TRADE, DISTRIBUTION AND DEVELOPMENT UNDER SUPPLY CHAIN CAPITALISM

Abstract

Despite significant global growth in both trade and foreign investment volumes during the past 40 years, many developing nations and their domestic firms still struggle to realize the development benefits of this economic expansion. Although the Asian Tigers—China, India and a few others—have achieved significant increases in income per capita and reductions in poverty rates, most developing countries remain woefully short of their development goals notwithstanding a major shift in the composition of developing country exports from resource-based products to manufactured goods and a significant increase in developing country manufactures as a percentage of total global manufactures. One factor contributing to these disappointing development results is the now dominant organization of global production through disaggregated, geographically disbursed, nonproprietary supply chains governed increasingly by concentrated “buyer” firms, which I term “supply chain capitalism.” In this essay, I will suggest how the organization of global production into supply chain capitalism limits the bargaining powers and innovative capacity of many (if not most) developing states and their domestic firms, as well as their ability to capture an equitable share of the rents from participation in global trade. In addition, I will describe ways in which supply chain capitalism complicates national trade and development policymaking and makes it more difficult for many developing countries to achieve sustainable development benefits from global trade. In the face of these challenges, standard progressive prescriptions for development through trade seem insufficient: for developing country firms, focus on innovation and upgrade your position in global supply chains; for national development policymakers, secure sufficient domestic policy space to support your firms and their access to the chains. If the goal is a more equitable global distribution of power and resources, we will need a much richer understanding of the complex of norms and institutional formations that underpin the allocations of power and resources within supply chain capitalism. The traditional tools for national trade policy—tariffs, subsidies, strategic liberalization, industrial policy—and the global trade rules that govern them will be part of the story but not the most significant part. Explicating the key legal and institutional drivers that enable, facilitate, reinforce and sustain supply chain capitalism should bring into focus the significance of numerous legal regimes—national and transnational, public and private—beyond trade law and policy that constrain the bargaining power, policy choices and development outcomes of much of the developing world. Such a shift in focus should also illuminate new legal tools and policy strategies to enable developing countries and firms to gain greater advantage in the global economy. At the same time, a more informed and clear-eyed analysis of the challenges and opportunities for achieving sustainable and equitable growth through supply chain capitalism may lead progressive trade theorists and development policymakers to question whether competitive participation in global markets remains a promising (or even viable) pathway to development for many countries. Perhaps more plausibly, it may prompt trade theorists and development policymakers to consider the possibility that the greatest challenge to equitable distribution and global prosperity is not the trade effects of protectionism by nation-states but the unacknowledged power of dominant firms governing global commerce through their supply chains.