Shujiro Urata, Atsuyuki Kato, 01 December 2017

Many governments have engaged in free trade agreements to facilitate the growth of regional production networks and global value chains, but critics argue that such agreements damage domestic industries. This column uses Japanese evidence to show that free trade agreements can increase the significance of the domestic industry in a country’s supply chain networks through intra-firm trade, and restrain the hollowing-out of the domestic industry.

Hylke Vandenbussche, William Connell, Wouter Simons, 27 November 2017

Global value networks make it difficult to evaluate the trade impact of Brexit. Using a new model of trade that accounts for the indirect effect of these networks, this column delivers fresh bad news for the UK, and for the rest of Europe. Brexit cuts GDP more, and costs more jobs, if we also consider global value chains. A hard Brexit would destroy four times as much GDP, and four times as many jobs throughout Europe, as a soft Brexit.

Raphael Auer, Claudio Borio, Andrew Filardo, 28 April 2017

In the past two decades, international trade has been transformed by the rise of global value chains. This column suggests that the rise of global value chains can help resolve the puzzle of the increasingly global nature of domestic inflation. Their expansion has greatly increased international competition for both intermediate and final goods and services, meaning price pressures arising from economic slack in one country become more relevant for others. This may be changing the trade-offs central banks face when managing domestic inflation.

Andrew Bernard, J. Bradford Jensen, Stephen Redding, Peter Schott, 22 December 2016

Events of the last year have raised questions about the future growth of international trade. This column examines the role played by ‘global firms’ that both import and export, and are likely to be part of multinationals, in the international economy. In a world of interdependent firm decisions, small reductions in tariffs or trade costs can have magnified effects on trade flows, as they induce firms to serve more markets with more products at greater volumes, and also to source greater volumes of intermediate inputs from more countries. At the same time, policies to restrict imports can end up hurting producers for whom both importing and exporting are a central pillar of their overall business strategy.

Hylke Vandenbussche, Christian Viegelahn, 02 October 2016

In a world where production is increasingly fragmented across borders, a large number of firms import their raw material inputs from abroad. This column investigates how firms’ input and output choices are affected by import tariffs on inputs that domestic firms use in production. Based on firm-product level data for India, it finds that firms decrease their use of inputs subject to the tariff, relative to other inputs. Firms also decrease their sales of outputs made of these inputs, relative to other outputs.

Filippo di Mauro, Konstantins Benkovskis, Sante De Pinto , Marco Grazioli, 29 June 2016

In the ‘currency wars’ discussion, it is almost taken for granted that exchange rate depreciations will result in non-trivial export gains.  Using evidence from countries in Europe and Asia, this column argues instead that factors unrelated to prices/exchange rates often play a predominant role in shaping trade developments. Moreover, these factors affect export outcomes in a very diversified manner across countries, in part because of the interplay of global value chains.

Richard Frensch, Jan Hanousek, Evžen Kočenda, 09 February 2016

With the rise of global value chains, trade in intermediates now accounts for more than two-thirds of total trade. This column provides evidence that trade in parts and components of capital goods between new and old EU countries is driven by wage differences across countries. It further shows that wage differences play an important role in the ex ante investment decision to establish a new production network.

Filippo di Mauro, Arne Nagengast, Robert Stehrer, 29 January 2016

Now that the worst of the Eurozone Crisis has passed, one question that emerges is whether improving current account balances should be an objective for policymakers. And if so, what tools are available? This column argues that because of the emergence of global value chains, trade imbalances within the Eurozone are to a large extent an endogenous result of the international organisation of production at the firm level. It is therefore better to disregard intra-EZ imbalances and focus on the total.

Konstantins Benkovskis, Julia Woerz, 14 January 2016

Global value chains have increased the complexity of good economic analysis no end. This column assess the extent to which global value chains change how we think about the world, and argues that the evolution of global market shares is no longer an adequate indicator of a country’s competitiveness in most cases. ‘Made in China’ has changed almost everything.

Hiau Looi Kee, Heiwai Tang, 09 December 2015

While domestic content in exports has been declining globally, the opposite trend has been observed in China. This column argues that this is mainly due to the structural transformation and FDI liberalisation in the country since 2000. As a result, individual processing exporters have substituted domestic for imported materials, both in terms of volume and varieties. These results indicate that China has become more competitive, particularly in the intermediate input sectors, which supports its ascent along the global value chains.

Laura Alfaro, Pol Antràs, Davin Chor, Paola Conconi, 20 September 2015

Building on Antras and Chor (2013), we describe a property-rights model of firm boundary choices along the value chain. To assess the evidence, we construct firm-level measures of the upstreamness of integrated and non-integrated inputs by combining information on the production activities of firms operating in more than 100 countries with Input-Output tables. In line with the model’s predictions, we find that whether a firm integrates upstream or downstream suppliers depends crucially on the elasticity of demand for its final product. Our results suggest that contractual frictions play an important role in shaping the integration choices of firms around the world.

Swarnali Ahmed Hannan, Maximiliano Appendino, Michele Ruta, 27 August 2015

The export-less depreciation of the yen has opened a debate on the power of exchange rates to boost exports. This column presents new evidence on how the exchange rate elasticity of exports has changed over time and across countries, and how global value chains have affected it. The upshot is that greater integration in global value chains makes exports substantially less responsive to exchange rate depreciations.

Uri Dadush, 13 March 2015

Manufacturing is often seen as the key to sustainable export and productivity growth in developing countries. This column argues that, while manufacturing played a key role in some countries’ development, high growth can be sustained without relying primarily on manufacturing. A process of learning, productivity improvement, and investment that touches all sectors characterises the most successful economies. Policies that artificially favour manufacturing should instead give way to maximising learning from the frontier in all sectors of the economy.

Victor Kummritz, 05 March 2015

Global value chains (GVCs) clearly promote trade and investment but their impact on domestic value-added is less clear. This column discusses new evidence showing that GVCs participation stimulates domestic value, but not for all nations. It is necessary for low- and middle-income countries to increase their absorptive capacities if they are to reap benefits from GVC participation.

Otaviano Canuto, Cornelius Fleischhaker, Philip Schellekens, 11 January 2015

While Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in GDP. This column argues that this cannot be explained simply by the size of Brazil’s economy. Rather it is due to a reliance on domestic value chain integration as opposed to participation in global production networks. Greater trade openness could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.

Emine Boz, Matthieu Bussière, Clément Marsilli, 12 November 2014

The past three years have witnessed a slowdown in global trade. This column shows that the slowdown was particularly pronounced in advanced economies, especially the Eurozone. In a panel of 18 OECD economies, most of the slowdown can be explained by cyclical factors. However, structural factors – global value chains and especially protectionism – may have played a role too.

Juan Blyde, 09 November 2014

While participation in global value chains is giving developing countries the opportunity to diversify production and to acquire know-how from global buyers, few countries in Latin America are taking advantage of these new forms of production. Using a combination of innovative datasets at the macro and micro levels this column presents a comprehensive picture of the participation of Latin America and the Caribbean in global value chains and describes why it is so low.

Maria Bas, Vanessa Strauss-Kahn, 14 July 2014

The rise of trade in intermediate inputs is well documented, but its role in shaping domestic economies is not yet completely understood. This column presents evidence from French firms on the effects of importing intermediate inputs. Firms importing more varieties of intermediate inputs increased their productivity and exported more varieties. Foreign inputs from the most advanced economies have the strongest effect on firm productivity, but imported inputs from all countries help raise the number of export varieties.

Patricia Ellen, Jaana Remes, 12 July 2014

Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.

Gary Gereffi , Xubei Luo, 14 June 2014

The explosion of trade in intermediate goods has created new development opportunities, but many of the jobs at the bottom of global value chains are low-paid, insecure, and dangerous. This column argues that participation in global value chains brings risks as well as opportunities. The gains from ‘moving up the global value chain’ are not equally distributed – large, professional, high-tech firms with diversified export markets, and high-skilled workers with formalised contracts benefit the most.

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