On Tuesday, the World Bank said that the global value chains’ growth has significantly stalled in the last decade, and would be more negatively affected by global trade conflicts and emerging new technologies.
Between 1990-2007, the GVCs growth grew swiftly as trade barriers were reduced, combined with improved information technology and transportation links supporting manufacturers which made up half of all trade.
However, in recent years the economic growth has slowed down while some dynamic regions showed maturing manufacturing. The trade conflicts added to the problem and could lead to retrenchment or segmentation of GVCs.
The trade conflict between the US and China has massively affected the GVCs and would lead to a slump in investor confidence which could drive poverty and global growth to the edge. Global income could drop by USD1.4 trillion and more than 30 million people could be pushed into poverty.
Further, the bank elaborated that the emerging market countries could get harmed as increased protection could drive reshoring of GVCs or shift to new locations unless policy predictability is restored since the uncertainty was delaying investment plans.
Another threat to the GVCs is new technologies including 3D printing which could draw production closer to the consumer, according to the World Bank.
