New dynamics of upgrading in global value chains: Shifting terrain for suppliers and workers in the global south

Abstract

The rise of global value chains (GVCs) has been associated with the rapid expansion of outsourcing by lead firms in the global North to interlinked networks of cross-border suppliers in developing countries. Outsourcing was facilitated by trade and financial liberalization initiated in the 1970s and 1980s, and driven by intense competitive pressures for cost reduction. GVC and global production network (GPN) analysis provide crucial insights into inter-firm coordination and governance, with diverse and uneven embeddedness across an expanding range of countries (Coe and Yeung, 2015; Dicken et al., 2001; Gereffi et al., 2001, 2005). The consequences for suppliers and workers have been mixed. The search for cost reduction went hand in hand with entry into relatively unregulated environments leading to what Appelbaum et al. (2005) have called ‘the race to the bottom’ in many industries. At the same time, buyer pressure for product quality and consistency has increased the demands on suppliers to comply with private standards and monitoring (Nadvi, 2008). For some the outcome has led to a combination of economic upgrading (suppliers moving to higher value activities) and social upgrading (better terms and conditions for workers), while others have experienced economic and social downgrading (Barrientos et al., 2011a; Lee and Gereffi, 2015). Global outsourcing has led to the creation of new architectures for the organization of production, trade and consumption in the global economy. Today multilateral organizations (including the WTO, World Bank and OECD) have acknowledged that GVCs have reshaped traditional trading patterns between nations. UNCTAD (2013) estimates that 80% of world trade now passes through GVCs. Furthermore the developing country share in global value-added trade increased from 20% in 1990 to over 40% today, and GVC participation contributes 28% to their GDP on average. Global production has opened up new opportunities for employment to millions of workers in developing countries. The International Labour Organisation (ILO) estimates that in 2013, 453 million jobs were GVC