Global Value Chains and Industrial Upgrading
in Developing Economies:
A Comparison of Africa, China, and Latin America
Gary Gereffi
Duke University
Center on Globalization, Governance & Competitiveness
http://www.cggc.duke.edu
ggere@soc.duke.edu
COMESA Conference
Seychelles
March 12-13, 2008
Agenda
•
Global Value Chain Analysis and Industrial Upgrading
•
Africa and China
•
Comparing Latin America, Africa and China
•
Case Studies: China vs. Mexico
•
Challenges and Opportunities
2
Global Value Chain Analysis
and Industrial Upgrading
3
What is Global Value Chain Analysis?
 Actors in global industries, and how their roles are
changing (lead firms plus supply chains)
 Power in the chain (brands, global buyers)
 Linkages – between GVC activities (firms, intra-firm,
networks)
 Geography – locate domestic and national industries in
their global context
 Institutions – Government, unions, trade associations,
NGOs, multi-lateral agencies and regulations
http://www.globalvaluechains.org/
4
Upgrading
Upgrading refers to the acquisition of technological capabilities and market
linkages that enable firms to improve their competitiveness and move into
higher-value activities. Analyses of upgrading from a value chain perspective pay
particular attention to the ways in which value chain linkages facilitate or obstruct
upgrading.
 Product and Process
Upgrading
Functional
Upgrading
Inter-Chain
Upgrading
5
Africa and China
6
Africa’s share of world exports has
been declining
7
Africa’s Exports are still in Raw Form, Resulting in
Little Value-Added Being Extracted on the Continent
8
Top 10 Exports COMESA to the World,
2006
2006
68-Non-ferrous metals
34-Gas,natural and manufactured
93-Special transactions & commod.,not class.t
66-Non-metallic mineral manufactures,n.e.s.
03-Fish,crustaceans,mollucs,preparations ther
97-Gold,non-monetary
33-Petroleum,petroleum products and related m
84-Articles of apparel and clothing accessories
07-Coffee,tea,cocoa,spices,manufactures there
28-Metalliferous ores and metal scrap
$Bil
3.3
3.0
1.7
1.4
1.4
1.2
1.2
1.1
1.0
0.9
Source: UN Comtrade
9
Chinese trade with Africa, 2007 (US$
bill)
10
China Imports from Africa % Share
11
Top 10 Chinese Imports from COMESA
HS
2709
2605
7402
2603
2515
2401
7403
8105
1207
7401
Description
D2007
US$ million
Crude Oil From Petroleum And Bituminous Minerals
Cobalt Ores And Concentrates
Unrefnd Cppr; Cppr Anods F Elctroltc Refining
Copper Ores And Concentrates
Marble, Travertine Etc. And Alabaster, Crude Etc.
Tobacco, Unmanufactured; Tobacco Refuse
Refined Copper & Alloys (No Mast Alloy), Unwrought
Cobalt Mattes Etc, Cobalt & Art, Inc Waste & Scrap
Oil Seeds & Oleaginous Fruits Nesoi, Broken Or Not
Copper Mattes; Cement Copper (Precipitated Copper)
18,503.75
244.37
172.99
131.83
120.63
119.15
108.41
99.08
82.97
57.34
Source: World Trade Atlas
12
Top 10 Chinese Exports to COMESA
HS
8517
7308
9801
5407
6104
8711
6103
4011
8704
6402
Description
D2007
US$ million
Electric Apparatus For Line Telephony Etc, Parts
Structures Nesoi & Parts Thereof, Of Iron Or Steel
Expts Of Repaired Impts; Impts Of Returned Expts
Woven Fab Of Syn Fil Yn, Incl Monofil 67 Dec Etc
Women's Or Girls' Suits, Ensemb Etc, Knit Or Croch
Motorcycles (Incl Mopeds) & Cycles With Aux Motor
Men's Or Boys' Suits, Ensembles Etc, Knit Or Croch
New Pneumatic Tires, Of Rubber
Motor Vehicles For Transport Of Goods
Footwear, Outer Sole & Upper Rubber Or Plast Nesoi
764.92
215.09
209.95
207.88
204.87
202.98
200.66
191.17
185.96
181.61
Source: World Trade
Atlas
13
Opportunities for COMESA
• Engage and encourage trade with China
• Involvement in higher value added
activities
• Upgrading key industries in which COMESA
is already exporting raw materials
14
Case Studies: Latin America and China
15
China Import by Continents/Regions, 2007
Source: The People’s Republic of China. Ministry of Commerce.
16
China’s Trade with Latin America, 1995-2005
17
The Commodity Composition of China-Latin American
Trade, 1999-2005
18
China’s commodity Imports from Latin America,
1999 and 2005
19
China’s Commodity Exports to Latin America,
1999 and 2005
20
China’s Trade with
Latin America and Africa
• Both regions export a diversified set of raw
materials to China
• Latin America’s commodity exports to China are
more processed than those from Africa
• China’s manufactured exports to Latin America
are diversified than those to Africa
• A key challenge for both Latin America and Africa
is to avoid declining terms of trade with China,
where the cost of raw material exports rises less
than manufactured imports
Case Studies: China Vs Mexico
22
Mexico vs. China
 Head-to-head competition in U.S. market
 China is world’s leading exporter of many
manufactures, esp. consumer goods
 China and Mexico are typically among the top
three exporters to the U.S. market in many
product categories
 China is moving ahead of Mexico with
dominant market shares in the United States,
especially in 2000-2005 period
23
Composition of Mexico’s Exports to the World Market, 1986-2006
60
Primary Products
Resource Based Manufactures
Low Tech Manufactures
50
Medium Tech Manufactures
High Tech Manufactures
% Export Market
40
30
20
10
0
Total
1986
1988
1990
1992
1994
1996
Exports
US $B 19 21 20 23 26 27 46 52 61 80 96
1998
2000
2002
2004
2006
110 117 136 166 158 161 165 188 214 250
Source: UN Comtrade.
24
Composition of China’s Exports to the World Market, 1987-2006
60
Primary Products
Resource Based Manufactures
Low Tech Manufactures
50
Medium Tech Manufactures
High Tech Manufactures
% Export Market
40
30
20
10
0
Total
Exports
US $B
1987
39
1989
48
53
1991
62
72
1993
85
92
1995
1997
1999
2001
2003
2005
121 149 151 183 184 195 249 266 326 438 593 762 969
Source: UN Comtrade.
25
Top US Imports in which Mexico and/or China hold 40% or
more of the US market, 2007
Mexico
China
% Market
Share in
USA
Change in %
Market Share
2000-2007
Product
Vegetables, fresh, chilled, frozen; roots,
tubers and other edible vegs
Equipment for distributing electricity,
n.e.s.
TV receivers (including video monitors &
projectors)
Motor vehicles for the transport of goods
Electrical apparatus for switching or
protecting electrical circuits
Instruments and appliances for medical,
surgical, dental or veterinary purposes
59.9
-1.0
894
50.8
-9.9
48.0
741
775
Product
054
773
761
782
772
872
% Market
Share in
USA
Change in %
Market Share
2000-2007
Baby carriages, toys, games and sporting goods
83.9
19.3
763
Sound recorders; television image and sound recorders
76.1
53.9
-15.5
831
74.2
24.3
46.6
28.3
15.0
3.9
851
697
Trunks, suitcases, vanity cases, binocular, camera cases,
handbags, wallets, etc.
Footwear
Household equipment of base metal, n.e.s.
72.8
66.4
10.9
30.7
26.9
6.7
813
Lighting fixtures and fittings, n.e.s.
65.5
7.1
Heating and cooling equipment and
parts thereof, n.e.s
25.8
1.5
848
Articles of apparel and clothing accessories; non-textile
fabrics
56.2
11.4
Household type electrical and
nonelectrical equip.
25.6
5.9
752
Automatic data processing machines; magnetic or optical
readers;
Made-up articles of textile
Furniture and parts; bedding, mattresses, supports,
cushions
Radio-broadcast receivers
Parts and accessories for use office machines
Household type electrical and nonelectrical equip.
Articles, n.e.s. of plastics
Women's or girls' coats, capes, jackets, suits, trousers,
dresses, skirts, underwear, etc. of woven textiles
49.3
38.0
48.8
47.7
24.7
24.1
45.4
44.5
44.2
42.8
42.4
10.0
33.0
7.0
11.9
26.6
Office machines
TV receivers (including video monitors & projectors)
Telecommunications equipment, n.e.s. and
telecommunications accessories
Electric power machinery
Miscellaneous manufactured articles
Manufactures of base metal, n.e.s.
Articles of apparel, of textile fabrics, whether or not knitted
or crocheted
Electrical machinery and apparatus
Women's or Girls' Coats, Capes, Jackets, Suits, Trousers,
Dresses, Underwear, etc. (except swimwear and coated
etc. apparel), knitted or crocheted
Rubber Tires, Interchangeable Tire Treads, Tire Flaps and
Inner Tubes
41.9
38.7
37.3
12.7
36.2
27.0
32.6
31.8
31.2
31.2
10.8
-11.0
17.6
20.4
26.6
29.3
14.7
25.3
26.0
19.4
(SITC categories)
658
821
762
759
775
893
842
751
761
764
771
899
699
845
778
844
625
(SITC categories)
Source: United States International Trade Commission and US Department of Commerce. (http://dataweb.usitc.gov) downloaded Feb. '08
1
Criteria: Over 2 Billion in US Imports from China or Mexico in 2007 at the 3 digit SITC level
26
Mexico's and China's Competing Exports to the United States,
2000-2007
27
Main Competitors in the U.S. Market for Automatic Data Processing Machines and Units
(SITC 752)
60%
China
50%
Malaysia
Percent of U.S. Market
Mexico
Thailand
Singapore
40%
Japan
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
28
Source: USITC http://dataweb.usitc.gov downloaded Feb 22, 2008
Main Competitors in the U.S. Market for Telecommunication Equipment and Parts
(SITC 764)
40%
China
Mexico
Korea
Japan
Percent of U.S. Market
30%
Malaysia
Canada
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
29
Source: USITC http://dataweb.usitc.gov downloaded Feb 22, 2008
Main Competitors in the U.S. Market for Furniture and Parts
(SITC 821)
50%
China
Canada
Mexico
Vietnam
Italy
Percent of U.S. Market
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
30
Source: USITC http://dataweb.usitc.gov downloaded Feb 22, 2008
Main Competitors in the U.S. Market for Articles of Apparel and Clothing
(SITC 84)
40%
China
Mexico
Vietnam
Indonesia
India
Percent of U.S. Market
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
31
Source: USITC http://dataweb.usitc.gov downloaded Feb 22, 2008
Why is China gaining U.S. market share
over Mexico?
 China is a lower-cost producer overall (labor costs lower,
but not transport & tariffs)
 China has huge scale economies
 China has a coherent and multidimensional upgrading
strategy – diversify and add high value activities
 China is using direct foreign investment to promote “fast
learning” in new industries
 China uses access to its domestic market to attract TNCs
and promote knowledge spillovers
32
China’s Supply Chain Cities in Apparel
Source: David Barboza, “In roaring China, sweaters are
west of socks city,” New York Times, Dec. 24, 2004.
33
MNC R&D Centers in China,
How are engineers being used?
 What kinds of work are Chinese, Indian,
and American engineers actually doing?
• Answer: Not just product adaptation,
but cutting-edge research &
commercialization
 China: More than 1,000 MNC R&D Centers
• GE’s China Technology Center:
Advanced research in energy storage,
environmental management
• Microsoft Research Asia: Cutting-edge
graphics & multimedia research
34
Challenges and Opportunities
35
Where we are today

New actors (global buyers, global suppliers, and
global intermediaries)

Rapid rise of new production centers (Taiwan,
Korea, China, Mexico, India)

Higher capabilities required to enter chains (health
and safety, speed, quality, responsiveness, IT)

Widening gap between connected and disconnected
in developing world

Growing global consolidation (supply chains,
countries)
36
Global Challenges and Opportunities
• Commodity export boom (L. America, Africa)
• Find GVC niches (specialization, high value
products, local sourcing, fresh produce)
• Take advantage of regional integration
• Differentiated global services (tourism, finance,
IT)
• Invest in R&D
• Go “green” with environmentally friendly goods
and services (corporate sustainability)
Thank you
for your attention!
Gary Gereffi, Director, CGGC
Duke University
Center on Globalization, Governance &
Competitiveness
ggere@soc.duke.edu