The theme of the Global Value Chain Development Report 2021 is Beyond Production.

Most research on global value chains (GVCs) focuses on manufacturing production; in other words, the breaking up of production processes into many discrete steps with a resulting explosion of trade in parts and components. But there are aspects of GVCs that go beyond manufacturing processes; in fact, value added and employment generation in GVCs are depending less and less on manufacturing production. This year’s report features research on these aspects. For example, by highlighting the role of multinational corporations (MNCs) and, closely related to that, the role of intellectual property (IP) in setting up GVCs. Value chains are an efficient way for firms to exploit their brands, patents, and other IP. In the extreme, this leads to “factoryless” production in which firms that design and market manufactured products own none of the production process. An important part of modern GVCs consists of innovator countries exporting the services of their IP in return for manufactured goods.

Other issues that go beyond production are the role of GVCs in spurring technological innovation; the growing importance of services, both as an input into manufacturing value chains and as a component of final demand produced via their own complex value chains; and the potential for online platforms to enable more inclusive globalization by facilitating the participation of micro, small, and medium-sized enterprises (MSMEs).

The report also examines the issue of risks to GVCs. The years 2018–2020 revealed some of the important risks that can threaten the normal functioning of GVCs and trade more generally. It was during this period that the Trump administration imposed a 25% tariff on about half the products that the United States (US) imports from the People’s Republic of China (PRC), which disrupted major production chains. Natural hazard events in 2021, including floods in Thailand and the deep freeze in Texas, have highlighted the risks inherent in a production system that relies heavily on the just-intime delivery of parts sourced from only a few key locations. The COVID-19 pandemic was a huge shock to world trade and GVCs. It is too early to say definitively how GVCs will evolve in response to the heightened awareness of geopolitical, environmental, and health risks, but some early evidence and analysis is emerging. So far, there has been no generalized reshoring of production back to the US or Europe, nor would that likely be effective as a response to most of the risks that have emerged. GVCs are more likely to evolve than to shut down. The rest of the summary looks at the key messages and findings in this report’s six chapters.