The single most significant unifying theme in all G20 deliberations since the Los Cabos summit in 2012, when Global Value Chains (GVCs) were first singled out for attention, is the need for GVCs to foster inclusiveness and contribute to a viable development path. All subsequent G20 summits, along with supporting prior meetings covering this topic, have called for – with more or less specificity – development-oriented policy approaches. The Turkish presidency in 2015 added considerable emphasis on supporting small and medium-sized enterprise (SME) participation in GVCs. If GVCs are to fulfil their promise as a development vehicle, they must contribute to economic diversification, jobs, and upgrading beyond simple low value-added tasks. The ways in which this may be assured involve national governments, business, and international agreements that stabilise equitable and opportunity-creating trade and investment relationships. Outsourcing by lead firms in GVCs is an important mechanism for fostering inclusion, providing opportunities for SMEs, building up local specialisation and creating production clusters. Governments can do much to encourage lead firms to source locally by creating an enabling environment and assisting potential domestic suppliers to prepare themselves for GVC participation. Over time, outsourced suppliers can build up expertise, find ways of upgrading, and...
Written by Patrick Low