Value chains in Europe and Asia: Which countries participate?

The paper starts by reviewing the evolution and current status of value chains, and by assessing alternative measures of their significance. The value chains centred on North America, the European Union and East Asia are contrasted. North American value chains tend to be limited to the three NAFTA members under negotiated rules. In the European Union and East Asia value-chain formation has been largely a bottom-up process with free entry supported by low trade costs. To identify which countries have joined value chains, we calculate two measures of value-chain participation by European and Asian emerging market economies. The measures highlight (1) the rapid growth of value-chain activity in the twenty-first century, (2) the greater value-chain participation by East Asian emerging market economies than by EU emerging market economies, and (3) the cross-country variation in participation, with value- chain participation dominated by a handful of countries in both continents. The final section draws conclusions about the nature of international value chains and the policy implications.