Sustainable value chains: Editorial
With the Nairobi Ministerial Conference (MC10) of the World Trade Organization (WTO) coming in December for the first time on African soil, the intricate nexus between trade and development is attracting special attention for good reason. With the globalisation of production processes, economies and their trade are increasingly interconnected: 70% of global trade is in intermediate goods and services. Global and regional value chains (GVCs) have taken centre stage. This has two major implications for development concerns. First, the challenge for developing countries is not just to integrate with, but also to climb up the global value chain ladder. This requires addressing not only regulations affecting international exchanges, as traditionally done in international trade fora such as the WTO, but also focusing on domestic and international conditions affecting production processes more broadly, including but reaching far beyond conventional trade-related regulatory and logistic issues. Ultimately, it is about using global value chains to stimulate industrialisation and the structural economic transformation of developing economies, while integrating with the world economy. Second, the international interconnection of trade and production processes requires a global approach to development, focused on promoting sustainability along global value chains and beyond. Given the cross-border nature of the chains, sustainability concerns cannot be limited to one single country. They must encompass the various countries and stakeholders along the GVCs and related to it, including more advanced economies. It is de facto a global agenda. This universal dimension is now well embodied in the 2030 Agenda for Sustainable Development adopted at the UN Summit in September. Enhancing the sustainability and development impact of GVCs is an important contribution to the Global Goals, in particular in terms of sustainable economic and structural transformation. It is also important for promoting environmental sustainability to attain the objectives of the 2015 Paris Climate Conference (COP21). This is therefore a critical moment to build on the international momentum generated by the Global Goals, the COP21 and the MC10, to boost efforts towards stimulating the sustainability of GVCs and their development impact. Such endeavours require a multi-country, multi-partner and multi-actor engagement. This includes in particular the private sector. Sustainability and development objectives should not be left to good deeds, with philanthropic actions, and public relations, with enclave corporate social responsibility initiatives. To be impactful and transformative, it must address the core of business operations and strategies, to become an integrated approach to sustainability, so that business activities along value chains become sustainable both from an economic perspective as well as from a developmental, social and environmental perspective. Governments and other institutional actors have also an important role to play in shaping the appropriate incentives and creating a conducive environment to promote and enforce not only responsible business conducts, but also broader sustainability objectives along GVCs. The attention on GVCs provides a natural basis for international cooperation, and convergence of efforts. But it should not end there. Global and regional value chains should not operate in a silo, with good behaviour along the chains by only a few multinational companies and domestic businesses, in a narrow number of sectors, in a limited number of countries. On the contrary, efforts to ensure the sustainability of GVCs should be an entry point to initiate and leverage synergy with development concerns and sustainability concerns in other part - non-tradable sectors or less internationally connected sectors of the domestic economy. The objective should be to avoid a dual system, a developmental and responsible one along GVCs, with other parts of the economy left open to rogue behaviour and poor practices. The issue of policy coherence and synergy across issues is thus more than ever, at stake. But beyond loadable principles, it is action that matters more than words. The challenge is to strike a balance, not only now but also in the longer term, between voluntary commitments and more coercive approaches, so as to build and stimulate the appropriate incentives and enforcement mechanisms leading to effective increases in the sustainability and development impact of global and regional value chains and transformative processes in developing countries. This issue of GREAT Insights brings a range of reflections and insights on these questions, related to current international dynamics, the various dimensions of sustainability and development of GVCs, the need for diversification and upgrading in resource-based developing economies and to foster regional integration. It also highlights some key considerations on the role of trade policy in general, the role of donors, and the EU in particular. We hope you will appreciate these insights and welcome your comments and contributions.
Dr San Bilal (Editor), Head of Economic Transformation and Trade Programme, ECDPM
This article was published in GREAT Insights Volume 4, Issue 6 (December 2015/January 2016).
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