Policies at the End of the Global Value Chain Rainbow: What Has the World Bank Discovered?

Shahid Yusuf; Xiaolun Sun

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June 29, 2023

The concept of global value chains (GVCs) has become a workhorse of trade analytics ever since it was identified around the turn of the century. By showing empirically how value addition is distributed across trading economies, it provides a better handle on the contribution of each country as goods crisscross international borders in the production process. The concept was quickly adopted by the World Bank Group—and other international financial institutions (IFIs)—and has become a fixture of country diagnostics. In fact, the disruption caused by the COVID-19 shock made GVCs something of a cause célèbre. But this paper argues that conceptual attractions aside, the use of GVCs for analytic purposes has not enlarged the policy toolkit, expanded the spectrum of usable policies, or enhanced their efficacy. Especially in low- and lower-middle-income countries, policymakers are no better equipped to promote development export-led or other. Based on its dealings with four countries—Bangladesh, Côte d’Ivoire, Ethiopia, and Vietnam—each of which is participating in one or multiple GVCs, this paper shows that the World Bank’s recommendations are no different from ones that were the norm in pre-GVC times. To paraphrase Robert Solow, we see GVCs everywhere except in the policy menu. Implementing conventional policies more effectively is what counts.