Why is one product built across many countries at once?

Because making a product has many separate steps, and each step can be done wherever it is best done. A global value chain is the full range of activities needed to bring a product to market, and it does not only involve production: it also includes preproduction such as design and postproduction such as marketing and distribution. When those stages happen in different parts of the world, the product is built in many countries at once.

The scale is large. An OECD study found that intermediate inputs, the parts and services that go into other products, represent 56% of goods trade and 73% of services trade. That trade in parts is a result of fragmentation of production and increasing outsourcing, which followed a rapid decrease of trade costs, including transportation costs, transaction costs and tariffs, and the development of information and communications technologies.

An example is the smartphone. Foxconn's Zhengzhou Technology Park produces the bulk of Apple's iPhone line and is sometimes called "iPhone City". But a factory is only one link in a chain that, by definition, also includes design, marketing and distribution.

The big argument is who gains. Early writing on global value chains was enthusiastic about the upgrading prospects for developing countries that join them, and UNCTAD found that participation is associated with stronger GDP-per-capita growth. Other researchers argue that joining a chain does not always lead to upgrading, because the relationship between buyers and suppliers is asymmetrical. The benefits come at a cost, with distinct winners and losers within the chain.