RESTRICTED  
  
WT/COMTD/SE/W/30/Rev.1  
 
25 November 2014  
(14-6876)  Page: 1/3  
Committee on Trade and Development 
Dedicated Session    
 
 WORK PROGRAMME ON SMALL ECONOMIES  
 
OUTLINE OF PROPOSED RESEARCH ON THE CHALLENGES AND OPPORTUNITIES 
EXPERIENCED BY SMALL ECONOMIES1 WHEN LINKING INTO GL OBAL VALUE CHAINS IN 
GOODS AND SERVICES 
Revision 
 
 The Ministerial Decision of 7 December 2013 on the Work Programme on Small Economies 
instructed the Secretariat to provide relevant information and factual analysis for discussion 
among Members in the CTD's Dedicated Session in the area identified in item (k) of paragraph 2 of 
the Work Programme on Small Economies and, in particular, the challenges and opportunities 
experienced by small economies when linking into Global Value Chains (GVCs) in trade in goods 
and services. In order to assist Members with th eir discussions, the Secretariat and the proponents 
of Small Economies have identified several areas of research considered to be relevant to small 
economies and their links to GVCs.  
 OUTLINE  
1    INTRODUCTION 
1.1.   The introduction will provide a broad defini tion of GVCs and briefly describe their origins and 
recent evolutions, concentrating on how reductions in cost and transportation times coupled with 
advances in information and communication technology (ICT) have been major drivers of GVCs. 
Attention will be given to identifying which sectors have dominated the spread of GVCs and explore the challenges and opportunities faced by Small Economies when linking into GVCs. This 
section will introduce specific GVCs which will be analysed in greater detail in the report and will 
outline the objectives of the paper and examine how GVCs have affected international trade patterns, including those of small economies. It w ill also underline some characteristics of GVCs, 
for instance, that many GVCs are actually regional and not global, and that many GVCs have 
experienced changes in the relationship between lead firms and other participating firms.  
2   OPPORTUNITIES AND CHALLENGES FOR SMALL ECONOMIES JOINING GVCS  2.1.  This section will describe the opportunities and challenges (e.g. constraints, vulnerabilities 
and obstacles) which small economies face when trying to (i) integrate into and move up in GVCs 
and (ii) increase their domestic value-added within specific GVCs. It will examine how trade-related factors such as technological development, absorptive capacity, cost structures, 
appropriateness of labour skills, infrastructure, transfer of technology and competitiveness can 
affect the participation in GVCs. Attention will also be given to the role of standards, intellectual property rights (IPRs), rules of origin and customs procedures as well as issues related to access to finance, governance of GVCs and adequate transport infrastructure. The section will cover 
opportunities and challenges in both goods and services GVCs and differentiate among small 
economies, e.g. in terms of regions, landlockedness or islands, where appropriate. 
2.2.  Recent research and analysis of the operation of GVCs by academic institutions, 
intergovernmental organizations and think tank s may be discussed and provide the basis for a 
                                               
1 Upon its request, The Plurinational State of Bolivia will not be included in the study.  WT/COMTD/SE/W/30/Rev.1 
 
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  more specific assessment of small economies' in volvement with GVCs. To achieve the latter, the 
section will discuss recent reports on developing countries' participation in global value chains.2 It 
will also address the results of relevant questionnaires such as those used for the Fourth Global Review of Aid for Trade in 2013, where applicab le, provide case studies of private sector 
companies and assess framework conditions for GVC integration by using relevant indicators such 
as trade costs, infrastructure, institutions, skills and the business environment.  
2.3.   This section will also look at the industrial and trade policies some small economies have 
undertaken to link into GVCs.   
3   EVIDENCE OF THE INTEGRATIO N OF SMALL ECONOMIES IN GVCS 
3.1.   This section will assess the participation of small economies in primary, manufacturing and 
services value chains. In particular, it will use case stories, analysis of trade in intermediate goods, 
trade data and other statistics to assess the actual and potential integration of small economies 
into GVCs for different sectors such as agri-food and textiles in the case of goods and tourism, information technology and business process outsourcing in services.
3 The analysis will also cover 
the domestic impact of services liberalization conducted by small economies, which often 
accompany attempts to attract GVC activities. 
3.2.  The paper will examine the various types of  data sources currently being used to assess 
countries' participation in primary, manufacturing and services value chains. It will also describe 
the limitations of specific data sources. For instance, in contrast to trade in goods, no distinction exists between trade in final and intermediate services. Besides standard trade data, this section will look at new databases in the form of international input-output tables, which describe GVC 
participation in terms of import content of exports and other indicators based on trade in value 
added. Where international input-output tables are not available for small economies, the study will seek to find other alternatives appropriate to small economies. The study will also examine 
how data on taxes and IPR-royalties transfer could lead to a better understanding of how countries 
participate in GVCs. This analysis will be based on work done by UNCTAD, the IMF and the World Bank and other relevant sources.  
4   THE ROLE OF FOREIGN DIRECT INVESTMENT IN GVCS 
4.1.   Using the latest research available, this section will analyse the importance of foreign direct 
investment (FDI) for small economies in the contex t of GVCs by analysing regional FDI trends and 
how these relate to domestic investment. The stud y will examine which trade-related factors affect 
decisions by companies to make investments and which small economies have benefitted from 
such investments and how. In that regard the study will also evaluate the extent to which size influences access to foreign direct investment. The paper will examine how multinational 
enterprises (MNEs) can serve as drivers of GVCs and how they can affect small economies in their 
economic development.  
5   CHALLENGES AND OPPORTUNITIES FOR SMALL AND MEDIUM-SIZED ENTERPRISES  
5.1.   Similar to other developing countries, small economies typically do not host headquarters of 
MNEs but participate in GVCs through either MN E affiliates or through small and medium-sized 
enterprises (SMEs). This section will discuss the role of SMEs and MNEs in GVCs and assess the opportunities and challenges. Factors such as being able to compete with MNEs or gaining access 
to finance and information about foreign markets and trading partners will be examined. In this 
regard, the paper will discuss how SMEs could act as suppliers to local or foreign firms in GVCs and/or specialize in product niches. The stud y will examine how micro enterprises in small 
economies could use SMEs to connect to GVCs and eventually to MNEs. 
5.2.   This section will also describe the opportunities and challenges (e.g. constraints, 
vulnerabilities and obstacles) which SMEs face when trying to integrate into and move up in GVCs.  
                                               
2 WTO's World Trade Report 2014 and OECD study on "Developing Countries' Participation in Global 
Value Chains"  
3 Such data, however, are often not available for Small Economies and related estimates should be 
interpreted with great care.  WT/COMTD/SE/W/30/Rev.1 
 
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  5.3.    Besides reviewing the literature, the section will draw on related Aid-for-Trade work and 
seek inputs from the International Trade Centre and other international organizations.  
6   THE ROLE OF LOGISTICS AND TRADE FACILITATION  6.1.   This section will examine how factors rela ted to logistics and trade facilitation may affect 
small economies' participation in GVCs. It will assess how factors such as distance to markets, 
transportation costs, technological developments, ICT infrastructure to clear goods, logistic services and customs procedures affect the ability of small economies to link into regional 
networks or hub-and-spoke structures, which requir e just-in-time delivery in the production of 
goods. The focus in this section will be on th e electronics, automotive, agri-food and textile 
industry and will include a discussion of how such factors as demand fluctuations (e.g. fashion), the perishability of products (e.g. agriculture an d food), just-in-time production requirements 
(e.g. automotive) or rapid technological change (e.g . electronics), affect the participation of small 
economies.  
6.2.   This section will also describe the role of infrastructure, logistics and trade facilitation for the 
functioning of GVCs and discuss relevant evidence and policy issues for small economies, including 
in terms of trade flows outside GVCs. 
7   TRADE POLICY EXPERIENCES  
7.1.   This section will examine the different ki nds of policies that the literature has put forward 
regarding integration into GVCs, taking into account GVCs vertical specialization structure and the upgrading of developing countries and how they relate to small economies. Furthermore, it will provide policy experiences of those firms and smal l economies which integrate or upgrade in goods 
and services GVCs and those which do not.  
8   CONCLUSION  8.1.   The concluding section of the paper will summarise its main findings for discussion and 
action where appropriate in the CTD’s Dedicated Session, as instructed at the Ninth Ministerial 
Conference.  
 
 
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