8
Global Value Chains in a Postcrisis World
more than 30 million in 2009 to a total of 200 million unemployed (ILO 2010). On the poverty front, it is claimed that an additional 64 million people lived in extreme poverty at the end of 2009 as a result of the crisis (World Bank 2010). The effect of the crisis on trade has been even more pronounced. According to the World Trade Organization (WTO 2010), trade volumes dropped by over 12 percent in 2009—the sharpest contraction in world trade ever recorded. Only services trade seemed to be relatively resilient to the crisis, as documented by Borchert and Mattoo (2009) and Gereffi and Fernandez-Stark (chapter 9). The sharp contraction in demand, which was larger and more widespread than in past crises, was identified by economists as the primary cause of the trade collapse. The magnitude of the overshooting of trade that occurred during the 2008–09 crisis has surprised economists, however, and a number of explanations have been put forward, including the shortage of trade finance and the amplification of intermediate goods trade in GVCs, a topic explored in detail in the first part of this volume (chapters 2, 3, and 4). International trade was not only a casualty of the crisis, but also one of its main transmission channels. In recent decades, an increasing number of developing countries have relied on exports to sustain growth. This shift from import-substituting industrialization to export-oriented development strategies translated into a higher reliance on export revenues and greater exposure to external shocks. As documented by Milberg and Winkler (chapter 2), exports as a share of low- and middle-income countries’ GDP grew from just 10 percent in 1970 to 33 percent in 2007. For China, the reliance on exports jumped from 3 to 43 percent of GDP over the same period. Similar patterns were observed in most emerging economies, including Argentina, India, Mexico, and the Republic of Korea. This increasing reliance on exports translates into a rising share of low- and middle-income countries in world exports of goods from 16 percent in 1986 to over 30 percent in 2008; in services the share grew from 13 percent in 1986 to 20 percent in 2007. Many countries are still highly dependent on exports to the United States and the European Union (EU), which represented 13.4 percent and 14.2 percent (or 42.4 percent if one includes intra-EU trade), respectively, of world imports in 2008. At the onset of the crisis, Europe and North America still captured 60 percent of African manufactured exports (down from about 70 percent in 2000). By comparison, Asia and South America represented only 13 percent and 2 percent, respectively, of African manufactured exports (WTO 2009). These differences help explain the magnitude and geographical diffusion of the 2008–09 crisis: countries less dependent on imports from high-income economies were buffered from the crisis. In Asia, for example, regional trade and large emerging markets like China fared relatively well.