Chapter 1 Analytical frameworks for global value chains: an overview

In a keynote speech at a seminar on global value chains (GVCs), Richard Baldwin delivered wittily, with his mischievous smile, a rather provocative statement: "The term 'global value chains' doesn't describe what we see today in the world economy" 1 because:• The world economy is not global; it remains regionally segregated, such as Factory Asia, Factory Europe, and Factory North America.• What matters is not value (added) but jobs, especially good jobs.• Production systems are not configured as a linear sequence of production stages like chains but consist of complex networks of hubs and spokes.This is alarming.However, it is also true that many people now use the term "GVCs" -often inconsistently across contexts.With that as the backdrop, this chapter cultivates some common ground for approaching this new area of academic interest by tracing the development of relevant studies.This is not an encyclopedic literature survey; it focuses only on the strands of research that explicitly consider vertical (supply-use) relations of cross-border production sharing and their impact on distributing value among the parties -which is at the heart of GVC studies. 2 The first section of the chapter considers why GVC studies are important from the viewpoint of their contribution to the history of international trade theories.The second traces the development of the GVC concept, with some reference to the evolution of global production networks.The third introduces the main theoretical achievement in GVC studies.The fourth summarizes the challenges for a quantitative description of GVCs, particularly for the innovative use of multicountry input-output tables.The fifth addresses pressing issues for advancing GVC research.The last section presents some meta-methodological considerations on the development of GVC analyses.3 The global value chain paradigm: New-New-New Trade Theory?Since David Ricardo established the foundation of international trade theory two centuries ago, mainstream thought, from Heckscher-Ohlin to Samuelson, has hinged on three classic premises (figure 1.1):• Markets are perfectly competitive, and producers operate at constant returns to scale.• An industry consists of homogeneous producers.• Countries trade only final products -traditionally phrased as Portuguese wine for English cloth -and each product is made using the production factors of only the exporting country.