Participation In GVCs Research Articles

Analysis of Bratislava and Žilina as urban areas in Western Slovakia in the context of associations among employment and industries

Research background: This paper observes especially the position of cities, urban areas in the context of global value chains ? GVCs. Global value chains reflect specialization and labour division of companies, mostly multinational enterprises ? MNEs. MNEs can be considered flagships of some industries. Such flagships influence suppliers and purchasers. MNEs are a part of networks or have got access to such networks that combine dispersion of the value chain, the boundaries of the firm and across national borders.
 Purpose of the article: The impetus for this work was to look at the position of Slovak cities (Bratislava, Žilina) in order to look for sectors that can help to develop the city and its adjacent regions, particularly cross-border regions. The paper discussed how the attribute of the cross-border regions gives the cities more advantageous position in GVCs.
 Methodology: Applying the method of location quotient allowed to shed a light on the GVCs, which cities participate in. Some cities were in a position to take advantage of participation in GVCs.
 Findings & Value added: Examined cities are located in the western part of the Slovak Republic. Discussion about the attribute of the cross-border regions can stimulate new ideas for finding causalities in city sprawl or in specialization patterns in the industrial structure of the city. Discussion further fosters the comparison of two cities strengths and weaknesses of each of them that were summarized in terms of employment and industrial exploitation of GVCs. This is the first finding and value added of the paper. The second one is that the method of location quotient is simple but provides clear evidence of the regional development or decline in particular industries and at the time of observation.

Global value chain and its impact on the linkage between exchange rate and export: Cases of China, Japan and Korea

AbstractThe link between exchange rate and trade has been studied for a long time, but there is no consensus about their relation. This paper tests the old argument, whether depreciation of real effective exchange rates (REERs) raises exports. We differentiate the test with earlier studies by employing a new measurement of REER and incorporating the effect of GVCs. We measured REER at industry level with value‐added trade weights. We analysed the topic with LSDV and system GMM for China, Japan and Korea since these counties are known to participate actively in GVCs. Our main finding is that exchange rate has significant impact on trade for three countries. However, the movement of elasticity of export to REER varies by country. While the elasticity in China decreased over time, Korea and Japan experienced increasing patterns between mid‐1990s and mid‐2000s and decreasing trends afterwards. This study also tests whether the level of incorporation in GVCs causes a change in elasticity. The results show that growing participation in GVCs lowers the elasticity of export to REER in absolute value. However, this result is only statistically significant in Korea.

Intangibles Trade and MNEs: Supply-Chain Trade in R&D Services and Innovative Subsidiaries

This paper contributes to the literature on vertical specialization in R&D (or ‘R&D fragmentation’) and trade in intermediate services by examining the role of multinational enterprises (MNE) activities associated with bilateral foreign direct investment (FDI). Prior work in production networks (or global value chains [GVCs]) and R&D fragmentation suggests a complementarity relationship between FDI in R&D and technological knowledge flows. The paper examines this proposition empirically for R&D services trade by extending the gravity framework of supply-chain trade for intermediate services with bilateral MNE operations as economic mass variables. The results are partially consistent with the hypothesized complementarity. The econometric strategy accounts for zero trade observations. The latter addresses possible selection and consistency issues of traditional gravity trade specifications, and allows exploring extensive vs. intensive margin of trade. Understanding the role of MNEs in these transactions may be useful for policies aimed at increasing participation and upgrading in MNE-driven GVCs.

Characterizing Global and Regional Manufacturing Value Chains: Stable and Evolving Features

Since the extent of offshoring and production sharing varies by sector and country, we develop measures of GVCs in terms of length, intensity, and location of participation at the levels of country, country-sector, and bilateral sector, and distinguish among pure domestic, directly traded, and indirectly traded production activities. Using these measures, we characterize cross-country production sharing patterns and GVC related trade activities for 35 sectors and 40 countries over 17 years. We find that the production chain for the world as a whole has become longer. While the relative ranking of the length at the sector level is stable across countries, the average length for a given country-sector, of both the domestic and international components, and their participation and position in GVCs in general, do evolve significantly over time. The results contribute to a better understanding of features of global value chains and patterns of participation by individual country-sectors.

The convergence in domestic value-added of exports in the EU

Difficulties in measuring domestic value-added in exports (DVA) have led to the development of alternative measures of trade in value-added terms. These new measures have enabled more accurate estimates that reveal that the EU countries from Central and Eastern Europe (CEE10) exhibit an approximately five percentage points lower DVA share of exports compared with other EU countries (EU15). The lag is on average the highest in knowledge-intensive manufacturing sectors (eight percentage points) and the lowest in knowledge-intensive services (0.3 percentage points). However, this article argues that the CEE10 economies have acquired new knowledge by participating in GVCs and thus have gradually started increasing their level of DVA. Based on EU trade data, this article presents evidence of convergence of DVA in manufacturing and especially in the services sector. It is also shown that a negative relationship exists between participation in GVCs and DVA in the CEE10 economies that is declining over time in both manufacturing and services exports.

Supporting participation of Asia-Pacific SMEs in global value chains

PurposeGlobal value chains (GVCs) have become increasingly influential in determining the patterns of international trade and foreign direct investment (FDI) and in providing growth opportunities in Asia and the Pacific while small- and medium-sized enterprises (SMEs) have been an engine of economic development. The purpose of this paper is to provide effective development strategies and relevant policy approaches to facilitate dynamic insertion of SMEs into GVCs.Design/methodology/approachThis paper was developed based on various Economic and Social Commission for Asia and the Pacific works in the fields of the development of SMEs and GVCs in Asia and the Pacific. Sectoral case studies on agribusiness, garment/apparel, automotive and electronics illustrate SMEs’ effective integration into GVCs.FindingsSMEs face multiple obstacles and challenges which may limit the benefits derived from the development of GVCs in Asia and the Pacific. Policymakers are suggested to design and implement appropriate strategies and polices in order to facilitate the development of SMEs under the ongoing globalization.Research limitations/implicationsThis paper is mainly based on existing policy papers which were developed by the United Nations Secretariat, its specialized agencies and others. Further empirical and policy studies are expected to be conducted in order to deepen the understanding of the present topics and to come up with practical policy options.Practical implicationsPolicymakers are suggested to consider strategies and policy options recommended by this paper for their works on SME development and trade and investment promotion.Originality/valueThis is the first policy paper which proposes a comprehensive framework for SMEs’ effective participation in GVCs, specifically suggesting seven approaches, namely, SME development; trade policy; behind-the-border and cross-border trade facilitation; regional integration frameworks; FDI promotion; SME clusters; and national innovation system.

A Possible WTO Agreement on Investment-Identifying Emerging Issues and Their Implications for India

The potential of foreign investment to inject a positive and multiplier effect on the receiving economy’s national output is now universally recognised. Most developing countries are unilaterally liberalizing their capital account and actively pursuing foreign capital to finance, primarily, their infrastructure and development projects. In 2015, global FDI flows stood at US$ 1.76 trillion, increasing by more than 5.5 times in the last two decades (US $315 billion in 1995). In rhythm with the forces of globalisation, as capital began to disavow its territorial linkages and started moving freely across borders, concerns regarding the inability of States to establish the legal institutions necessary to offer protection for foreign investments and demands for an international investment protection regime heightened. The scepticism regarding host State’s behaviour was founded on the assumption that, although there is initially a convergence in the interests of the foreign investor and the host State in bringing in investment, post-establishment, the aspirations of the investor and the objectives of the State are fundamentally conflictive. Whereas the investor is forever aiming to maximise its profits and exit the market without suffering a financial loss, the host State, guided by the purpose of keeping the investment steadfast, has an incentive to amend the governing laws or put in place capital controls, if not expropriate the investment without compensation. It was against this background of scepticism regarding hostile host State behaviour that international legal instruments for protection of foreign investment first developed. They were concluded at the bilateral level as a set of rules that would offer a minimum standard of protection to foreign investments. Bilateral Investment Treaties (BITs) containing disciplines on non-discrimination, expropriation, fair and equitable treatment of investors and investments, prohibition of performance requirements and provisions on investor-state dispute settlement system (ISDS) were the first concrete building blocks for an international investment protection regime. It was expected that these scattered fragments of bilateral treaties would eventually pave the way to a multilateral investment agreement. Concerted efforts to initiate negotiations for such an agreement under the WTO framework were made at the Singapore Ministerial Conference of the WTO in 1996. However, the path towards multilateralism in international investment law has been fraught with complexities and has eluded the consensus that was visible in other areas of international economic laws (GATT and then WTO for international trade law and the IMF for international monetary law). This paper attempts to identify and evaluate the issues that need to be addressed before moving towards a multilateral agreement, specifically from the perspective of India. This issue has gained emphasis today as the efforts to locate a multilateral investment agreement within the WTO matrix have once again gained traction. In the run up to the 10th WTO Ministerial Conference at Nairobi, certain members proposed “new issues” as an item for consideration at Nairobi. Amongst other issues, the facilitator’s report that was circulated before the Nairobi Ministerial Conference mentioned ‘investment’ as an issue that could be pursued after Nairobi or as a recurring issue. The renewal of attention towards the “Singapore new issues” forms part of a larger narrative to develop multilateral rules on competition, investment, e-commerce, government procurement so as to enhance the participation of micro, small and medium enterprises in regional and global value chains. Even as debates continue regarding the appropriateness of the WTO as a forum for negotiating multilateral investment disciplines on investment and whether multilateral disciplines would actually contribute to enhanced MSME participation in GVCs, it seems pertinent to look at some of the substantive issues surrounding the extant international investment regime so as to assess whether any of these issues can be resolved by progressing from bilateralism to multilateralism. Part II of the paper identifies the issues underlying the multilateralization of the investment regime. The issues are broadly divided into three parts. Issues that pertain to the extant bilateral treaty framework are assimilated under Part IIa. The more fundamental question of whether FDI itself has the natural quality of positively impacting the economy of the host State has been dealt with under Part IIb. Issues that are India-centric, but could very well confront policy makers in other developing countries as they enter the transitory phase and liberalise FDI, are analysed in Part IIc. Part III concludes.

Dynamic Impacts of Global Value Chains Participation on Asian Developing Economies

This article aims to investigate the dynamic economic impacts of global value chains (hereafter GVCs) participation by examining value-added-trade patterns focusing on Asian developing countries. Our main findings were as follows. First, an economy’s participation in GVCs in manufacturing sectors has allowed an absolute domestic value added for exports to contribute to GDP growth. Second, the development paths of domestic value added contribution to exports in a GVCs participating economy have followed ‘smile curve’ with the bottom being 5,651 US dollars in per capita GDP. Third, the turning points of smile curves differed according to manufacturing sectors: the sectors of machinery, electrical and transport equipment reach the turning point at higher per capita GDP than those of food, textile and wood products. These observations imply the dynamic process of GVCs impacts, where the initial stage of GVCs participation has reduced domestic value added contribution to exports, but it has been recovered at a later stage of GVCs involvement with upgrading domestic productive capacities. In particular, this recovery has taken a longer time for such high-value sectors as machinery, electrical and transport equipment.