Value added chains are the underlying production system of the present international trade. The production processes of many of the commodities are spread across the world in different political economies. The basic proposition of the global value added chains are that they are an outcome of globalisation. Globalisation for all sectors of economy has led to increasingly fine-meshed sourcing, production and distribution networks around the globe. They were developed as a result of many nationally spread companies turning to international markets and economies for one or more than one stages of the value chain. Since a value chain is essentially defined as the full range of activities that are required to bring a product from its conception, through its design, its sourced raw materials and intermediate inputs, its marketing, its distribution and its support to the final consumer, when these stages are spread across the geographies of the world or a particular region, they are known as global or regional value chain.
One of the most important features of the global value added chains is that they highlight the essential divide between the developing and the developed countries through the nature of the stages in production that has been outsourced to them. One of the changes that these chains have brought in is the emergence of new players in the national markets of many of the developing countries. This inequality can be described as Unequal power relationships in these chains and trade barriers impact on the distribution of the costs and benefits over the chain participants keeping the sole authority over the high-value added activities with the developed countries, although it does seem like the developing countries have found a medium to channelise their excessively present low-skilled and unemployed population.
The representation of the labour class union and their opinion in the determination of their working conditions highly rests on their bargaining power, not just in the domestic but also the international political economy. Looking at the economies of the South Asian Region, The production unit led by USA-based Apple… (and) Asian firms like Toshiba from Japan and Samsung from South Korea capture another major part as profits from manufacturing high-value components, such as hard-disk drive, display and memory. In contrast, assembling and testing activities by Chinese workers is estimated to capture no more than 2 percent. One of the most widely present chain industry in the world is the garment industry.
In the garment industry, the supply chain can be divided into two major types of activities: the primary and secondary. The primary chain of activities includes the inbound and outbound transportation, services that transform the inputs into outputs and the other allied services. The secondary activities include procurement of the firm, land, resources and other inputs, human resource management for the recruiting, hiring, training and treatment of the organisational actors, technological base which includes the software and hardware and the scientific knowledge required and finally infrastructure which includes accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management.
David Smith gives two important approaches towards this North-South divide. The first aim of such a neo-liberal arrangement is cheap labour. However, Smith criticises this approach by calling it over-simplification. He is interested in knowing how a MNC can choose to ignore the Proximity to markets, availability of skilled labour, provision of basic infrastructure—roads, telephones, electricity—and business services—from FAX machines to lines of credit—and convenient access to production facilities for designers, engineers and quality-control inspectors while taking a decision regarding the location of the operations. Apart from the infrastructure, the political situation of the host country such as taxes, duties, and labour and environment regulation and enforcement, as well as more general issues of corruption, stability, and attitudes toward investors and international relations, particularly as it bears on trading status, protectionist barriers, and import quotas, come into play along with a lot of other hassles such as good communication, quality monitoring and guaranteed on-time delivery, etc.
Second approach is of technological and organisational requirements. The world entered into a new industrial setting where the developing economies became the centres of the third-wave of industrialisation and thus the production centres had to be moved accordingly. This group of economies use the post-Fordist mode of production to give a very sanguine vision of this kind of development. Thus, East Asia emerged as the capital in the second half of the twentieth century in the 1970s. By 1977 Hong Kong was the world’s number one exporter of garments, South Korea ranked third, and Taiwan was fifth. By 1987 these countries plus China and Japan accounted for fully one-third of world apparel exports.
Thus, the development of global value added chains in the South Asian economies is a post-colonial outcome and a sheer representation of the North-South divide and this can be proved not just across the garment industry in the South Asian Economies but also via the coffee industry in Latin America, and electronics industry in East Asia, etc.
Picture Credits : thewire