Global Value Chains : Linking Local Producers from Developing Countries to International Markets

Agriculture, food and global value chains: issues, methods and challenges

Global value chains (GVCs) have changed the nature of production and specialisation around the world, including in agriculture and food sectors. This study takes an in-depth look at the landscape of agro-food GVCs and explores the factors that influence GVC participation by making use of a newly developed database on trade in value added for 20 agro-food sectors derived from the Global Trade Analysis Project (GTAP) database. The study also explores the benefits of GVC participation, viewed through the lens of domestic value added creation and employment, with a focus on the policy factors that influence these benefits. The study points to considerable variation in GVC participation across agro-food sectors, driven not only by product characteristics but also by policy factors related to trade and investment, the agricultural enabling environment and policies influencing service markets. The study shows that for agro-food sectors, trade barriers act as a tax on exports, reducing the domestic value added created from participation in agro-food GVCs.

This paper introduces value chain analysis and development as tools for addressing gender inequities in markets. We describe how factors such as access to assets, gendered education differentials and the nature and value of economic activities affect the way in which men and women participate and gain in value chains, distinguishing among household, institutional and chain levels of analysis. Current empirical evidence for the role of upgrading in value chains in impacting gender inequities in markets is weakened by our as yet imperfect understanding of the issues. However, horizontal coordination can reduce gender-related disparities in bargaining and management power as a precursor to stronger vertical relationships. Improvements in processes, products and functional distribution in value chains can improve chain-level outcomes leading to women's empowerment and, ultimately, to improved household poverty outcomes. However, this progression from positive impacts to desirable outcomes is not a given and depends on often complex context-specific socio-cultural norms. In particular, the benefits of women's participation in agricultural value chains are determined by their control of productive resources and household level decisions. Where both sexes play a role in decision making generic interventions, or even those applied to men only, can benefit both sexes. Where women do not participate in spending decisions a more gender-specific approach that targets underlying gender issues in households and institutions is required. We illustrate that unsound gender analyses can miss the point, resulting in flawed understanding of the real issues and ineffective or even damaging interventions. We conclude that the universal application of packages of generic 'default' interventions risk doing harm and that upgrading strategies should be applied on a case by case basis and only after a thorough and robust analysis of causal factors. We outline for practitioners what a robust analysis should look like and present a menu of policy options for acting to promote gender equity and reduce poverty using the value chain analysis and development approach.

Abstract. A resurrected interest in agriculture has brought in its wake growing interest in smallholders in the global South by scholars, companies, governments and development agencies alike. While non-governmental organisations and development agencies see the potential to reduce poverty, companies look upon smallholder agriculture as a widely untapped resource for the sourcing of crops and as a sales market for agricultural inputs. While the important role of large corporate buyers of agricultural produce as lead firms in value chains is often discussed and emphasised, the power of providers of technology and agricultural inputs is being rather neglected. In this paper, we analyse two case studies of technology and input providers in agricultural value chains and their role in smallholder inclusion with the aim of finding out how such companies impact the governance of the value chains. To do so we combine insights from the value chain literature with the concept of framing/overflowing.

Smallholder farmers are the cornerstone of the livestock sector and an essential element in building and developing the local dairy value chain, critical for developing its local economy. In Georgia, and despite the efforts made since independence from the Soviet Union until now, farmers still face many problems that prevent them from participating effectively in developing the dairy value chain, especially heavy metal pollution that afflicts the study region. This research study refers to smallholder farmers’ viewpoints in the Kvemo Kartli region on the dairy production sector and the problems these farmers face. This study also investigates the effect of several factors (ethical factors, traditions, animal welfare, cultural factors, etc.) on the dairy value chain. The convergence model was used in the mixed-method approach’s triangular design as a methodology for this research study. As part of the social data, 140 farmers who produce and sell milk and cheese in the Kvemo Kartli region were interviewed. The results showed the influence of the ethical, cultural, and traditional factors in developing the value chain. The results also showed the problems and difficulties small farmers face in rural areas, on the one hand, and the gap between these farmers and governmental and private organisations on the other hand. These results are compared to those of a previous study, where interviews with experts in Georgia’s dairy production sector were performed.

Governance of agricultural value chains: Coordination, control and safeguarding

Purpose– The purpose of this paper is to synthesize lessons from the agricultural value chain models and their associated financing mechanisms in China and India as to provide policy recommendations on how best to facilitate development of efficient and inclusive value chains.Design/methodology/approach– The paper builds on a review of the existing literature on agricultural value chains and their financing mechanisms, and draws lessons from it for strengthening interface between product and financial markets in order to enable smallholders capture benefits of the value addition.Findings– From the comparative review of value chain financing mechanisms and current policy contexts the authors find dominance of internal financing of value chains (in terms of provision of inputs, technology and services) in both the countries. Value chain finance from commercial banks and other financial institutions is limited and mainly through tripartite agreements among the financing institutions, lead firms and farmers.Practical implications– The lessons drawn from various value chain models and their financing mechanisms provide feedback to financial institutions and policymakers to take measures to strengthen value chain finance in smallholder agriculture.Originality/value– The paper undertakes a rigorous review of the existing value chain models and their financing mechanisms in light of the most recent research on emerging innovations and development strategies, in order to glean key lessons for policy recommendations on strengthening linkages between financial and product markets.

Recent decades have witnessed an increasing integration of developing countries into global value chains (GVCs). This growing participation in global production sharing has raised hopes for economic upgrading within such value chains. However, globalization has intensified international competition, and achieving economic upgrading is not an easy task. Moreover, the social consequences of participating in GVCs are not always positive; however, they have received considerably less attention in the literature. This paper suggests a simple and parsimonious approach to measuring economic and social upgrading (and downgrading) in GVCs. Applying this parsimonious methodology and using quantitative secondary data, we analyze how widespread upgrading has been in four selected manufacturing GVCs: apparel, wood furniture, automotive, and mobile phones. We also investigate to what extent downgrading is part of the reality and undertake a comparative analysis across GVCs, regions and country groups (developing vs. developed countries). We find that the promise of industrial upgrading through participation in GVCs does not materialize for everyone. Indeed, economic upgrading has taken place in just over a quarter of the countries in our sample, among them mainly developing countries. Finally, we examine the relationship between economic performance and social performance in the different GVCs to investigate whether or not economic upgrading is typically associated with social upgrading. While patterns differ across GVCs, we find that economic upgrading is more likely to occur simultaneously with social upgrading than without, and vice versa. Our analysis, thus, suggests that economic upgrading is conducive to, but not sufficient for, social upgrading to occur.

The concept of agricultural value chain covers full range of activities and participants involved in moving agricultural products from farmers’ fields to consumers’ tables. (Farm gate to food plate). Value chain participation by farmers can be merely as suppliers, in which case they do not get any share of the further value added. If, however, the farmers are aggregated into large numbers, and enabled to own parts of the value chain, they can benefit from the downstream value addition as well. For this, they need to invest capital and the value chain has to be integrated. To create an effective agricultural value chain, financing of agricultural value chains is a very important need. Agricultural value chain finance is a structured way of financing agriculture that links stakeholders operating within the value chains and lending institutions, and reduces the risks that are commonly associated with traditional agricultural financing. This paper shows number of approaches that are emerging in financing the building of agricultural value chains and emphasizes on need for many more innovative approaches, particularly to support small farmers to become an integral part of profitable value chains.

In this paper, we employed a blend of multiple and historical case study design, and a mix of institutional, behavioral, resource-based, and multinational theories, to examine the nature of multinational companies’ (MNC) engagements in local economic development and capital export practices in an African context. Evidence from our Nigerian case analysis (FrieslandCampina, Nigerian Breweries Plc. and Dangote Cement) confirms the proposition that, faced with a similar degree of uncertainty and constrained institutional environment and laying claims to differing sources of competitive advantage, both local and foreign MNCs would repatriate profits and limit exposures to local value chains (LVCs) mainly as a strategy for mitigating country risks and preserving corporate value. Such limited exposures detach MNCs, especially the foreign ones, from the LVCs, and by doing so push them to deeper reliance on the global value chains (GVCs). Linking local businesses to the GVCs is central in the inclusive development (ID) debate essentially because it allows for the redistribution of economic benefits, helps in building a complementary (rather than competitive) relationship between MNCs and local businesses, and facilitates local businesses’ access to international markets. We, therefore, recommend that in pursuit of the inclusive and sustainable development projects in Africa, industrial policies need to be tailored toward stabilizing the policy environment, protecting investments from risk of expropriation, and incentivizing MNCs’ participation in the LVCs.

This study examines the public-private-producers partnership (4Ps) model for agriculture value chain development implemented through Project ConVERGE of the Department of Agrarian reform. The model adopted a cluster approach whereby farmer groups are organized into clusters to coordinate their production methods to produce good uniform products and other business activities. The interventions or assistance from government agencies and the private sector are coordinated through the Project Management Office of ConVERGE at the central, regional, and provincial levels. The study notes that the 4Ps is a form of a facilitator-driven agriculture value chain that is a suitable strategy given the level of agriculture development in the country. The 4Ps value chain interventions have addressed some of the constraints small farmers face to participate in the value chain. Farmer cooperatives that received the interventions on farm equipment and processing facilities reported increased production, expansion of production area, improved mobility, and less dependence on traders. However, markets remain limited, and the cooperatives still lack the volume and quality of production that major buyers, including exporters, require. The key challenges include the lack of adequate extension services, including organizational training; inadequate capital and credit access of farmer cooperatives; limited subsidy for infrastructure development and other value chain interventions; weak cooperatives or farmers organizations; and poor geographic conditions. Government plays a major role in addressing these challenges. It needs a coordinated plan among partner agencies for extension and capacity building. Given bureaucratic problems and other institutional constraints, there is also a need to have a good selection of private sector partners both as service providers and financing partners. Market access can be improved through links with financial institutions and agro-input dealers and through the development of brands and certifications. In the case of farmer organizations, they need to strengthen their savings and insurance programs to enhance credit access and hedge against climate shocks.

While international value chains have been present in planned economies for several decades, their integration into global value chains (GVCs) began in the 1990s. In this study, we investigated the evolution of downstream value chains in Eastern Europe (including the Balkan countries, Moldova, and Ukraine) from 1995, by applying Wang's UIBE methodology and the Eora database. The results of this study suggest that European Union (EU) membership indisputably has a positive impact on GVC embeddedness, whereas non-EU economies are still integrated in their own local downstream value chains. We further investigated the automotive sector in the Central and Eastern European countries and demonstrate how deeper integration into GVCs prompted the emergence of assembly activities.

This paper lays out the main features of the global automotive industry and identifies several important trends. A boom in developing country sales and production has not yet overshadowed the importance of existing markets in developed regions. Regional integration is very strong at an operational level, yet the industry has recently developed a set of global-scale value chain linkages, and retains national and local elements as well. The paper highlights how global, regional, national and local value chains are nested to create a pattern of global integration that is distinctive to the industry. We use global value chain analysis to help explain the limits of build-to-order in the industry, the role of regional and global suppliers, the shifting geography of production and how the characteristics of value chain linkages in the industry favour tight integration and regional production. We describe how industry concentration focuses power in the hands of a few large lead firms and discuss the implications of this for value chain governance and the geography of production.

In this paper, I aim to provide empirical evidence about how an efficient integration into global value chains can promote economic growth through industrial upgrading and prevention of external imbalances in Latin America (LATAM). I define US-China political economics in this region for the period from 1998 to 2015. The research uses TiVA raw data that I obtained from the UNCTAD-EORA database for the US, China, and nine major economies in LATAM. The development of global value chains has brought unprecedented alternatives for commercial alliances and industrial strategies to developing countries. An effective integration of LATAM onto global value chains through forward linkages or increases in indirect value added (DVX) can strengthen both their industrial development and manufacturing industries to achieve the macroeconomic goal of long-term economic growth. China as the world’s fastest growing economy when trade is measured by the value added has stimulated forward linkages and economic development throughout several developing countries within the ASEAN+3, EU -13, and LATAM since 1998. However, strategic competition with the US has prevented China from further expanding its value chain to LATAM. Therefore, the whole region endures a peripherical position in relation to global value chains, as it is still too reliant on lower value-added investments in extractive industries. Yet strengthening TiVA exchanges with China, along with the US, is critical to broadening the alternatives for a sound and sustainable economic development in LATAM.

Chapter 5 - The food-fuel-fiber debate