GVC graphic of the day

From the World Bank's 2020 WDR, the graphic below highlights the lop-sided nature of global value chain integration.

The first panel measures the share of foreign value added in gross exports of Japanese textile companies, and the second measures the share of domestic value added in India embodied in importing countries' exports to others. Markup is output price divided by marginal cost for Japanese and Indian textile companies.

For the textile firms in developed countries like Japan, the rise in the share of imported components in exports has been accompanied by a rise in their markups. This indicates some form of pricing power over their retail customers. In stark contrast, for textile firms in supplier countries like India, an increased share of their sales to an importer becoming embodied as share of their exports to third countries is associated with decreasing price markups. In other words, supplier countries exercise limited pricing power over their branded buyers whose pricing power in turn has been increasing. The Mathew Effect of GVCs!

In so far as Indian textile exports are as contract manufacturers to foreign brands (unlike the Japanese firms which are brands themselves), this only reinforces the lop-sided nature of value capture in the manufacturing value-chain. 

This trend is consistent across developing countries, except China.