Global Value Chains (GVC) are seen as the nexus between trade and investment (OECD, 2013b, p. 16). As a result of globalization GVCs have gained ever more importance. With production being extremely fragmented, with 70% of imports being intermediate goods and services (OECD, 2015, p. 47), it is evident from empirical research that GVCs and investment are inextricably linked. In particular, the close correlation between FDI stocks within a country and the countries GVC participation index is evidence of the relationship between globalized production and investment (OECD, WTO, and World Bank Group, 2014, Foreword p. 3). However, it should be noted, that GVCs also carry the risk that the previously stated benefits may not materialize by themselves, but rather depend on active GVC participation and active development of human and technological capital (OECD, 2013b, p. 20).
This relationship has also shown development implications of GVCs, whereby GVCs contribute to development within a country by directly increasing GDP as well as providing employment gains and technological advances within a country (UNCTAD, 2013a, p. 148). This is reflected by developed countries where value-added trade creates 28% of GDP (UNCTAD, 2013b, p. iii). Therefore, developing countries should be aware that GVCs are obtaining growing influence in determining trade and foreign direct investment and through this, opportunities for growth (OECD, WTO, and World Bank Group, 2014, p. 11). Thus, countries must not only regulate barriers to trade for goods and services but also barriers for investment with respect to GVCs.
The Committee on Investment Global Value Chains and Development shall discuss how to actively incorporate investment into GVCs and development strategies. Additionally, as the best development results occur from higher GVC participation, whether that is by “‘engaging’ in GVCs, ‘upgrading’ along GVCs, or ‘leapfrogging’ and ‘competing’ via GVCs” (UNCTAD, 2013b, p. iii), the Committee shall discuss how to enable greater GVC participation.
Furthermore, the Committee shall also discuss how to align trade and investment policies. Many trade agreements touch upon investment. For example, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), the General Agreement on Trade in Services (GATS) discussing foreign investment in services within a mode of supply of services, and Agreement on Trade-Related Investment Measures (TRIMs). This has led to a very fragmented coverage of investment (Vocke, 1997, p. 6), which in turn poses the question, how trade measures affecting investment and investment policies affecting trade can be synergized. Finally, the Committee shall bring all of these points of discussion together in either as part of a new regulatory agreement or within an existing agreement.
Author of the Committees 2018:
Marisa Menzel (email@example.com)
Model WTO Head of Simulation Design