Trade Today Conference: Global Value Chain Development Report 2025

Chapter 1: Recent Developments in Global Value Chains
Key messages
• Trade proved resilient after successive shocks, but the widening gap since 2022between traditional
and GVC-related trade points to deeper reorganization of production networks.
• Services have overtaken goods in GVC participation, showing greater resilience post-pandemic,
especially digitally deliverable services such as finance, telecommunications, and IT. This shift reflects
the increasing role of services in global trade and their relative insulation from physical supply chain
disruptions.
• The average number of production stages in GVCs has lengthened in many economies since 2020,
driven by supply chain disruptions and rerouting of trade, especially in Europe and Central and West
Asia.
• Economies with the highest GVC participation still dominate, but their combined share of GVC related trade dropped from 76% in 2010 to 63.6% in 2025 as low-GVCtraders have increased their
participation, signaling a modest broadening of globalization.
• Reshoring and regionalization trends are evident in major economies such as China, the US, and the
EU, which have reduced their dependence on foreign value-added in domestic consumption,
suggesting a shift toward reshoring.
• Gross and direct value-added trade were negatively affected by growing fragmentation along
geopolitical lines, while indirect value-added trade was generally unaffected. The Russian
Federation’s trade pivoted to China and India, Central and West Asia rose as a transit hub, and
indirect routes between the US and China via connector economies such as Mexico and Viet Nam
grew.
Chapter 2: Resilience and Re-Globalization GVC Trends and New Opportunities
Key messages
• Globalization is being rewired, not reversed. GVC integration has slowed and consolidated since
2011, with production, trade and investment concentrating on technologically advanced, regionally
integrated hubs. Apparent diversification often masks continued dependence on a narrow set of
partners and products, especially in LAC and Africa.
• Latin American and the Caribbean and Africa participate in GVCs but struggle to upgrade. New TiVA
evidence and firm-level diagnostics show that many economies in both regions remain locked into
low-complexity, low-margin tasks, while foreign-controlled firms dominate high-value segments.
Participation alone does not guarantee domestic value capture, learning, or resilience.
• Readiness rather than volume is the new basis of competitiveness. A Global Value Chain Readiness
Index (GVCRI) across six pillars (technology and connectivity, trade and investment, sustainability and
energy, institutional and geopolitical, financial and business readiness) highlights that LAC and Africa
lag in digital backbone, logistics reliability, institutional quality and financial depth, even where they
hold strengths in renewables, critical minerals, demographics and pragmatic diplomacy.
• Corridor-first, KPI-anchored reforms can convert endowments into reliability-priced opportunities.
For both regions, priority actions include strengthening digital and data infrastructure, grid reliability
and green power, trade facilitation and preference utilization, and investment de-risking around key
corridors. Progress should be tracked through practical metrics-such as corridor uptime, broadband
affordability, ETG tariffs, customs clearance times and SME upgrading-so that reglobalization
translates into higher domestic value capture and more resilient, inclusive growth.
Chapter 3: Global EV Value Chains: Paradigm Shifts and New Opportunities for Developing Economies
Key messages
• The rapid rise of electric vehicles (EVs) is reshaping traditional global automotive supply chains. In
2023, China accounted for 76.9% of global EV production, far exceeding the United States, Germany,
and Japan. This stands in sharp contrast to the ICEV era, when global production and trade were long
dominated by these three countries. As the core component of EVs, EV batteries rely heavily on
minerals. In 2023, global battery manufacturing consumed 85% of lithium, 70% of cobalt, and over
10% of nickel. While this creates new opportunities for resource-rich developing economies to
upgrade within the EV supply chain, the extreme concentration of mineral supply, such as cobalt
from the Democratic Republic of the Congo and lithium from Chile, also exposes the upstream
segment to significant vulnerability. Diversifying sources of critical minerals may therefore emerge as
an urgent strategic priority for major battery-and vehicle-producing countries.
• EVs are essential to global transport decarbonization. According to EV-ICIO and life-cycle
assessments, EVs emit 2–4 more tons of CO₂ during production than ICEVs due to battery
manufacturing yet deliver substantial life-cycle emissions reductions. The carbon payback period
varies widely—1.7 years in the United States, 5.7 years in China and 7.6 years in Japan. However, the
simulation results show that a 15% increase in renewable energy and electric-drive efficiency would
shorten the payback period to 3.5 years in China and 4.6 years in Japan, underscoring the critical role
of policy interventions in accelerating the mitigation benefits of EVs.
• Product-space analysis identifies three evolutionary pathways through which economies develop
new advantage products in the EV industry: breakthrough-, cluster-, and chain-type. Developed
economies such as the United States and South Korea mainly expand their EV-related capabilities
through cluster and chain paths, reflecting strong path dependence. In contrast, large developing
economies and resource-rich countries tend to enter and upgrade within the EV industry through
breakthrough and chain-type modes, gradually building new competitive strengths.
Chapter 4: Toward Greener and Inclusive Global Value Chains: Insights from Environmental Policy
Key messages
• GVCs are deeply rooted in domestic production systems while simultaneously operating through
cross-border production sharing. This duality implies that meaningful climate mitigation requires
action across all nodes of the chain.
• Expanding carbon pricing to cover a wider range of firms, including SMEs, and ensuring more
equitable green financial access across firms of different sizes and ownership types can improve
emissions efficiency while minimizing GDP losses.
• When countries adopt different environmental regulations, this can introduce border adjustment
complexities (e.g., EU-CBAM), disrupt economies of scale for firms operating across multiple
jurisdictions and create a need for “regulatory hedging” strategies, where firms adjust production to
serve specific regulatory markets.
• Trade-related environmental policies shape GVCs by influencing green innovation and technological
upgrading. Policies that encourage green innovation-such as R&D supports, intellectual property
reforms, and market-based incentives for low-emission technologies-can accelerate the shift of firms
and sectors toward the green technological frontier.
Chapter 5: Industrial Policy in a Strategically Contested Global Economy
Key messages
• Industrial policy has re-emerged at unprecedented scale and scope as governments pursue climate,
technology, and security objectives. Recent mapping exercises show large, targeted interventions
across more than 70 economies, concentrated in GVC-intensive sectors such as semiconductors,
clean energy technologies, digital infrastructure, and critical minerals. These measures are no longer
occasional exceptions but a core feature of national development and security strategies.
• Modern industrial policies are embedded in fiscal and financial architectures rather than confined to
line ministries. Tax credits, production subsidies, targeted credit, green finance, and strategic public
procurement are increasingly coordinated with macro-stabilization and climate investment
frameworks, so that industrial policy now functions both as a tool of structural transformation and as
an integral component of long-term public investment planning.
• Because production is organized through dense cross-border value chains, policy impacts propagate
through upstream and downstream linkages. New empirical work using MRIO and firm-level data
finds that indirect spillovers on suppliers, customers, and third-country competitors can rival or
exceed the direct domestic effects of support, creating both positive learning externalities and
negative displacement or overcapacity risks across borders.
• The effectiveness and welfare consequences of industrial policy remain highly context dependent.
Case studies in sectors such as autos, shipbuilding, and clean energy show that outcomes hinge on
detailed design and implementation quality, including targeting, competitive neutrality, time
consistency, and phase-out strategies. At the same time, the evidence base is still incomplete, so
strong global welfare conclusions about industrial policy, in aggregate, are not yet warranted.
• Geoeconomic fragmentation and subsidy competition are reshaping the geography of GVCs. Firms
respond to tariffs, sanctions, and subsidies by rerouting trade and investment through “connector”
economies such as Viet Nam, Mexico, Turkey, and parts of ASEAN that can bridge rival blocs. Much of
this adjustment reflects re-routing and incremental upgrading rather than wholesale relocation, but
it is gradually altering regional industrial structures and the distribution of bargaining power.
• Multilateral rules and monitoring have not kept pace with this surge in policy activism. WTO subsidy
disciplines remain formally in place, but notification gaps, weak enforcement, and the broader
dispute settlement impasse reduce their constraining power. In response, institutions such as the
IMF, OECD, World Bank, and WTO are experimenting with joint subsidy platforms, sectoral
observatories, and modular transparency proposals that can provide a shared factual basis for
dialogue even when legal reform is slow.
• For firms, industrial policy has become a strategic operating condition rather than a background
parameter. Large multinationals now treat policy regimes as part of their comparative advantage
calculus, hedging risks and arbitraging incentives across locations when structuring supply chains and
investment. This creates opportunities for anchor economies that can credibly combine incentives
with stability, but it also raises the risk of inefficient subsidy races and fiscal strain, especially where
transparency and evaluation remain weak.
Chapter 6: Foreign Direct Investment, Trade Finance and Global Value Chain Integration
Key messages
• FDI provides the structure of global production, while trade and supply-chain finance (TF/SCF)
provide the motion. FDI anchors long-term capital formation, technology transfer and organizational
know-how, determining where production occurs. TF/SCF-through letters of credit, guarantees,
factoring, and receivables finance-supplies the short-term liquidity that keeps goods and
intermediate inputs moving. Without this dual-capital system, GVC integration remains shallow:
investment without liquidity traps firms outside supply chains; liquidity without investment keeps
them in low-margin roles.
• Liquidity constraints severely limit firm participation in GVCs-even where FDI presence is strong.
Evidence from banking, WBES, and regional surveys shows that 71% of exporter working capital in
developing economies is self-financed, with only 18% coming from banks; 40% of sales occur postdelivery, creating long cash-flow gaps. Payment cycles of 60–120 days, high collateral requirements,
and rejection rates above 20–25% in parts of Africa and the Mekong region prevent SMEs from
supplying multinational firms. The global trade-finance gap reached USD 2.5 trillion in 2022,
reflecting severe structural shortages in short-term credit. Trade-finance pricing remains
prohibitively high: confirmed letters of credit cost 3.5–4% of transaction value in many emerging
markets versus 0.25–0.5% in advanced economies. Trade-finance coverage remains extremely low3–20% in many emerging economies-compared with more than 60% in advanced countries. WTO–IFC modelling shows that raising trade-finance coverage from 25% to 40% and lowering costs to

emerging-market benchmarks would boost annual trade flows by ~8%.
• Supply-chain finance is expanding but highly concentrated and inaccessible to lower-tier suppliers.
SCF supports only 0.5% of trade in Viet Nam and Cambodia and 1% in Mexico, where 90% of SCF is
provided by just three banks concentrated on top-tier firms. In Mexico, domestic SCF is four times
larger than cross-border SCF but still dominated by a handful of institutions and multinational
anchors. Most SMEs lack access to receivables finance or pre-shipment working capital: 70% of
exporting SMEs in Viet Nam cannot access working-capital loans, and 75% of Mexican MSMEs do not
qualify for bank credit. These constraints limit their ability to meet multinational procurement
requirements and weaken domestic linkages created by FDI.
• Trade and FDI respond to different financial architectures, creating diverging integration patterns.
Gravity-model estimates show that bilateral stock-market development strongly raises trade flows,
while banking-sector depth and private-credit availability drive FDI. This “financial duality” implies
that comparable levels of trade and investment openness require different institutional reforms.
Countries with more compatible financial systems trade and invest more with each other, reinforcing
the importance of financial-system compatibility for GVC integration.
Chapter 7: Technology, Productivity, and Inclusive Growth through Global Value Chains
Key messages
• Technological change and GVCs are mutually reinforcing. Advances in ICT, logistics, and digital
platforms enable finer fragmentation of production, while GVCs operate as channels for technology
transfer and learning. However, the benefits are structurally selective: they accrue mainly to
economies with sufficient absorptive capacity, appropriate industrial structures, and strong firms,
rather than automatically diffusing to all GVC participants.
• Between-economy inequality has declined on a population-weighted basis since the 1990s, but
convergence is uneven and limited for many low-income economies. New evidence shows that
productivity gains from GVC participation are strongest where sectors rely on sophisticated
intermediates and where economies occupy technology-intensive or central network positions;
many low-income economies remain in low-complexity segments that deliver modest convergence
at best.
• Macro-level studies highlight the importance of linkage types and network position. Forward GVC
linkages, where domestic inputs feed into other economies’ exports, generate relatively rapid
productivity convergence even at modest participation levels, while backward linkages require
higher thresholds before strong gains materialize. A new concept of “global TFP” shows that
productivity improvements in one economy propagate through GVCs and can have larger indirect
effects on trading partners than direct domestic gains, reinforcing the importance of network
structure for welfare outcomes.
• Firm-level evidence indicates that GVC participation primarily helps lagging firms catch up rather
than pushing leaders further ahead. Joining multinational or superstar supply chains raises supplier
productivity, employment, and access to better buyers, largely through direct knowledge transfer
and the diffusion of “relationship capabilities”. These mechanisms generate within-industry
convergence in productivity, even as overall rents remain skewed toward highly connected firms.
• The same mechanisms that support productivity growth can widen gaps within economies. GVC
integration and technology adoption are associated with falling labor shares, higher skill premia, and
job polarization. Women, youth, and informal workers are disproportionately concentrated in
routine or low-protection roles that are more exposed to automation and upgrading shocks, while
superstar firms, digitally connected MSMEs, and core regions capture a growing share of value
added and innovation rents.
• Emerging technologies such as AI, advanced robotics, and digital platforms interact with GVCs in two
opposing ways. On one side, they lower trade and coordination costs and can open new upgrading
paths, including for smaller firms that can leverage digital intermediation. On the other side, they
extend automation into non-routine tasks, erode low-wage comparative advantages, reinforce firm
and regional concentration, and create algorithmic barriers to visibility in platform-mediated trade,
with ambiguous net effects on inclusive development.
• Policy choices determine whether GVCs and technology become engines of inclusive growth or
sources of new divides. The chapter emphasizes the need for selective GVC integration aligned with
domestic capabilities, sustained investment in skills and absorptive capacity, active labor-market and
social-protection systems, competition and tax policies that limit excessive concentration, and
technology governance that keeps AI and digital rents from being locked into a narrow set of frontier
firms and locations. Economies that combine these elements are more likely to translate GVC-linked
productivity gains into broad-based improvements in incomes and opportunities.
Chapter 8: Targeted Trade Deals as A New Form Of Global Value Chain Governance
Key Messages
• Targeted Trade Deals (TTDs), sectoral or otherwise limited trade agreements often focused on
addressing non-tariff barriers through soft law provisions, are not a new phenomenon, but they have
seen a sharp rise in the past five years.
• TTD formation is driven by a limited set of factors clearly linked to their specific objective. For
instance, digital TTDs are signed primarily by economies with strong digital capabilities while critical
mineral TTDs require at least one signatory to have high resource endowments.
• Empirical evidence is consistent with TTDs increasing trade between the signatories in the regulated
areas. The strongest evidence of a systematic effect on trade is found for CRMTTDs with an average
effect of 12%, whereas for digital TTDs significant effects are limited to more ambitious agreements.
• TTDs fulfil pragmatically strategic objectives and contribute to international cooperation. Their
flexibility provides policymakers with a simple tool to address frontier issues through a cooperative
approach. Increased transparency could further the goals of TTDs and address concerns regarding
policy fragmentation and public accountability