Are global value chains receding? The jury is still out. Key findings from the analysis of deflated world trade in parts and components

Abstract

Over the period 2000-2016, the share of intermediate goods in world trade in nominal terms is fairly well correlated to various Global Value Chain (GVC) indicators based on international input-output matrices: a moderate expansion of international fragmentation followed by a decline from 2011 onwards. However, taking into account price effects (using an original deflator by production stages based on very detailed and harmonised bilateral trade unit-values), our results show a different evolution: the intermediate trade share in volume is growing at a subdued rate between 2000 and 2016. Focusing on the manufacture of Parts and Components (P&C), which corresponds to activities more embedded in GVCs than other intermediate goods, that is, semi-finished products, the same pattern emerges, namely a slight increase in the share of P&C in manufacturing world trade in volume. Furthermore, after controlling for the global business cycle, there is a modest but steady rise, with no sign of a downturn after the Great Recession. GVCs are particularly well-developed for electronics, the share of this sector in P&C trade being the highest and remaining stable over the period. However, subsectors exhibit contrasting development: P&C trade related to office machinery and computers receded while trade in telecommunications equipment, the flagship IT revolution industry, thrived. Counts of clients or suppliers by stages of production indicate a higher and growing geographical diversity for P&C.

Finance & Development, June 2019: The IMF at 75

“…This share has increased at a moderate pace since the 1990s and has not shown any signs of reversal since the global crisis. Moreover, as Gaulier, Sztulman, and Ünal (2019) show, these dynamics are not the result of sectoral composition effects. Within the electronics sector-one of the most internationally fragmented sectors, with a 40 percent share in parts and components trade-there have been contrasting developments.…”

“…The evidence for the second hypothesis-that fragmentation has run its course-is more mixed (Gaulier, Sztulman, and Ünal 2019). One proxy for production fragmentation used in the literature is trade in intermediate products.…”

“…While the share of parts and components trade relative to total trade for office machinery and computers has decreased, it has risen for telecommunications equipment. Finally, global value chains are still expanding in terms of product and country coverage: there is growing geographic and product diversity of parts and components trade as measured by the number of product-country combinations, net of new products (Gaulier, Sztulman, and Ünal 2019).…”

Transformative impacts of globalization on the economy of South Caucasus and Central Asia1

“…Aside from this immediate shock, mid-term effects on the global scale include the disruption of global value chains. GVCs will remain at the centre of future economic debates and, especially, in the context of the recent protectionist tensions and regional disintegration pressures in NAFTA and the EU [25]. It is clear that up-to-date measures of this phenomenon are crucial for analyses of the globalization process in SC&CA countries.…”

On the Relevance of Global Value Chains and the Intra-European Division of Labour

“…• After 2011, the role of global value chains has not expanded further in nominal terms and even decreased with regard to important GVC-indicators (Degain et al, 2017;Gaulier et al, 2019;Li et al, 2019; see also section 3). 6…”