Global Value Chain Participation

A global value chain divides production across countries, so that value is added at several locations before a final product reaches consumers. Backward participation uses foreign value added in a country's exports, whereas forward participation supplies domestic value added that is subsequently embodied in another country's exports.

Backward participation

Backward participation captures a country's downstream integration into global production. It measures the foreign value added contained in that country's gross exports.

• A firm may import components or services, process or assemble them domestically, and then export the resulting product.
• Higher backward participation generally indicates greater use of imported intermediate inputs in export production.
• For example, imported electronic components assembled domestically into an exported device constitute backward participation.

Forward participation

Forward participation captures a country's upstream integration. It measures domestic value added exported as an intermediate input and later embodied in the exports of another country.

• The domestic exporter supplies raw materials, components or services used by a foreign producer for further exports.
• For example, domestically produced steel exported for incorporation into machinery that the partner country exports constitutes forward participation.
• Forward participation excludes domestic value added that is finally consumed in the first importing country.

How to interpret the distinction

The two forms identify the direction in which value crosses borders within the production chain, not the overall quality of participation.

• Backward participation looks back to foreign inputs used in one's own exports; forward participation looks ahead to one's inputs used in foreign exports.
• A country may participate in both forms simultaneously across different industries or stages of the same chain.
• Total GVC participation is commonly represented by combining backward and forward participation relative to gross exports.
• Neither measure alone reveals employment, technological learning or the amount of value retained domestically.

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