Global Value Chains and International Competition

Abstract

Globalization has given rise to a new era of international competition that is best understood by looking at the global organization of industries and how countries rise and fall within these industries. The global value chains framework has evolved from its academic origins to become a major paradigm used by a wide range of international organizations, such as the World Bank, the World Trade Organization, the International Labor Organization, and the U.S. Agency for International Development. Global value chains highlight how new patterns of international trade, production, and employment shape the prospects for development and competitiveness, using core concepts like “governance” and “upgrading.” This article illustrates the use of this framework by contrasting the industrial upgrading experiences of China and Mexico, through which China has wrested market share from Mexico in a diverse spectrum of U.S. product markets en route to becoming a dominant global manufacturing power in just a couple of decades. The future of international competition will reflect the consolidation and resilience of global value chains and the determination of emerging economies to continue to upgrade to higher value goods and services within these chains, with a growing emphasis on domestic and regional markets.