The digital trade advantage: investigating the impact on global value chain positions in manufacturing and service industries

ABSTRACT

This study investigates the impact of digital trade on global value chain (GVC) positions across industries and countries from 2007–2018. A newly developed digital trade level index measures various dimensions including digital infrastructure, industrial digital trade, e-commerce industrialization, and trade potential. Results show that digital trade significantly enhances GVC positioning, with trade potential having the strongest effect. The study also finds that digital trade drives GVC upgrading by optimizing industrial structures. Developed countries experience greater impacts of digital trade on GVC positions compared to developing nations, highlighting country heterogeneity. Industry differences are also observed, with medium-low tech manufacturing and transportation and warehousing services being most influenced by digital trade. The study uncovers industrial structure upgrading as a key mechanism through which digital trade improves GVC positions, though the industrial digital trade dimension somewhat impedes this effect. Based on these findings, the study provides policy insights for developing countries to harness digital trade for GVC upgrading, such as increasing investments in susceptible industries, fostering domestic and global digital ecosystems, promoting efficient resource allocation, and supporting digital integration in medium-low tech manufacturing.

KEYWORDS:

• Trade
• digital trade
• global value chain
• heterogeneity
• China

JEL CLASSIFICATION:

• F40
• Q27

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data will be available from the corresponding authors on a reasonable request.

Notes

¹ We have selected 53 countries namely: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Mexico, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, Brazil, Bulgaria Bulgaria, China, Croatia, Cyprus, India, Indonesia, Romania, Russia, Argentina, Cambodia, Colombia, Costa Rica, Iceland, Kazakhstan, Malaysia, Morocco, New Zealand, Philippines, South Africa, Thailand, and Tunisia.

² Matching code for medium and high digital intensity industries: D16, D17T18, D26, D27, D28, D29, D30, D31T33, D45T47, D58T60, D61, D62T63, D64T66, D69T75, D77T82, D94T96.

³ Classification criteria of the First Edition of the European Union Classification of Economic Activity (NACE1): High technology manufacturing (c17), middle and high technology manufacturing (c11, c12, c18, c19, c20, and c21), middle and low technology manufacturing (c10, c13, c14, c15, and c16), low technology manufacturing (c5, c6, c7, c8, c9, and c22). In this study, the high-tech manufacturing industry and the middle and high-tech manufacturing industry are merged into medium-high-tech manufacturing industry; the middle and low-tech manufacturing industry and low-tech manufacturing industry are merged into medium-low tech manufacturing industry.

Additional information

Funding

The study is financially supported by the Taishan Young Scholar Program, the Taishan Scholar Foundation of Shandong Province of China under grant tsqn202103070, and the Social Science Foundation of Shandong Province of China under grant 23CKFJ17.