Chad Bown, 30 October 2018

President Trump’s protectionism has a distinctive focus on disrupting US access to global supply chains. This column reveals that the major economies had in fact begun to impose additional trade protection on intermediate inputs even prior to 2016. New barriers targeting cross-border supply chains simply arose through policies aside from headline tariffs. Some of this new protection has also already spread beyond China’s trade and begun to cover exports from other countries. These results, combined with more recent policy actions, widen the possibility of a negative protectionist impact on the global sourcing of parts and components.

Francois de Soyres, Erik Frohm, Vanessa Gunnella, Elena Pavlova, 09 October 2018

When a country’s currency depreciates, its export volumes are expected to increase. Yet some recent episodes suggest that exports now barely respond to significant exchange rate movements. This column argues that global value chains are an important part of the answer, as countries now need to import to export, and often re-import their exports. To assess the consequences of international input-output linkages on exchange rate elasticities, policymakers need indices of global value chain participation based on currencies rather than countries.

Laura Alfaro, Alejandro Cuñat, Harald Fadinger, Yanping Liu, 02 October 2018

Real exchange rate devaluations are typically seen as a viable development strategy, but the effectiveness of the approach may vary over time and across countries. This column explores this issue by focusing on the microeconomics of firm-level responses to exchange rate fluctuations. Results show varying patterns of responses to fluctuations by region and by import/export orientation. These results highlight the crucial role of a firm’s integration in global value chains.

Ronald Davies, Zuzanna Studnicka, 26 September 2018

Stock market returns provide a useful way of measuring investor expectations. The column uses stock return data following the Brexit referendum to show a persistent negative shift in sentiment towards multinationals with at-risk global value chains. In particular, even compared to others in the same industry, firms with a UK or EU focus underperform. This suggests the potential for targeted support policies.

Hylke Vandenbussche, William Connell, Wouter Simons, 24 August 2018

While talks of a preferential agreement between the US and EU were put aside when President Trump came in office, the presidents of the two trading partners have recently expressed a new desire to aim for zero tariffs and non-tariff measures between them. This column estimates the gains from such a deal, taking into account global value chains and input-output linkages in production. It finds that free trade would substantially benefit both the EU and the US, and these gains would result from the reduction in non-tariff barriers rather than tariffs. 

Woori Lee, 30 June 2018

Participation in global value chains is a key element of the industrialisation strategies of developing nations. To date, most research has focused on goods and the manufacturing sector. This column explores the role of services in global value chains. Trade agreements that liberalise services are found to foster global value chain trade, especially for developing country exporters and those that allow service exports without local presence.

Dan Andrews, Peter Gal, William Witheridge, 11 May 2018

Low inflation at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This column suggests that greater participation in global value chains has placed downward pressure on inflation. The current higher level of global value chain integration may also dampen inflation by accentuating the impact of global economic slack on domestic inflation. There is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term.

Richard Pomfret, 01 May 2018

A dramatic development in the 2010s has been establishment of overland rail freight services between the EU and East Asia. This column, the first in a two-part series, look at the catalyst for the Eurasian Landbridge rail services and it's impact on trade costs. While traffic on the Landbridge is still small compared to China-EU maritime trade, there is potential for further service improvement with implications for global value chains across Eurasia.

Swati Dhingra, Rebecca Freeman, Eleonora Mavroeidi, 30 March 2018

After Brexit, the UK will have to negotiate which provisions to include in its new arrangements, and a fundamental question is which provisions are most important in reducing non-tariff barriers to trade. This column uses a gravity model to show that trade agreements with deep provisions have the largest impact on domestic value added. The UK’s entry into a deep trade agreement with either the US or China/India that encompasses non-tariff liberalisation of services, investment, and competition can increase economic activity in industries that are key to its innovative activity.

Vito Amendolagine, Andrea Presbitero, Roberta Rabellotti, Marco Sanfilippo, 24 January 2018

A new wave of foreign direct investment has swept sub-Saharan African countries, with inflows becoming more diversified both geographically and sectorally. This column presents an analysis that shows a high degree of complementarity between involvement in global value chains and FDI. Policies supporting the entry and upgrading of countries in such chains – especially via a strong institutional setting and a well-educated labour force – can help maximise the spillovers from foreign investment.

Koji Ito, Ivan Deseatnicov, Kyoji Fukao, 23 January 2018

The study of global value chains has become increasingly relevant as production becomes more and more fragmented across countries. This column uses evidence from Japan to evaluate recent theories that such chains have caused some of the country’s industries to become less competitive. The findings suggest that considering production for exports and domestic sales separately may provide a more complete picture of firm heterogeneity within industries, and a more complete picture of interconnected countries at the industry level.

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.

Pages

Events

CEPR Policy Research