New York, 16 June 2021 Global Value Chains (GVCs) may have experienced a setback during the early phases of the pandemic, but it seems premature to diagnose a wholesale failure of the system, or to forecast a large-scale shift to other means of production, according to a new UNDP policy brief.
“Despite early pessimism, Global Value Chains as a predominant model of production and trade proved resilient, and remains key for medium-term economic rebound,” said Kanni Wignaraja, UN Assistant Secretary-General and UNDP’s Regional Director for Asia and the Pacific. “We must diversify and future-proof the supply chains based on the disruptions experienced during the pandemic.”
The Post-Covid-19 Future for Global Value Chains policy brief notes that the effect of the pandemic is far from negligible, but the analysis shows that it would be extremely costly to radically alter the prevalence of GVC trade. The general model of joining GVCs, rather than developing full domestic supply chains, still offers important potential advantages.
“The smart join-up to Global Value Chains remains a winning development strategy, over full re-shoring. Countries that have invested in new skills, quality infrastructure and specialized services are better poised for recovery,” added Ms. Wignaraja.
Asia-Pacific economies have considerable experience in GVC in a range of sectors. Standout examples include transport equipment, electronics, and textiles and apparel. Specialization varies from country to country, but in a global context, Asia-Pacific countries have enjoyed notable success in these sectors. The policy brief argues that, from a future standpoint, evolutions in consumer preferences towards environmentally-focused goods, such as electric vehicles or green energy products like solar cells, mean that existing value chains may need to retool to produce distinct, but related, goods.
The research points to important lessons learned during the pandemic. Two of particular import are that: not-withstanding the current global crises, national leadership should remain committed to open trade and investment flows, underpinned by a rules-based multilateral trading system; and should ramp up investments in a standing social protection architecture, domestically, to help those more vulnerable deal with shocks.
The Post-Covid-19 Future for Global Value Chains is part of a series of Policy Briefs prepared by the UNDP Regional Bureau for Asia and the Pacific to debate and influence development policy priorities during the ‘Decade of Action’ leading up to the implementation of the 2030 Agenda for Sustainable Development.
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