Multilateralising 21st-century regionalism
Richard Baldwin 20 January 2014
The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought of as network externalities and harmonisation costs respectively. More research is needed to determine how the megaregional trade agreements across the Pacific and Atlantic will fit with the WTO.
Trade and trade agreements used to be relatively simple. Trade primarily meant trade in ‘made-here-sold-there’ goods, so 20th-century regional and multilateral trade agreements dealt primarily with barriers to goods crossing borders – especially tariffs. For governments, the key purpose of trade and trade agreements was to help their firms sell things.
Global governance International trade
WTO, trade, regional trade agreements, supply chains, harmonisation, global value chain, megaregionals, network effects
The ICT revolution and the international organisation of the firm
Sergi Basco, Martí Mestieri 05 October 2013
The ICT revolution has fostered internationalisation of production networks, but the impact has been uneven across sectors. This column presents evidence that ICT interacts with monitoring difficulties to explain differences in international firm organisation at the sector level. ICT is one way that developing nations can ascend in the global supply chain. Those countries that invest in ICT technologies gain a comparative advantage in harder-to-monitor industries, which tend to be more skill-intensive.
The Information and Communication Technology (ICT) revolution has changed how goods and services are produced. ICT has rendered some jobs obsolete while spurring the creation of new ones (Autor et al. 2003). Moreover, they have transformed the organisation of production itself. The ICT revolution has enabled a finer degree of specialisation in the production process, allowing it to be more fragmented than in the past, a phenomenon coined by Baldwin (2006) as the “Second Great Unbundling”.
Global economy Industrial organisation International trade
global value chain
Firms and credit constraints along the global value chain: Processing trade in China
Kalina Manova, Zhihong Yu 13 May 2013
What can we learn from China’s experience as a linchpin in the global value chain? This column presents new research showing that financial frictions influence the organisation of production across firm and country boundaries. If you’re credit-constrained, you might be stuck in the low value-added stage of the supply chain. Strengthening capital markets might thus be an important prerequisite for moving into higher value-added, more profitable activity. China’s experience tells us that liquidity-constrained manufacturers might therefore benefit more from import liberalisation and from the fragmentation of production across borders.
The past 20 years of globalisation have witnessed a dramatic expansion in the fragmentation of production across countries. Firms today can not only trade in final goods, but also conduct intermediate stages of manufacturing by importing foreign inputs, processing and assembling them into finished products, and re-exporting these to consumers and distributors abroad. While processing trade contributes just 10% of EU exports, at over 50% it has been a major driving force behind the rapid growth of Chinese exports (Cernat and Pajot 2012).
China, global supply chain, global value chain