Rise Of Global Value Chains Research Articles

Compilation of a regionally extended inter-country input\u2013output table and its application to global value chain analyses

Studies on the rise of global value chains (GVCs) have attracted a great deal of interest in the recent economics literature. However, due to statistical and methodological challenges, most existing researches ignore domestic regional heterogeneity in assessing the impact of joining GVCs. GVCs are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. To better understand the nature of a country’s position and degree of participation in GVCs, we need to fully examine the role of individual domestic regions. Understanding the domestic components of GVCs is especially important for larger economies such as China, the USA, India, and Japan, where there may be large variations in economic scale, geography of manufacturing, and development stages at the domestic regional level. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a target country’s (e.g., China or Japan) domestic inter-regional input–output tables into the OECD inter-country input–output model. Using this framework, we can more clearly understand how global production is fragmented and extended internationally and domestically.

Renewable futures and industrial legacies: Wind and solar sectors in China, Germany, and the United States

AbstractThis article develops an explanation for patterns of industrial specialization in emerging high-technology industries through a comparative analysis of wind and solar sectors in China, Germany, and the United States. Although governments have held similar industrial policy goals in the support of renewable energy industries, firms in all three economies have established distinct innovative capabilities in response to the policies of the state. This article shows that firms utilize both legacy institutions and engage in relational learning in global networks to carve out distinct niches in emerging industries. Based on an original dataset of more than 200 firm-level interviews, the article suggests that the rise of global value chains has widened the space for national diversity in industrial specialization. Firms no longer have to establish the full range of skills required to bring an idea from lab to market, but can specialize and collaborate with others. In this context, firms respond to industrial policy by incrementally building on existing industrial capabilities and by relying on familiar public resources and institutions, even in emerging industries. These findings point to the role of industrial legacies in shaping firms' positions in global value chains and show that firms are active agents in maintaining distinct industrial specializations and domestic institutions under conditions of globalization.

Complex Network Analysis for Characterizing Global Value Chains in Equipment Manufacturing.

The rise of global value chains (GVCs) characterized by the so-called “outsourcing”, “fragmentation production”, and “trade in tasks” has been considered one of the most important phenomena for the 21st century trade. GVCs also can play a decisive role in trade policy making. However, due to the increasing complexity and sophistication of international production networks, especially in the equipment manufacturing industry, conventional trade statistics and the corresponding trade indicators may give us a distorted picture of trade. This paper applies various network analysis tools to the new GVC accounting system proposed by Koopman et al. (2014) and Wang et al. (2013) in which gross exports can be decomposed into value-added terms through various routes along GVCs. This helps to divide the equipment manufacturing-related GVCs into some sub-networks with clear visualization. The empirical results of this paper significantly improve our understanding of the topology of equipment manufacturing-related GVCs as well as the interdependency of countries in these GVCs that is generally invisible from the traditional trade statistics.

New dynamics of upgrading in global value chains: Shifting terrain for suppliers and workers in the global south

The rise of global value chains (GVCs) has been associated with the rapid expansion of outsourcing by lead firms in the global North to interlinked networks of cross-border suppliers in developing countries. Outsourcing was facilitated by trade and financial liberalization initiated in the 1970s and 1980s, and driven by intense competitive pressures for cost reduction. GVC and global production network (GPN) analysis provide crucial insights into inter-firm coordination and governance, with diverse and uneven embeddedness across an expanding range of countries (Coe and Yeung, 2015; Dicken et al., 2001; Gereffi et al., 2001, 2005). The consequences for suppliers and workers have been mixed. The search for cost reduction went hand in hand with entry into relatively unregulated environments leading to what Appelbaum et al. (2005) have called ‘the race to the bottom’ in many industries. At the same time, buyer pressure for product quality and consistency has increased the demands on suppliers to comply with private standards and monitoring (Nadvi, 2008). For some the outcome has led to a combination of economic upgrading (suppliers moving to higher value activities) and social upgrading (better terms and conditions for workers), while others have experienced economic and social downgrading (Barrientos et al., 2011a; Lee and Gereffi, 2015). Global outsourcing has led to the creation of new architectures for the organization of production, trade and consumption in the global economy. Today multilateral organizations (including the WTO, World Bank and OECD) have acknowledged that GVCs have reshaped traditional trading patterns between nations. UNCTAD (2013) estimates that 80% of world trade now passes through GVCs. Furthermore the developing country share in global value-added trade increased from 20% in 1990 to over 40% today, and GVC participation contributes 28% to their GDP on average. Global production has opened up new opportunities for employment to millions of workers in developing countries. The International Labour Organisation (ILO) estimates that in 2013, 453 million jobs were GVC

Global Value Chains and East Asian Trade in Value-Added

The rise of global value chains (GVCs) has changed the patterns of trade in East Asia. This paper aims to analyze GVCs since the mid 1990s and to investigate the determinants of East Asian trade in value-added. At the world level, export (measured in value-added) is increasingly sensitive to the capital–labor ratio and high-skilled labor productivity. In East Asia, however, the opposite trend is seen. It is also found that free trade agreements do not promote export in East Asia, only export in intermediate goods.

Reaping the Benefits from Global Value Chains

Against the backdrop of the rise of global value chains (GVCs), particularly in Asia, this paper documents key developments of GVCs and investigates what factors cause economies to reap greater benefits from GVC participation. Key findings include: first, moving toward a more upstream position in production and raising economic complexity are associated with the country increasing its share of GVC value added. Second, fostering GVC participation and expanding the share of the domestic value added in a value chain require efforts to reduce trade barriers, enhance infrastructure, foster human capital formation, support research and development, and improve institutions.

Reaping the Benefits from Global Value Chains

Against the backdrop of the rise of global value chains (GVCs), particularly in Asia, this paper documents key developments of GVCs and investigates what factors cause economies to reap greater benefits from GVC participation. Key findings include: first, moving toward a more upstream position in production and raising economic complexity are associated with the country increasing its share of GVC value added. Second, fostering GVC participation and expanding the share of the domestic value added in a value chain require efforts to reduce trade barriers, enhance infrastructure, foster human capital formation, support research and development, and improve institutions.

What Accounts for the Growth of Carbon Dioxide Emissions in Advanced and Emerging Economies? The Role of Consumption, Technology, and Global Supply Chain Trade

Climate policy pledges and negotiations involve commitments about the reduction of emissions within national borders. However, the rise of global value chains has changed the nature of production and international trade, blurring the attribution of ultimate responsibility for emissions. This paper applies a novel method that examines the change in territorial emissions due to changes in energy intensity, supply chain participation, and domestic and foreign consumption. Our findings suggest that rising levels of domestic consumption are related to increased carbon dioxide emissions in both advanced and emerging economies. A substantial share of emissions growth in emerging economies is accounted for by higher participation in global production networks that serve expanding foreign consumption. However, even for economies that most rapidly integrated in global production networks, such as the People’s Republic of China, rising domestic consumption accounts for the bulk of territorial emissions. Improved energy efficiency partially stemmed the spike in emissions from higher consumer demand.

East Asian Value Chains and Economic Effects of Free Trade Agreements

The rise of global value chains has changed the trade and investment patterns in East Asia. The intra-regional trade of intermediate goods in East Asia turned out to increase compared to the EU and the US, and East Asian value chains have grown rapidly in recent years. This paper calculates the indicators to show how the global value chains have deepened in each region by using the World Input-Output Tables which cover 41 countries and 35 sectors during 1996-2009. The results from this study provide some policy recommendations as follows. Global trade liberalization is needed to maximize the positive effects expected from the global value chains. East Asian countries also need to harmonize the border measures including standards, SPS, and TBT which are expected to facilitate global value chains in the region. The liberalization of services such as distribution, finance, and business services among others are also expected to contribute to efficient movement of goods and materials in the intra- and inter-region trade. Specifically, the East Asian countries need to harmonize the intra-regional bilateral FTAs to reduce the so-called noodle bowl effects.

FTAA (East Asian Value Chains and Economic Effects of Free Trade Agreements)

Korean Abstract: 우리나라는 아세안, 미국, EU 등과의 FTA를 마무리한 이후 동아시아국가들과의 FTA추진에 박차를 가하고 있다. 우리나라는 2012년 5월 한·중 FTA 협상을 개시한 이후 한·중·일 3국간의 FTA와 더불어 중국, 일본, 아세안, 인도, 뉴질랜드, 호주 등과 함께 RCEP(Regional Comprehensive Economic Partnership) 협상을 2012년 말에 착수하였다. 최근 동아시아국가 상호간에는 무역 및 투자가 활발하며 제도적 통합도 많이 이루어져 있다. 또한 중간재교역 및 외국인투자가 활발하게 이루어지면서 기업의 생산과 판매 등 많은 생산과정이 자회사 및 협력회사에 급속하게 분할되고 있다. 이에 따라 동아시아국가들은 국제무역 및 투자에서 부가가치가 생성되는 글로벌 가치사슬에 빠른 속도로 편입되고 있다. 우리나라로서는 동아시아의 글로벌 가치사슬을 효율적으로 활용하기 위해 역내국간 FTA를 통해 무역·투자 등 상호의존성을 강화하고 제도적 통합을 가속화할 필요가 있다. 이에 따라 본 연구는 동아시아의 가치사슬구조를 국별 및 산업별로 분석하고, 부가가치 기준 원산지규정에 따른 동아시아 FTA 협상의 시나리오별 경제적 효과를 분석함으로써, 정부의 동아시아 FTA 협상 추진을 위한 참고자료를 제공하고자 한다. English Abstract: Companies have set up global value chains by fragmenting the production processes including product design, outsourcing, assembling, and marketing to subsidiary and cooperative firms since the 1990s. As a result, recent trade patterns have been transformed from trade in goods to trade in tasks. The rise of global value chains has changed the trade and investment patterns in East Asia. The East Asian intra-regional trade and investment has increased substantially in recent years. Specifically, the intra-regional trade of intermediate goods in East Asia turned out to increase compared to the EU and the US, and East Asian value chains have grown rapidly in recent years. This paper calculates the indicators to show how the global value chains have deepened in each region by using the World Input-Output Tables which cover 41 countries and 35 sectors during 1996~2009. The indexes of global value chains have been proposed by Fally (2011), Fally (2012), Antras and Chor (2011), Antras et al. (2012), Koopman et al. (2010), OECD (2012), Meng et al. (2006). We calculated international downstreamness and upstreamness indexes based on the international input-output tables. The international downstreamness index in case of East Asia turned out to be relatively high compared to the EU and NAFTA. It is notable that the East Asian international upstreamness index also increased substantially during the same period. This study also decomposes the trade in value added into domestic and foreign contributions in order to analyze the effects of global value chains on the East Asian intra-regional value added. It uses the data for the 41 countries and the 35 industries contained in the World Input-Output Tables. This study investigates the shares of intra-regional value added for the East Asian countries by FTA scenarios, applying the methodologies developed by Koopman et al. (2010) and Hummels et al. (2001). It is not surprising to see that the shares of intra-regional value added turn out to be dependent on the number of countries joining FTAs, which implies that the positive effects of global value chains will be magnified with the deepening regional integration. This study also analyzed the economic effects of value chain structure in East Asia by various FTA scenarios. We used the recursive dynamic computable general equilibrium (CGE) model to analyze the value chain structure in trade and industrial linkages. The policy simulations based on rules of origin are expected to provide more realistic results and meaningful implications consistent with previous research. According to the results, the economic growth effect of a KC FTA is greater than other FTAs regardless of strictness of rules of origin. The simulation results also indicate that the effects of FTAs decrease as rules of origin become stricter and relative decreases in ratios of economic integration are less than those of bilateral FTAs. The value chain structures turn out to magnify the effects of KC FTA and RCEP, but decreases those of the KJ FTA because Korea’s trade dependency on China and ASEAN are relatively intense. The results from this study provide some policy recommendations as follows. Global trade liberalization is needed to maximize the positive effects expected from the global value chains. East Asian countries also need to harmonize the border measures including standards, SPS, and TBT which are expected to facilitate global value chains in the region. The liberalization of services such as distribution, finance, and business services among others are also expected to contribute to efficient movement of goods and materials in the intra- and inter-region trade. Specifically, the East Asian countries need to harmonize the intra-regional bilateral FTAs to reduce the so-called noodle bowl effects.

East Asian Value Chains and Economic Effects of Free Trade Agreements

The rise of global value chains has changed the trade and investment patterns in East Asia. The intra-regional trade of intermediate goods in East Asia turned out to increase compared to the EU and the US, and East Asian value chains have grown rapidly in recent years. This paper calculates the indicators to show how the global value chains have deepened in each region by using the World Input-Output Tables which cover 41 countries and 35 sectors during 1996-2009. The results from this study provide some policy recommendations as follows. Global trade liberalization is needed to maximize the positive effects expected from the global value chains. East Asian countries also need to harmonize the border measures including standards, SPS, and TBT which are expected to facilitate global value chains in the region. The liberalization of services such as distribution, finance, and business services among others are also expected to contribute to efficient movement of goods and materials in the intra- and inter-region trade. Specifically, the East Asian countries need to harmonize the intra-regional bilateral FTAs to reduce the so-called noodle bowl effects.

Global Value Chains and the Transmission of Business Cycle Shocks

The collapse of trade during the great recession of 2008-2009 has raised the question of whether the rise of global value chains (GVCs) has increased or accelerated the international transmission of business cycle shocks. In this paper, we empirically investigate two channels through which a country’s integration into GVCs may increase the income elasticity of its exports. First, GVCs may simply be concentrated in sectors that are more sensitive to external income fluctuations (composition effect). Alternatively, there may be characteristics that are inherent to GVCs that trigger a faster and more amplified propagation of business cycle shocks (supply chain effect). Using trade data from the People’s Republic of China, we find supporting evidence for the composition effect. However, we find no evidence that trade within GVCs have an intrinsically higher income elasticity than regular trade.

A Rodada Doha, as mudanças no regime do comércio internacional e a política comercial brasileira

Este trabalho tem como objetivo discutir os atuais desafios do multilateralismo tradicional no comércio, visíveis nos impasses da Rodada Doha, diante das novas realidades do comércio internacional globalizado, caracterizado pela dispersão e fragmentação da produção sob a lógica das cadeias de valor globais (CVG). O artigo discute a forma em que essas transformações estão desafiando pressupostos tradicionais do sistema multilateral de comércio e as negociações da Rodada Doha. Tomando o caso do Brasil como exemplo, o artigo argumenta que o descompasso entre a agenda negociadora e as novas realidades do comércio internacional reside nos próprios países-membros da OMC que, em sua maioria, ainda não pautam suas políticas comerciais e suas estratégias de inserção internacional por essas novas dinâmicas do comércio internacional. Por fim, o trabalho mostra que a política comercial brasileira durante a última década esteve desalinhada com essa nova realidade ao dar demasiada ênfase às formas tradicionais de negociação comercial, deixando de considerar as modificações essenciais ocorridas nos padrões de comércio na esteira do processo de globalização.

Product Modularity and the Rise of Global Value Chains: Insights from the Electronics Industry

In the field of economics, a vast literature has attributed the rise of global value chains to globalization-related forces such as declining costs of transportation, improvements in communications technology, and institutional and policy reforms in developing countries. Through an in-depth review of the industry transformation in the electronics industry, however, we find that an additional relatively unexplored factor is the modularization of electronics products. We analyze the mechanisms through which product modularization may lead to the rise of global value chains and discuss the implications for future research.

Measuring success in the global economy: International trade, industrial upgrading, and business function outsourcing in global value chains

This article contributes to an assessment of the scholarly work of Sanjaya Lall, especially as it relates to improved measures of industrial upgrading and technological learning. We argue for the collection of new statistics, in addition to reworking and linking existing data sets. Changes in the global economy, especially the rise of global value chains (GVCs), have created measurement problems that require not only continued innovation in the use of existing data sources, but also the development and deployment of new measures that analyze GVCs more directly. Specifically, we advocate for the collection of establishment-level economic data according to business functions. Data collected according to a standardized set of generic business functions can provide researchers and policymakers with a better map of the value chain, reveal the roles that domestic establishments, firms, and industries play within GVCs, and offer a unique view of the competitive pressures facing domestic firms and industries.