The growth of global value chains, a key driver of trade and poverty reduction in emerging markets, has largely stalled in the past decade, and is under threat from trade conflicts and emerging new technologies, the World Bank said on Tuesday.
In a new report, the World Bank said global value chains — which spread production processes of goods over multiple nations — grew swiftly from 1990 to 2007 as reduced trade barriers, as well as improved information technology and transportation links, induced manufacturers, making up half of all trade.
However, this momentum has reversed, partly due to slower economic growth and a maturing of manufacturing in dynamic regions such as China.
Trade conflicts among large economies have also contributed to the decline and could lead to a retrenchment or a segmentation of global value chains, it said.
The report said such disruptions were already resulting from the US-China trade dispute.
“If the trade conflict worsens and causes a slump in investor confidence, the effects on global growth and poverty could be significant — more than 30 million people could be pushed into poverty and global income could fall by as much as [US]$1.4 trillion,” the report said.
The multilateral lender’s poverty benchmark is measured as being income levels below US$5.50 a day.
Increased protection was likely to induce the reshoring of global value chains or shift them to new locations unless policy predictability is restored, it said, adding that uncertainty is delaying investment plans.
The stalling of global value chains is bad news for emerging markets that participate in them because those nations that do — such as China, Vietnam and Bangladesh — have seen the steepest declines in poverty, the report said.
There are other serious threats to global value chains, including new technologies such as 3D printing that could draw production closer to the consumer, it added.
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