Dear Members of the World Investment Network,

UNCTAD's Division on Investment and Enterprise has just released its preliminary analysis on Investment and Value Added Trade in the Global Economy. Building on efforts by the international community to map the distribution of value added in global trade, the Division has established a new dataset of global value chains (GVCs) that covers 187 countries and a broad range of industries and activities.

The UNCTAD-Eora GVC Database – part of UNCTAD's FDI-TNCs-GVC Information System – provides new perspectives on how trade links economies and how transnational corporations (TNCs) shape patterns of value added trade through their equity investments and contractual arrangements.

Highlights of the findings presented in the report include:

·       Global investment and trade are inextricably intertwined through the international production networks of firms investing in productive assets worldwide and trading inputs and outputs in cross-border value chains of various degrees of complexity.  Such value chains (intra-firm or inter-firm, regional or global in nature, and commonly referred to as global value chains or GVCs shaped by TNCs) account for some 80% of global trade.

·        GVCs are responsible for the growing significance of "double counting" in global trade figures. The new data shows that some 28% of gross exports consist of value added that is first imported by countries only to be incorporated in products or services that are then exported again.

·        GVCs make extensive use of services. While the share of services in gross exports worldwide is only around 20%, service sector activities contribute almost half (46%) of value added inputs to exports. In fact, a large part of TNCs' international production networks is geared towards providing services inputs, with more than 67% of global FDI stock in services activities (as compared to 26% in manufacturing and 7% in the primary sector). This picture is similar in both developed and developing economies.

·        The majority of developing countries, including the poorest, increasingly participate in GVCs. The developing country share in global value added trade increased from 20% in 1990 to 30% in 2000 to over 40% today. Again, the role of TNCs is instrumental, as countries with a higher presence of FDI relative to the size of their economies tend to have a higher level of participation in GVCs.

·        GVC links in developing countries can play an important role in economic growth. Domestic value added created from GVC trade can be very significant relative to the size of local economies. In developing economies, value added trade contributes some 28% to countries' GDP on average, as compared to 18% in developed economies. Furthermore, economies with the fastest growing GVC participation have GDP per capita growth rates some 2 percentage points above the average.

These findings have some important policy implications. UNCTAD intends to build on the preliminary analyses of the new dataset in the forthcoming World Investment Report 2013, which will examine GVCs’ contribution to development (including market access, employment generation, productive capacity building), as well as the risks involved for developing countries (including social and environmental sustainability impact, the risk of remaining locked into low value adding activities, and the foot looseness of GVC activities).

UNCTAD hopes that its GVC Database will stimulate and contribute to a better informed policy debate by providing new insights into the evolving nature of integrated international production networks and their development impact.

James X. Zhan
Director
Investment and Enterprise Division
United Nations Conference on Trade and Development
Palais des Nations, Geneva
Tel: +41 22 9175797
www.unctad.org/diae
Twitter @unctadwif