ISLAMABAD, March 2: Global trade is increasingly dominated by complex and circuitous routes followed by goods and services as they are upgraded into finished products, a new UNCTAD report says.

These global value chains (GVCs), orchestrated for most part by transnational corporations (TNCs), offer opportunities for poor countries to gain access to international markets, just as they offer opportunities for statistical confusion to economists.

The ever-more complicated webs of investment and trade, by which raw materials extracted in one country may be exported to a second country for processing, then exported again to a manufacturing plant in a third country, which may then export to a fourth country for final consumption, are the topics of the UNCTAD report: “GVCs and Development: Investment and Value Added Trade in the Global Economy.”

The report says that the value chains administered in various ways by TNCs now account for 80 per cent of the $20 trillion in trade each year.

It also says that the relentless zigzagging across borders of goods and services as they are upgraded means that some 28 per cent of the value of this trade – or about $5 trillion – is overstated through double counting.

In its key findings, the report says that global investment and trade are thoroughly entwined in international production networks.

This is especially true of TNCs investing in productive assets worldwide as they manage trading inputs and outputs in cross-border value chains that often are highly complex.

GVCs are responsible for significant and growing instances of double counting in global trade figures.

The new data shows that some 28 per cent of gross exports consist of value-added that is first imported by countries only to be incorporated into products or services that are then exported again.

Thus some $5 trillion out of the $19 trillion of recorded global gross exports in 2010 was actually double-counted.

According to the report, the majority of developing countries, including the poorest, are increasingly participating in GVCs.

The developing-country share in global value-added trade increased from 20 per cent in 1990 to 30 per cent in 2000, and is over 40 per cent today.

Again, the role of TNCs is critical, as countries with a higher presence of FDI relative to the size of their economies tend to have a higher level of participation in GVCs and a greater relative share in global value-added trade compared to their share of global exports.

GVC links in developing countries can play an important role in economic growth.

In developing economies, value-added trade contributes some 28 per cent to countries’ GDPs on average, as compared to 18 per cent for developed economies.

Furthermore, there appears to be a positive correlation between participation in GVCs and GDP per capita growth rates.