Project Summary

The world economy has witnessed a significant transformation in the structure of international trade since the early 1980s. This development led to what some have called the “age of global value chains.” A combination of information and communication technology, an acceleration in the reduction rate of trade barriers, and political developments that brought about a remarkable increase in the share of the world population participating in the global economic system fueled this transformation. These forces worked together to alter how firms use foreign parts and components in their production processes and how intermediate input producers sell their output internationally rather than only to domestic end-users. Nowadays, trade in intermediate inputs constitutes a remarkable two-thirds of world trade. This development underscores the critical need to understand how U.S. integration in GVCs has evolved and how trade policies have affected the positioning of the U.S. economy in global supply chains.

Participation in GVCs unlocks numerous opportunities and challenges. One of the key advantages lies in enhanced market access and an expanded global reach. Through integration into GVCs, U.S. producers have gained access to international markets more efficiently, overcoming the confines of domestic boundaries for their products. This integration has allowed U.S. products to become integral components of intricate value chains, facilitating distribution to diverse export destinations. Consequently, tapping into a broader network of production and distribution channels has enhanced market access. It also helped to diversify export destinations, a critical factor for the growth and stability of the U.S. economy. GVCs play a pivotal role in improving the competitiveness of U.S. products on the global stage. The specialization and division of labor inherent in GVCs enable U.S. producers to focus on their areas of comparative advantage, optimizing production efficiency and improving societal welfare. This specialization has led to cost reductions and increased competitiveness, ensuring that U.S. products have become attractive in domestic and international markets.