engage effectively with contemporary trade, which manifests as global value chains (GVCs), it is incumbent on governments to better understand corporate strategies. The achievement of structural economic transformation within the context of GVC trade entails system-wide approaches, more cognisant of innovation systems, as opposed to more siloed approaches towards sectoral development. Concerted action is required to facilitate interactions between private and public agents, so as to effectively enable societal upgrading processes. In this publication, as well as taking stock of past performance, we reflect on potential dynamics and future fragmentation processes. The chapters collated in this publication provide for a more careful examination of GVCs within which our members specialise at the sectoral level: manufacturing, services and commodity trade, including within the realm of the oceans economy. Given that the overwhelming majority of the 52 Commonwealth member countries are small states, 45 are oceans states and around one-fifth are least developed countries, understanding how dynamics are unfolding at the sectoral level is critical to encouraging more gainful GVC participation.

Through a more inductive approach, one that involves learning from experiences across the Commonwealth of existing GVC participation, a clear set of policy measures becomes apparent. These include overcoming barriers to entry, informational asymmetries and unfair competition, and stimulating innovation. Finally, important knowledge and data constraints for small states in the Pacific and Caribbean are highlighted.

Table of Contents:

• Foreword
• Preface
• List of Figures
• List of Tables
• List of Boxes
• Abbreviations and Acronyms
• SECTION 1: GLOBAL DEVELOPMENTS
• 1. Slowdown in Asia’s Global Value Chains and Industrial Latecomers
• Ganeshan Wignaraja
• 1.1 Introduction
• 1.2 The rise of ‘Factory Asia’
• 1.3 Slowing trade and global value chains in Asia
• 1.4 Prospects for latecomers in global value chains
• 1.5 Entry of firms into global value chains
• 1.6 Public policies for global value chains
• 1.7 Conclusions
• Note
• References
• 2. Scale, Distance, and Remoteness in Global Value Chains
• Timothy J. Sturgeon, Thomas Farole, Leonardo Ortega Moncada and Carlo Pietrobelli
• 2.1 Introduction
• 2.2 Global value chains and economic development
• 2.3 Size and distance: their importance in economic development, trade and global value chains
• 2.4 Does distance matter?
• 2.5 Overcoming distance
• 2.6 Concluding remarks
• Notes
• References
• 3. The Changing Landscape in Commodity Markets and Trade and Implications for Development
• Machiko Nissanke
• Abstract
• 3.1 Introduction
• 3.2 Changing structures in world commodity markets and excessive price volatilities
• 3.3 Evolving governance in global commodity chains and implications for development
• 3.4 Concluding remarks
• Notes
• References
• SECTION 2: THEMATIC ISSUES
• 4. Effectively Governing Global Value Chains: The Institutional Interface
• Jodie Keane
• Abstract
• 4.1 Introduction
• 4.2 Reflection on regulatory frameworks
• 4.3 New measurements of global value chains: trade in value added
• 4.4 Adding value
• 4.5 Facilitating learning
• 4.6 Influencing value-chain governance
• 4.7 Informing quantitative analyses
• 4.8 Concluding remarks
• Notes
• References
• 5. Modes of Service Delivery and Upgrading in Global Value Chains
• Patrick Low
• 5.1 Introduction
• 5.2 Servicification
• 5.3 The data challenge
• 5.4 Modes of services delivery
• 5.5 Global value chains
• 5.6 Concluding remarks
• Note
• References
• 6. Global Value Chains, Tax and Trade: Upgrading the Position of Small States
• Lucas Rutherford
• Abstract
• 6.1 Introduction
• 6.2 What are international financial centres?
• 6.3 Small state hosts
• 6.4 High-value services and export diversification strategies
• 6.5 Responding to regulatory change
• 6.6 The G20-led international tax agenda
• 6.7 The re-emergence of ‘blacklists’
• 6.8 Other recent developments
• 6.9 Concluding remarks
• Notes
• References
• SECTION 3: SECTORAL DEVELOPMENTS
• 7. Commodity Price Volatility: An Evolving Principal–Agent Problem
• John Struthers
• 7.1 Introduction
• 7.2 What are the main risks faced by commodity producers?
• 7.3 Commodity price volatility: from a stakeholder approach to a principal–agent approach
• 7.4 From international commodity agreements to domestic commodity exchanges
• 7.5 Principal–agent theory applied to commodity markets: a suggested taxonomy
• 7.6 Conclusions and policy implications
• Notes
• References
• 8. How Does Participation in International Value Chains Matter to African Farmers?
• Nora Dihel, Arti Grover Goswami, Claire Hollweg, Sohaib Shahid and Anja Slany
• 8.1 Introduction
• 8.2 The characteristics of contract farmers, non-participants and dropouts
• 8.3 Participation in value chains
• 8.4 Conclusion and way forward
• Notes
• 9. Global Value-Chain Participation and Development: The Experience of Ghana’s Pineapple Export Sector
• Nana A Asante-Poku
• 9.1 Incorporating Ghana into the pineapple value chain
• 9.2 Ghana’s experience: 1986–2004
• 9.3 Ghana’s experience: 2005–2013
• 9.4 The restructuring of relations
• 9.5 Improved supply and quality of fruits
• 9.6 Conclusion
• Notes
• References
• 10. Emerging Tiers of Suppliers and Implications for Upgrading in the High-Value Agriculture Supply Chains Jodie Keane
• 10.1 Introduction
• 10.2 Evolution of the high-value agriculture and cut-flower global value chain
• 10.3 Evolution of the cut-flower industry and trade policy developments
• 10.4 Emergence of tiers of suppliers
• 10.5 Country capabilities
• 10.6 Upgrading opportunities
• 10.7 Concluding remarks
• Notes
• References
• 11. The Global Value Chain in Canned Tuna, the International Trade Regime and Implementation of Sustainable Development Goal 14
• Liam Campling
• 11.1 The EU tuna trade regime and Commonwealth producer countries
• 11.2 Lead firms and market power in the global value chain in canned tuna
• 11.3 Commonwealth government responses to canned tuna preference erosion: leveraging fishery access for development gains
• 11.4 Implications for implementation of Sustainable Development Goal 14
• Notes
• References
• 12. Clothing Value Chains and Sub-Saharan Africa: Global Exports, Regional Dynamics and Industrial Development Outcomes
• Cornelia Staritz, Mike Morris and Leonhard Plank
• 12.1 Background
• 12.2 Global value chains and the clothing industry
• 12.3 Regulatory context of clothing trade
• 12.4 Global trade patterns
• 12.5 The export-oriented clothing industry in SSA
• 12.6 Different types of firms and upgrading implications
• 12.7 Main development challenges
• 12.8 Policy recommendations
• Notes
• 13. The Automotive GVC: Policy Implications for Developing Economies
• Justin Barnes
• 13.1 Introduction
• 13.2 Automotive global value chain dynamics
• 13.3 Global policy context
• 13.4 Developing economy policy lessons
• Notes
• References
• 14. Tourism, Trade in Services and Global Value Chains
• Keith Nurse, Sherry Stephenson and Amilin Mendez
• 14.1 Introduction
• 14.2 Defining tourism
• 14.3 Tourism and the global economy
• 14.4 Tourism services and global value chains148
• 14.5 Tourism global value chains and trade in services: perspectives from the Caribbean
• 14.6 Conclusion
• Notes
• References
• SECTION 4: POLICY PERSPECTIVES
• 15. Understanding Shifts in Trade in Value Added: The Relative Position of the Commonwealth Caribbean and Pacific
• 15.1 Understanding shifts in value-added trade
• 15.2 Caribbean: key findings
• 15.3 Pacific: key findings
• 15.4 Concluding remarks
• Notes
• References
• 16. The End of Industrial Policy? Why a Productive-Sector Policy Agenda Better Meets the Needs of Sustainable Income Growth
• Raphael Kaplinsky
• 16.1 Introduction
• 16.2 The increasingly prominent role of global value chains in outward-oriented industrialisation
• 16.3 Two broad families of global value chains
• 16.4 The impact of global value chains on the character of industrialisation
• 16.5 Industrialisation and structural transformation: global value chains challenge received wisdom
• 16.6 The character of capability building differs between the two families of global value chains
• 16.7 The end of industrial policy? If so, what then?
• Notes
• References
• 17. Making Global Value Chains Work for Development in the Age of Automation and Globalisation Scepticism
• Daria Taglioni, Deborah Winkler and Jakob Engel
• 17.1 Introduction
• 17.2 Why global value chains matter for development
• 17.3 What upgrading trajectories do we observe?
• 17.4 What factors are likely to influence countries’ engagement in global value chains?
• 17.5 GVC participation in the context of technical progress and globalisation scepticism
• 17.6 Policy frameworks
• 17.7 Conclusion
• Notes
• References
• 18. Delivering Inclusive Global Value Chains
• Mohammad A Razzaque and Jodie Keane
• 18.1 Introduction
• 18.2 Global value chain participation and measures to promote it
• 18.3 Current policy prescriptions
• 18.4 Economic geography and value chain trade
• 18.5 Value creation and distribution: effective governance of global value chains
• 18.6 The rise of developing countries in global trade: new demand drivers
• 18.7 Charting the way forward and concluding remarks
• Notes
• References
• 19. Growth Identification and Facilitation Framework: A Pragmatic Approach for Promoting Economic Structural Transformation
• Jiajun Xu
• Notes
• References