Value chain approaches to reducing policy spillovers on international business

Christopher Findlay,Bernard Hoekman

doi:10.1057/s42214-020-00083-5

Abstract

Government policy can add to the costs of doing international business. It can distort the construction of and raise the costs of operation of global value chains (GVCs), to the detriment of the participating economies. Given rising technological and market-driven headwinds confronting GVCs, countries seeking to attract GVC activities have greater incentives to identify and address policies that negatively affect international business investment. Cooperation of businesses with regulators, analysts, and researchers has the scope to develop better policy. This paper suggests principles for the design and operation of such cooperation, drawing on the experience with multi-stakeholder value chain partnerships and the policy responses to the 2020 COVID-19 pandemic.

Highlights

Global value chains (GVCs) offer significant benefits to participants and final consumers, allowing firms or plants in different geographic locations to specialize in tasks that are needed to produce a good or service
We offer an example of a GVC, leading to the production of face masks, the operation of which has attracted attention during the COVID-19 pandemic
As traditional trade barriers that constrain market access such as tariffs have been reduced, policies of a regulatory nature – nontariff measures (NTMs) – have become more prominent as factors affecting the operation of GVCs

Summary

INTRODUCTION

Global value chains (GVCs) offer significant benefits to participants and final consumers, allowing firms or plants in different geographic locations to specialize in tasks that are needed to produce a good or service. Evenett (2020) observes that the forms of policy response may vary by crisis, and that a feature of recent events has been the use of restrictions on exports (e.g., of or related to medical products) Restrictions of these types impede successful operations of GVCs. Value chains have long been recognized in the international business literature. As traditional trade barriers that constrain market access such as tariffs have been reduced, policies of a regulatory nature – nontariff measures (NTMs) – have become more prominent as factors affecting the operation of GVCs. Examples are product regulation to achieve health, safety, or security objectives, licensing requirements, certification and conformity assessment procedures, data privacy, and consumer protection rules.

Design

Findings

CONCLUSION