Expansion of Global Value Chains

A new OECD trade policy paper graphically illustrates the importance of global value chains to the global economy, while recognizing that there is still much we do not know about the size and direction of the resulting effects. The paper defines a value chain as “the full range of activities that firms undertake to bring a product or a service from its conception to its end use by final consumers”. A GVC results when the activities undertaken span two or more countries.

The report reviews GVCs for agriculture and food products, chemical products, vehicles, electronics, business services, and financial services but the most illustrative part of the report is a case study on the well-known breakfast spread Nutella®. Note that the report’s analysis appears to be based on European-made Nutella®. Ferrero also manufactures Nutella® in Brantford, Ontario.

According to the report, Nutella® has a global value chain spanning at least six countries. Ferrero International SA, its manufacturer, is headquartered in Italy and has nine factories producing Nutella®: five are located in Europe, one in Russia, one in North America, two in South America and one in Australia. Some inputs are locally supplied, for example the packaging or some of the ingredients, like skimmed milk. There are however ingredients that are globally supplied: hazelnuts come from Turkey, palm oil from Malaysia, cocoa from Nigeria, sugar from Brazil (but also from Europe) and the vanilla flavour from France. Nutella® is then sold in 75 countries.

The OECD report is available at http://www.oecd-ilibrary.org/trade/mapping-global-value-chains_5k3v1trgnbr4-en by clicking on the Adobe Acrobat PDF symbol.

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