Trade Imbalances and Global Value Chains

The academic framework for understanding how production is fragmented across national borders is commonly traced to the concept of the global value chain, formalized in an influential 2005 article, "The Governance of Global Value Chains," by sociologist Gary Gereffi together with John Humphrey and Timothy Sturgeon, published in the Review of International Political Economy. The framework describes how a single finished product, rather than being manufactured start to finish within one country, typically passes through a sequence of design, component production, assembly, and distribution stages spread across multiple countries, each specializing in the stage where it holds a comparative advantage in cost, skill, or infrastructure.