The Significance of Services and Data in Global Value Chains

Abstract

Global value chains (GVC) are undergoing a transformation as business focus on building resilience. Services and data are already adding value to GVC, particularly manufacturing GVC. Global data flows and digital technologies such as cloud computing and AI enable growth in digitally enabled service exports and further opportunities to add value to manufacturing GVC. Moreover, services-only GVC are evolving as businesses use digital services and technologies sourced globally. • All countries have some comparative advantage in services and as GVC become increasingly services driven and rely on data, new opportunities for GVC participation by developing country and small and medium sized enterprises (SMEs), are emerging. As manufacturing GVC mature, served used are increasingly being sourced globally as business seek best-in-class inputs to maintain overall competitiveness. Yet, services trade barriers remain high – higher than for goods. In addition, countries are increasingly restricting global data flows and requiring data localization. There is also the risk that divergent standards in areas such as 5G, a technology which will underpin new digital services and GVC, will create additional barriers. Trade policy has an important role to play in supporting growth in services and data in GVC. Trade policy should also priorities addressing barrier to services trade and data flows. The failure of the WTO in further liberalizing services trade has had the perverse effect that for many countries services restrictions are becoming the key barriers to growing trade in manufactured goods. Services trade restrictions are also higher in developing countries, placing them at a disadvantage when it comes to participating in GVC.