Regional Trading Blocs and Economic Integration

Regional Trading Blocs and Economic Integration

 

 

From Asia’s Rise in the New World Trade Order

Asia Rising

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From What is Regional Trade Blocs or Free Trade Agreements?

As trade integration across countries is intensifying, we hear more and more about Free Trade Agreements (FTAs) and Regional Trade Blocs (RTBs). As their name suggests these RTBs/FTAs are arrangements aimed for faster trade liberalisation at regional levels.

Countries are convinced that trade is an engine of growth and they are searching for arrangements that promote trade.

The WTO that contains 162 countries is the most popular one; a truly multilateral forum for trade liberalisation. But the history of WTO led trade liberalisation shows that the organisation is facing difficulty in bringing further trade liberalisation because of conflicting interest among large number of countries.

This has led to interest in trade liberalisation within a limited number of countries that may be regionally close together. These regional trade promoting arrangements advocate more tariff cuts and removal of other restrictions within the group while maintaining restrictions against the rest of the world.

Though many regional trade agreements like the EU, NAFTA and ASEAN were established before or around the time of WTO’s formation, there is mushrooming of RTBs in recent years. Recently formed Trans Pacific Partnership (TPP) shows this increasing affinity towards RTBs. Many RTBs like the TPP would like to make advanced level trade liberalisation and hence they are not satisfied with the slow pace of trade liberalisation within the WTO.

What are Regional Trade Blocs (RTBs)?

Regional Trade Blocs or Regional Trade Agreements (or Free Trade Agreements) are a type of regional intergovernmental arrangement, where the participating countries agree to reduce or eliminate barriers to trade like tariffs and non-tariff barriers.  The RTBs are thus historically known for promoting trade within a region by reducing or eliminating tariff among the member countries.

Over the last few decades, international trade liberalisations are taking place in a serious manner through the formation of RTBs. They are getting wide attention because of many important international developments. First, now the world is trying hard to escape from the ongoing great recession phase. Second is the failure of the WTO to take further liberalisation measures on the trade liberalisation front.

The EU, NAFTA, ASEAN, SAFTA etc are all examples for regional integration. The triad of North America, Western Europe, and Asia Pacific have the most successful trade blocs. Recently signed Trans Pacific Partnership is a powerful RTB. Similarly, another one called RCEP is in negotiation round. India has signed an FTA with the ASEAN in 2009. Simultaneously, the country has signed many bilateral FTAs.

Different types of RTBs

All regional trade blocs don’t have the same degree of trade liberalisation. They may differ in terms of the extent of tariff cutting, coverage of goods and services, treatment of cross border investment among them, agreement on movement of labour etc.

The simple form of regional trade bloc is the Free Trade Area. The Free Trade Area is a type of trade bloc, a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all)goods and services traded between them.

From the lowest to the highest, regional trade integration may vary from just tariff reduction arrangement to adoption of a single currency. The most common type of regional trade bloc is the free trade agreement where the members abolish tariffs within the region. Following are the main types of regional economic integrations.

Classification of RTBs

Preferential trading union: Here, two or more countries form a trading club or a union and reduce tariffs on imports of each other ie, when they exchange tariff preferences and concessions.

Free trade union or association: Member countries abolish all tariffs within the union, but maintain their individual tariffs against the rest of the world.

Customs union: countries abolish all tariffs within and adopt a common external tariff against the rest of the world.

Common market: in addition to the customs union, unrestricted movement of all factors of production including labour between the member countries. In the case of European Common Market, once a visa is obtained one can get employed in France or Germany or in any other member country with limited restrictions.

Economic union: The Economic Union is the highest form of economic co-operation. In addition to the common market, there is common currency, common fiscal and monetary policies and exchange rate policies etc. European Union is the example for an Economic Union. Under the European Monetary Union, there is only one currency- the Euro.

At present, out of the total regional trade arrangements FTAs are the most common, accounting for nearly 90 per cent.

 

From Regionalism in a globalizing world: an Asia-Pacific perspective

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From Asia’s Rise in the New World Trade Order

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From The world’s free trade areas – and all you need to know about them

International trade is a driving force behind economic growth, and two so-called “mega-regional” trade deals are dominating public debate on the issue: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

But there are around 420 regional trade agreements already in force around the world, according to the World Trade Organization. Although not all are free trade agreements (FTAs), they still shape global trade as we know it.

 Global exports and trade agreements

Image: The Economist

 

What exactly are free trade areas?

The OECD defines a free trade area as a group of “countries within which tariffs and non-tariff trade barriers between the members are generally abolished but with no common trade policy toward non-members”.

The free movement of goods and services, both in the sense of geography and price, is the foundation of these trading agreements. However, tariffs are not necessarily completely abolished for all products.

 

Which are the world’s major free trade areas?

 

The North American Free Trade Agreement (NAFTA)

 

Free trade between the three member nations, Canada, the US and Mexico, has been in place since January 1994. Although tariffs weren’t fully abolished until 2008, by 2014 total trilateral merchandise trade exceeded US$1.12 trillion.

According to the US government, trade with Canada and Mexico supports more than 140,000 small and medium-size businesses and over 3 million jobs in the US. Gains in Canada are reportedly even higher, with 4.7 million new jobs added since 1993. The country is also the largest exporter of goods to the US.

 US Trade with NAFTA Partner 1993-2012

Image: Congressional Research Service

 

However, the Council on Foreign Relations suggests that the impact on Mexico is harder to assess. Per capita income has not risen as fast as expected; nor has it slowed Mexican emigration to the US. However, farm exports to the US have tripled since 1994, and the cost of goods in Mexico has declined. The cost of basic household goods has halved since NAFTA came into force, according to estimates by GEA, a Mexican economic consulting firm.

 

Association of Southeast Asian Nations Free Trade Area (AFTA)

 

The AFTA was signed in January 1992 in Singapore. The original members were Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Four countries have subsequently joined: Vietnam, Laos, Myanmar and Cambodia.

The bloc has largely removed all export and import duties on items traded between the nations. It has also entered into agreements with a number of other nations, including China, eliminating tariffs on around 90% of imported goods.

 The ASEAN AFTA

Image: ASEAN Briefing

 

The AFTA nations had a combined GDP of US$2.3 trillion in 2012, and they’re home to 600 million people. The agreement has therefore helped to dramatically reduce the cost of trade for a huge number of businesses and people.

 

Southern Common Market (MERCOSUR)

 

Although MERCOSUR was envisaged as a Latin American single market, enabling the free movement of people, goods, capitals and services, this vision is yet to become reality. Internal disputes have slowed progress towards removing tariffs and the free movement of people and goods.

But MERCOSUR is still one of the world’s leading economic blocs, and has a major influence on South American trade and the global economy.

 

Common Market of Eastern and Southern Africa (COMESA)

 

Formed in December 1994, the organization aims to develop natural and human resources to benefit the region’s population. Its primary focus, according to the United Nations, is to establish a large economic and unit to overcome barriers to trade.

With 19 member states, and an annual export bill in excess of $80 billion, the organization is a significant market place, both within Africa and globally.

 COMESA Member States

Image: United Nations

 

COMESA utlimately aims to remove all barriers to intra-regional trade, starting with preferential tariffs and working towards a tariff-free common market and economic union.

 

What about the European Union?

 

The EU is a single market, which is similar to a free trade area in that it has no tariffs, quotas or taxes on trade; but a single market allows the free movement of goods, services, capital and people.

The EU strives to remove non-tariff barriers to trade by applying the same rules and regulations to all of its member states. The region-wide regulations on everything from working hours to packaging are an attempt to create a level playing field. This is not necessarily the case in a free trade area.

 The European Union

Image: BBC

 

The creation of the single market was a slow process. In 1957, the Treaty of Rome established the European Economic Community (EEC) or Common Market. However, it was not until 1986 that the Single European Act was signed. This treaty formed the basis of the single market as we know it, as it aimed to establish the free-flow of trade across EU borders. By 1993 this process was largely complete, although work on a single market for services is still ongoing.

Today, the EU is the world’s largest economy, and the biggest exporter and importer. The EU itself has free trade agreements with other nations, including South Korea, Mexico and South Africa.

 The State of EU Trade

Image: European Union

 

What about the TPP and TTIP?

 

Once fully ratified, the Trans-Pacific Partnership is set to become the world’s largest trade agreement. The TPP already covers 40% of global GDP, and trade between member nations is already significant.

However, by removing tariffs and other barriers to trade, the agreement hopes to further develop economic ties and boost economic growth.

 The Trans-Pacific Trade Deal

Image: Reuters

 

The Transatlantic Trade and Investment Partnership is a deal currently being negotiated between the EU and the US. If reached, it would itself become the world’s largest trade agreement – covering 45% of global GDP.

Like the TPP, it aims to cut tariffs and regulatory barriers to trade. Among these is the removal of customs duties, according to the EU’s negotiation factsheet.

The Center for Economic Policy Research has estimated that the deal would be worth $134 billion a year for the EU and $107 billion for the US – although opponents have disputed these figures.

 Transatlantic Negotiations

Image: Brookings

As the World Economic Forum’s E15 Initiative has highlighted, effective global trade is central to economic growth and development. Trade agreements are an integral part of making this a reality.

From Regional Trade Agreements and the Multi-polar Global Order:
Implications for South Korea’s Economy

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From Regional Trade Agreements and the Multi-polar Global Order:
Implications for South Korea’s Economy

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From Regional Trade Agreements: Promoting conflict or building peace?

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Key Terms:

  • Rising Powers
  • Global Economic Governance
  • Mega-Regionals
  • World Trade Organization (WTO)
  • Transatlantic Trade and Investment Partnership (TTIP)
  • Transpacific Trade and Investment Partnership (TPP)
  • MFN (Most Favored Nation)
  • PTA (Preferred Trading Agreement)
  • FTA (Free Trade Agreement)
  • RTA (Regional Trade Agreement)
  • MTS (Multi Lateral Trade System)
  • BTA (Bilateral Trade Agreement)
  • Belt and Road Initiative
  • Regional Comprehensive Economic Partnership (RCEP)
  • ASEAN
  • AEC
  • APEC
  • BRICS
  • EU
  • SAARC
  • MERCOSUR
  • Free Trade Area of the Asia-Pacific (FTAAP)
  • NAFTA
  • ASEAN+3
  • ASEAN+6
  • Custom Unions
  • Common Markets
  • Economic Unions
  • GATT
  • WTO
  • SADC
  • COMESA
  • ECOWAS
  • ECCAS/CEEAC
  • SACU
  • AFTA
  • SAPTA/SAFTA

Key Sources of Research:

 

 

What is Regional Trade Blocs or Free Trade Agreements?

http://www.indianeconomy.net/splclassroom/107/what-is-regional-trade-blocs-or-free-trade-agreements/

 

 

 

The world’s free trade areas – and all you need to know about them

2016

WEF

https://www.weforum.org/agenda/2016/05/world-free-trade-areas-everything-you-need-to-know/

 

Regional trade agreements: Blessing or burden?

Caroline Freund, Emanuel Ornelas

02 June 2010

http://voxeu.org/article/regional-trade-agreements-blessing-or-burden

 

 

 

Regional Trade Agreements: Promoting conflict or building peace?

Oli Brown
Faisal Haq Shaheen
Shaheen Rafi Khan
Moeed Yusuf

October 2005

Click to access security_rta_conflict.pdf

 

 

 

Regional trade agreements

WTO

https://www.wto.org/english/tratop_e/region_e/region_e.htm

 

A COMPLETE GUIDE TO THE REGIONAL TRADE AGREEMENTS OF THE ASIA-PACIFIC

WRITTEN BY TIM MARTYN
MARCH 2001

Click to access martyn.pdf

 

 

 

Globalization and the Growth in Free Trade Agreements

SHUJIRO URATA

2002

Click to access Globalization_and_FTA.pdf

 

 

 

Regional trade agreements: blessing or burden?

 

Click to access cp313.pdf

 

 

 

Mexico’s Free Trade Agreements

M. Angeles Villarreal
Specialist in International Trade and Finance

April 25, 2017

Click to access R40784.pdf

 

 

Regional Trade Agreements in a Multilateral Trade Regime: An Overview

Parthapratim Pal

Click to access survey_paper_RTA.pdf

 

 

 

REGIONAL TRADE INTEGRATIONS: A Comparative Study of African RTAs

Sannassee R., Boopendra S and Tandrayen Verena

Click to access 15.pdf

 

 

 

Trade Blocks and the Gravity Model: A Study of Economic Integration among Asian
Developing Countries

E. M. Ekanayake

Amit Mukherjee

Bala Veeramacheneni

Click to access 9180KU76078V3656.pdf

 

 

Free Trade Agreements, the World Trade Organization and Open Trade

Michael SUTTON

Click to access 04sutton.pdf

 

 

 

REGIONAL TRADE BLOCS THE WAY TO THE FUTURE?

ALEJANDRO FOXLEY

Click to access regional_trade_blocs.pdf

 

 

 

Regional Trade Agreements and the WTO

Ildikó Virág-Neumann

2009

Click to access 32_Neumann-Virag.pdf

 

 

 

PREFERENTIAL TRADE AGREEMENTS AND THE WTO: IMPETUS OR IMPEDIMENT?

Committee on International Trade

Principal Drafters:
Helena Sullivan, Chair
Stuart Shroff
Mark Du
Albert Bloomsbury

THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
42 WEST 44TH STREET, NEW YORK, NY 10036

Click to access 20071935-PreferentialTradeAgreementsandtheWTO.pdf

 

 

 

Regional Trade Agreements and the Multi-polar Global Order:
Implications for South Korea’s Economy

Dr. Mi Park

Click to access 84.full.pdf

 

 

 

Rising Powers in the Global Trading System – China and Mega-Regional Trade Negotiations

Clara Brandi

2016

Click to access vol1.1.Clara-Brandi.pdf

 

Asia’s Rise in the New World Trade Order

The Effects of Mega-Regional Trade Agreements on Asian Countries

Part 2 of the GED Study Series:

Effects of Mega-Regional Trade Agreements

Click to access NW_Asia_s_Rise_in_the_New_World_Trade_Order.pdf

 

 

 

 

Regional Trade Agreements: Development Challenges and Policy Options

By Antoni Estevadeordal, Kati Suominen, Christian Volpe Martinicus,
December 2013

 

http://e15initiative.org/publications/regional-trade-agreements-development-challenges-and-policy-options/

http://e15initiative.org/themes/regional-trade-agreements/

 

 

 

Regional Trade Agreements

https://ustr.gov/trade-agreements/wto-multilateral-affairs/wto-issues/regional-trade-agreements

 

 

 

What are mega-regional trade agreements?

WEF

https://www.weforum.org/agenda/2014/07/trade-what-are-megaregionals/

 

Regional trade agreements, integration and development

2017

 

Click to access ser_rp2017d1_en.pdf

 

Mega-Regional Trade Agreements and the Future of the WTO

Chad Brown
PIIE

http://onlinelibrary.wiley.com/doi/10.1111/1758-5899.12391/epdf

https://piie.com/commentary/speeches-papers/mega-regional-trade-agreements-and-future-wto

 

 

CHINA’S NEW REGIONAL TRADE AGREEMENTS

Agata Antkiewicz

John Whalley

December 2004

 

Click to access w10992.pdf

 

 

CHINA’S REGIONAL AND BILATERAL TRADE AGREEMENTS

Chunding Li Jing

Wang John Whalley

January 2014

 

Click to access pt.pdf

 

 

Currency Unions and Regional Trade Agreements: EMU and EU Effects on Trade

Reuven Glick

Federal Reserve Bank of San Francisco

October 2016

Click to access wp2016-27.pdf

 

Regionalism in a globalizing world: an Asia-Pacific perspective

Dilip Das

2001

http://wrap.warwick.ac.uk/2038/

 

Understanding Trade in Intermediate Goods

Understanding Trade in Intermediate Goods

 

One of the key source of International Trade statistics is a document published by the UNCTAD since 2013:

Key Statistics and Trends in International Trade

Please see references below to access reports for 2015 and 2016.

 

In 2014, out of USD 18.5 trillion in global trade, about USD 8 trillion was in intermediate goods.

 

From TRADE IN INTERMEDIATE GOODS AND SERVICES

Introduction: the international dimension of the exchange of intermediate inputs

1. Trade in intermediate inputs has been steadily growing over the last decade. However, despite the internationalisation of production and the increasing importance of outsourcing and foreign investment, some studies have found little rise in intermediate goods trade as a share of total trade1. More than half of goods trade is however made up of intermediate inputs and trade in services is even more of an intermediate type with about three quarters of trade flows being comprised of intermediate services. Trade in intermediate goods and services thus deserves special attention from trade policymakers and so far few studies have investigated how it differs from trade in consumption goods or services.

2. An intermediate good can be defined as an input to the production process that has itself been produced and, unlike capital, is used up in production3. The difference between intermediate and capital goods lies in the latter entering as a fixed asset in the production process. Like any primary factor (such as labour, land, or natural resources) capital is used but not used up in the production process4. On the contrary, an intermediate good is used, often transformed, and incorporated in the final output. As an input, an intermediate good has itself been produced and is hence defined in contrast to a primary input. As an output, an intermediate good is used to produce other goods (or services) contrary to a final good which is consumed and can be referred to as a “consumption good”.

3. Intermediate inputs are not restricted to material goods; they can also consist of services. Thelatter can be potentially used as an input to any sector of the economy; that is for the production of the same, or other services, as well as manufacturing goods. Symmetrically, manufacturing goods can be potentially used to produce the same, or other manufacturing goods, as well as services.

4. An important question we can ask is how to identify inputs among all goods and services produced in an economy. Many types of goods can be easily distinguished as inputs, when their use excludes them from final consumption. Notable examples include chemical substances, construction materials, or business services. The exact same type of good used as an input to some production process can however be destined to consumption. For instance, oranges can be sold to households as a final good, as well as to a factory as an input for food preparation. Telecommunication services can be sold to individuals or to business services firms as an intermediate input for their output. The United Nations distinguish commodities in each basic heading on the basis of the main end-use (United Nations, 2007). It is however recognized that many commodities that are traded internationally may be put to a variety of uses. Other methodologies involve the use of input-output (I-O) tables to distinguish between intermediate and consumption goods.

5. The importance of intermediate goods and services in the economy and trade is associated with a number of developments in the last decades. Growth and increased sophistication of production has given birth to strategies involving fragmentation and reorganisation of firm’s activities, both in terms of ownership boundaries, as in terms of the location for production. In what follows, the international dimension of the exchange of intermediate goods and services is explored by clarifying terms and concepts as well as the links between trade in intermediate inputs and FDI.

From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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 From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

Trade networks relating to global value chains have evolved during the last 10 years. In 2004, the East Asian production network was still in its infancy. Most trade flows of parts and components concerned the USA and the European Union, with a number of other countries loosely connected with these two main hubs. As of 2014 trade of parts and components was much more developed. The current state is characterized not only by the prominent role of China, but also by a much more tightly integrated network with a much larger number of countries many of which have multiple connections to different hubs.

From Mapping Global Value Chains: Intermediate Goods Trade and Structural Change in the World Economy

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Key sources of Research:

 

TRADE IN INTERMEDIATE GOODS AND SERVICES

OECD Trade Policy Working Paper No. 93
by Sébastien Miroudot, Rainer Lanz and Alexandros Ragoussis

2009

Click to access 44056524.pdf

 

 

An Essay on Intra-Industry Trade in Intermediate Goods

Rosanna Pittiglio

2014

Click to access ME_2014051916452646.pdf

 

 

The Rise of International Supply Chains: Implications for Global Trade

Click to access GETR_Chapter1.2.pdf

 

 

 

Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing or Increasing
Importance of MNE Networks?

by
Jörn Kleinert
October 2000

Click to access kap1006.pdf

 

 

 

Imported Inputs and the Gains from Trade

Ananth Ramanarayanan
University of Western Ontario
September, 2014

https://www.economics.utoronto.ca/index.php/index/research/downloadSeminarPaper/49816

 

 

 

Key Statistics and Trends in International Trade 2015

Division on International Trade in Goods and Services, and Commodities
United Nations Conference on Trade and Development

Click to access ditctab2015d1_en.pdf

 

 

 

Key Statistics and Trends in International Trade 2016

Division on International Trade in Goods and Services, and Commodities
United Nations Conference on Trade and Development

Click to access ditctab2016d3_en.pdf

 

 

Integration of Trade and Disintegration of Production in the Global Economy

Robert C. Feenstra
Revised, April 1998

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.39.7178&rep=rep1&type=pdf

 

 

 

GLOBAL VALUE CHAINS: CHALLENGES, OPPORTUNITIES, AND IMPLICATIONS FOR POLICY

OECD, WTO and World Bank Group
Report prepared for submission to the G20 Trade Ministers Meeting Sydney, Australia, 19 July 2014

Click to access gvc_report_g20_july_2014.pdf

 

 

Trade in Value Added: Concepts, Estimation and Analysis

Marko Javorsek* and Ignacio Camacho

20015

Click to access AWP150Trade%20in%20Value%20Added.pdf

 

 

The Similarities and Differences among Three Major Inter-Country Input-Output Databases and their Implications for Trade in Value-Added Estimates

Lin Jones and Zhi Wang, United States International Trade Commission Li Xin, Beijing Normal University and Peking University Christophe Degain, World Trade Organization

December, 2014

Click to access ec201412b.pdf

 

 

Advanced Topics in Trade
Lecture 9 – Multinational Firms and Foreign Direct Investment

Heiwai Tang – SAIS
April 8, 2015

Click to access lecture_8_new.pdf

 

 

Efforts to Measure Trade in Value-Added and Map Global Value Chains: A Guide

Andrew Reamer

May 29, 2014

Click to access Reamer_ISA_Trade_in_Value_Added_05-29-2014.pdf

 

 

 

Global Value Chains for Value Added and Intermediate Goods in Asia

N Shrestha

20015

Click to access CESSA%20WP%202015-07.pdf

 

 

 

Global Value Chains: The New Reality of International Trade

Sherry Stephenson
December 2013

Click to access E15-GVCs-Stephenson-Final.pdf

 

 

Asia and Global Production Networks Implications for Trade, Incomes and Economic Vulnerability

Benno Ferrarini

David Hummels

20014

Click to access asia-and-global-production-networks.pdf

 

 

Participation of Developing Countries in Global Value Chains:
Implications for Trade and Trade-Related Policies

by
Przemyslaw Kowalski, Javier Lopez Gonzalez, Alexandros Ragoussis
and Cristian Ugarte

Click to access OECD_Trade_Policy_Papers_179.pdf

 

 

GLOBAL VALUE CHAINS: SURVEYING DRIVERS, MEASURES AND IMPACTS

João Amador
Sónia Cabral

2014

Click to access wp20143.pdf

 

World Intermediate goods Exports By Country and Region

2014

WITS World International Trade Statistics

http://wits.worldbank.org/CountryProfile/en/Country/WLD/Year/2014/TradeFlow/Export/Partner/all/Product/UNCTAD-SoP2

 

 

Trade in global value chains

2013

WTO

Click to access its13_highlights4_e.pdf

 

 

The Rise of Trade in Intermediates: Policy Implications

  • February 10, 2011

http://carnegieendowment.org/2011/02/10/rise-of-trade-in-intermediates-policy-implications-pub-42578

 

 

International trade with intermediate and final goods under economic crisis

Elżbieta Czarny, Warsaw School of Economics
Paweł Folfas, Warsaw School of Economics
Katarzyna Śledziewska, Warsaw University

Click to access 375.pdf

 

 

 

Trade in Intermediate Goods: Implications for Productivity and Welfare in Korea

Young Gui Kim

Hak K. PYO

Date Written: December 30, 2016

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2929118

 

 

Growing Together: Economic Ties between the United States and Mexico

BY CHRISTOPHER WILSON

Click to access growing_together_economic_ties_between_the_united_states_and_mexico.pdf

 

 

Mapping Global Value Chains: Intermediate Goods Trade and Structural Change in the World Economy

Timothy J. Sturgeon
Olga Memedovic

Click to access WP%2005%20Mapping%20Glocal%20Value%20Chains.pdf

 

India’s Intermediate Goods Trade in the Inter Regional Value Chain:
An examination based on Trade data and Input Output Analysis

Simi Thambi

Click to access 10_2%20fp.pdf

 

Global Supply Chains

Click to access pub4253_2.pdf

 

 

Global value chains in a changing world

Edited by Deborah K. Elms and Patrick Low

Click to access aid4tradeglobalvalue13_e.pdf

 

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

 

Foreign Direct Investments of Firms can have three objectives:

  • Vertical Integration (Control of Supply Chain)
  • Horizontal Integration (Seeking Market Share)
  • Diversification ( Market Seeking)

In this post, Focus is on Sourcing of Goods and Services in FDI and Outsourcing Decisions of Firms.  That means focusing on supply chain related issues.

 

From GLOBAL SOURCING

A fi…rm that chooses to keep the production of an intermediate input within its boundaries can produce it at home or in a foreign country. When it keeps it at home, it engages in standard vertical integration. And when it makes it abroad, it engages in foreign direct investment (FDI) and intra-…firm trade. Alternatively, a …firm may choose to outsource an input in the home country or in a foreign country. When it buys the input at home, it engages in domestic outsourcing. And when it buys it abroad, it engages in foreign outsourcing, or arm’s-length trade.

Intel Corporation provides an example of the FDI strategy; it assembles most of its microchips in wholly-owned subsidiaries in China, Costa Rica, Malaysia, and the Philippines. On the other hand, Nike provides an example of the arm’s-length import strategy; it subcontracts most of its manufacturing to independent producers in Thailand, Indonesia, Cambodia, and Vietnam.

 

 

Intermediate Goods – Make vs.  Buy Decisions of Firms

 

Outsourcing2

 

From Integration of Trade and Disintegration of Production in the Global Economy

 

The rising integration of world markets has brought with it a disintegration of the production process, in which manufacturing or services activities done abroad are combined with those performed at home. Companies are now finding it profitable to outsource increasing amounts of the production process, a process which can happen either domestically or abroad. This represents a breakdown in the vertically-integrated mode of production – the so-called “Fordist” production, exemplified by the automobile industry – on which American manufacturing was built. A number of prominent researchers have referred to the importance of the idea that production occurs internationally: Bhagwati and Dehejia (1994) call this “kaleidoscope comparative advantage,” as firms shift location quickly; Krugman (1996) uses the phrase “slicing the value chain”; Leamer (1996) prefers “delocalization;” while Antweiler and Trefler (1997) introduce “intra-mediate trade.” There is no single measure that captures the full range of these activities, but I shall compare several different measures of foreign outsourcing, and argue that they have all increased since the 1970s.

 

Types of Supply Chain Relations:

  • Intra-firm Trade of MNCs
  • Foreign Outsourcing
  • Domestic Outsourcing
  • Vertical Integration

 

Key Terms:

  • Production Sharing
  • Vertical Integration
  • Fragmentation of Production
  • Global Value Chains
  • Outsourcing
  • Delocalization
  • Intermediate Goods Trade
  • FDI
  • Domestic Outsourcing
  • Production Offshoring
  • Onshoring
  • Economic Globalization
  • Value Added Tasks
  • Intra-firm Trade
  • Multinational Firms
  • Vertical Specialization
  • Vertical Disintegration
  • Transaction Cost Economics
  • Trade in Value Added Tasks
  • Vertical Production Networks
  • Production Unbundling

 

Key Sources of Research:

PHYSICAL CAPITAL, KNOWLEDGE CAPITAL AND THE CHOICE BETWEEN FDI AND OUTSOURCING

Yongmin Chen
Ignatius J. Horstmann
James R. Markusen

Working Paper 14515
http://www.nber.org/papers/w14515

December 2008

Click to access w14515.pdf

 

 

OUTSOURCING VERSUS FDI IN INDUSTRY EQUILIBRIUM

Gene M.Grossman
Elhanan Helpman

Working Paper 9300
http://www.nber.org/papers/w9300

October 2002

Click to access w9300.pdf

 

 

GLOBAL SOURCING

Pol Antràs
Elhanan Helpman

Working Paper 10082
http://www.nber.org/papers/w10082

November 2003

Click to access w10082.pdf

 

 

OUTSOURCING IN A GLOBAL ECONOMY

Gene M. Grossman
Elhanan Helpman

Working Paper 8728
http://www.nber.org/papers/w8728

January 2002

Click to access w8728.pdf

 

 

 

Globalization, Outsourcing, and Wage Inequality

Robert C. Feenstra

Gordon H. Hanson

January 1996

Click to access w5424.pdf

 

Global Production Sharing and Rising Inequality:  A Survey of Trade and wages

Robert C. Feenstra

Gordon H. Hanson

2001

Click to access w8372.pdf

 

 

TRADE, FDI, AND THE ORGANIZATION OF FIRMS

Elhanan Helpman

Working Paper 12091
http://www.nber.org/papers/w12091

March 2006

Click to access w12091.pdf

 

 

 

HOME AND HOST COUNTRY EFFECTS OF FDI

Robert E. Lipsey

Working Paper 9293
http://www.nber.org/papers/w9293

October 2002

Click to access w9293.pdf

 

 

Chapter Title: Introduction to “Foreign Direct Investment”

Chapter Author: Kenneth A. Froot
Chapter URL: http://www.nber.org/chapters/c6531

1992

Click to access c6531.pdf

 

Chapter Title: Where Are the Multinationals Headed?

Chapter Author: Raymond Vernon
Chapter URL: http://www.nber.org/chapters/c6534

1992

Click to access c6534.pdf

 

 

 

Determinants of Foreign Direct Investment: A Sectoral and Institutional
Approach

James P. Walsh and Jiangyan Yu

2010

Click to access wp10187.pdf

 

 

 

DETERMINANTS OF FOREIGN DIRECT INVESTMENT

Bruce A. Blonigen
Jeremy Piger

Working Paper 16704
http://www.nber.org/papers/w16704

January 2011

Click to access w16704.pdf

 

 

 

Determinants of Foreign Direct Investment in Developing Countries: A Comparative Analysis

Khondoker Abdul Mottaleba
Kaliappa Kalirajanb

2010

Click to access WP2010_13.pdf

 

 

 

Determinants of Foreign Direct Investment

Bruce A. Blonigen

Jeremy Piger

 

2014

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535582

 

Trends and Determinants of Foreign Direct Investment in South Asia

World Bank

2013

Click to access ACS48460WP0P13055B00PUBLIC00A9RBBB1.pdf

 

 

Determinants of Foreign Direct Investment (FDI)

Yi Feng
Publication Date: Jun 2017

http://politics.oxfordre.com/view/10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637-e-559

http://politics.oxfordre.com/view/10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637-e-559?print=pdf

 

 

 

Foreign direct investment (FDI)

Click to access s4IP1_8736.pdf

 

 

 

Foreign Direct Investment and the Multinational Enterprise: An Introduction

Steven Brakman and Harry Garretsen

2008

Click to access 9780262026451_sch_0001.pdf

 

 

 

AN EXTENSIVE EXPLORATION OF THEORIES OF FOREIGN DIRECT INVESTMENT

Patricia Lindelwa Makoni

Click to access 10-22495_rgcv5i2c1art1.pdf

 

 

 

A selective review of foreign direct investment theories.

Nayak, Dinkar and Rahul N. Choudhury (2014).

ARTNeT Working Paper Series No. 143, March 2014,

Click to access 782793517.pdf

 

 

Integration of Trade and Disintegration of Production in the Global Economy

Robert C. Feenstra

Revised, April 1998

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.39.7178&rep=rep1&type=pdf

 

 

 

The Distributional Effects of International Fragmentation,

Kohler, Wilhelm (2002)

Working Paper, Department of Economics, Johannes Kepler University of Linz, No. 0201

 

Click to access wp0201.pdf

 

 

 

International Fragmentation of Production and the Intrafirm Trade of U.S. Multinational Companies

Maria Borga and William J. Zeile
WP2004-02
January 22, 2004

Paper presented at:

The National Bureau of Economic Research/Conference on Research in Income and Wealth meeting on Firm-level Data, Trade, and Foreign Direct Investment, Cambridge, Massachusetts
August 7-8, 2003,
and
The OECD Committee on Industry and Business Environment/Working Party on Statistics
Session on Globalization,
Paris, France
November 3-4, 2003.

Click to access intrafirmtradejanuary04.pdf

 

 

The governance of global value chains

Gary Gereffi
John Humphrey
Timothy Sturgeon
2005

Click to access GVC_Governance.pdf

 

The economic consequences of increased protectionism

Riksbank of Sweden

2017

Click to access ppr_fordjupning_3_170427_eng.pdf

 

 

 

Deep integration and production networks: an empirical analysis

Gianluca Orefice
Nadia Rocha
World Trade Organization
Manuscript date: July 2011

Click to access ersd201111_e.pdf

 

 

 

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

Timothy J. Sturgeon and Gary Gereffi

Click to access diaeiia200910a1_en.pdf

 

 

 

Topics in International Trade

Reading list

Click to access readings-topics09.pdf

 

 

 

FOREIGN DIRECT INVESTMENT, TRADE, AND GLOBAL PRODUCTION NETWORKS
IN ASIA AND EUROPE

GPN Working Paper 2
October 2002

Click to access gpnwp2.pdf

 

 

Why has world trade grown faster than world output?

Mark Dean

Maria Sebastia-Barriel

Click to access Other_Paper_1.pdf

 

 

Vertical Specialization, Global Value Chains and the changing Geography of Trade: the Portuguese Rubber and Plastics Industry Case

João Carlos Lopes and Ana Santos

Click to access wp122015.pdf

 

 

The changing structure of trade linked to global production systems: What are the policy implications?

William MILBERG

 

Click to access Changing-Structure-of-Trade-Linked-to-Global-Production-Systems.pdf

 

 

WHO PRODUCES FOR WHOM IN THE WORLD ECONOMY?

Guillaume Daudin (Lille-I (EQUIPPE) & Sciences Po (OFCE), Christine Rifflart, Danielle
Schweisguth (Sciences Po (OFCE))1

This version: July 2009

Click to access WP2009-18.pdf

 

THE NATURE AND GROWTH OF VERTICAL SPECIALIZATION IN WORLD TRADE

David Hummels
Jun Ishii
Kei-Mu Yi
March 1999

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.475.3874&rep=rep1&type=pdf

 

Click to access sr72.pdf

 

 

Expansion Strategies of U.S. Multinational Firms

Gordon H. Hanson, Raymond J. Mataloni, and Matthew J. Slaughter

WP2001-01
May 10-11, 2001

Paper presented at:

The Brookings Trade Forum 2001, Washington, D.C.
May 10-11, 2001

Click to access HMS1.PDF

 

 

INTERNATIONAL JOINT VENTURES AND THE BOUNDARIES OF THE FIRM

Mihir A. Desai C. Fritz Foley James R. Hines Jr.

Working Paper 9115 http://www.nber.org/papers/w9115
August 2002

 

Click to access 000000005694_01.PDF

 

 

 

The Globalization of Production

Gordon H. Hanson

 

http://www.nber.org/reporter/spring01/hanson.html

 

 

 

The Politics of Transnational Production Systems A Political Economy Perspective

Helge Hveem
Department of Political Science
University of Oslo

Click to access hveem.pdf

 

 The Architecture of Globalization: A Network Approach to International Economic Integration.

Raja Kali and Javier Reyes

Second Revision: October 9, 2006

Click to access TradeNetwork.pdf

 

 

 

 

 

Paris School of Economics – Summer School on Trade

2017

Click to access trade-sumschool-pse-2017.pdf

 

 

Spain in the global value chains

2017

Click to access beaa1703-art20e.pdf

 

 

 An Outsourcing Bibliography

Foreign Policy magazine

2004

An outsourcing bibliography

 

 

 

OFFSHORING, FOREIGN DIRECT INVESTMENT, AND THE STRUCTURE OF U.S. TRADE

2006

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.564.6639&rep=rep1&type=pdf

 

 

 A Survey of Literature on Research of Intra-firm Trade

WANG Li, SHEN Rui

Click to access 2013jrgjgc311b13.pdf

 

 

Global Value Chains

OECD, WTO and World Bank Group
Report prepared for submission to the G20 Trade Ministers Meeting Sydney, Australia, 19 July 2014

Click to access gvc_report_g20_july_2014.pdf

 

 

 

TRADE IN INTERMEDIATE GOODS AND SERVICES

OECD Trade Policy Working Paper No. 93
by Sébastien Miroudot, Rainer Lanz and Alexandros Ragoussis

Click to access 44056524.pdf

 

 

The Boundaries of Multinational Enterprises and the Theory of International Trade

James R. Markusen

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.551.4665&rep=rep1&type=pdf

 

 

Incomplete Contracts and the Boundaries of the Multinational Firm

Nathan Nunn

Daniel Trefler

June 2008

Click to access NunnTreflerPaper.pdf

 

 

The Theory of the Firm goes Global

Dalia Marin

2008

Click to access 370.pdf

Slowdown in Global Investment (FDI) Flows

Slowdown in Global Investment (FDI) Flows

 

 

From Determinants of Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is a major component of globalization, together with international trade. Its operation is made possible by movements of factors across countries, in particular, capital. By definition, FDI involves long-term cross-country commitments. According to International Monetary Fund (IMF), FDI entails the establishment of a “lasting interest” by a resident entity of one economy in an enterprise located in another economy (International Monetary Fund, 1993). Lasting interest implies a long-term relationship between the foreign investor and the overseas enterprise where the said investor holds significant influence over management. The IMF defines a direct investment enterprise as one in which a foreign investor holds at least 10% of the ordinary shares or voting power (International Monetary Fund, 1993). The Organization for Economic Cooperation and Development (OECD, 1996, p. 10) classifies enterprises of direct foreign investors into three groups: subsidiaries, in which a nonresident investor holds more than 50% of the ownership; associates, in which a nonresident investor’s shares range between 10 and 50%; and branches, which are unincorporated enterprises owned by a nonresident investor, wholly or jointly. Obviously, such definitions and the resultant measurements leave ambiguities and imprecisions. However, they do help maintain relative consistency in cross-country comparisons.

From 1995 to 2015, the world saw a dramatic increase in FDI. The FDI inflows in 2015 were 8.6 times those in 1995, an increase from about 0.2 trillion USD in 1995 to about 1.8 trillion USD in 2015. While FDI inflows to developed countries increased 8.6-fold, those to developing countries and transitional economies increased 23 times. In 1995, FDI inflows to developing and transitional economies were 17% of the world total, and in 2015 they accounted for 45%. FDI flows to OECD countries peaked in 2007, at about 1.3 trillion USD. Between 2013 and 2014, for the first time, developing countries received more FDI than developed countries (UNCTAD, 2016), though the developed world recaptured the position as the largest FDI recipient in 2015 (see Figure 1).

There is an ever-growing body of literature on FDI. As Markusen (2008) demonstrated, three strands of relevant literature exist:

  • the international business approach that is oriented toward the rationale of individual firms,
  • the macroeconomic approach that focuses on aggregate flows of FDI without making a distinction between direct and portfolio investments,
  • and the international trade theory approach, which increasingly moves closer to the international business approach, combining firm-level FDI analysis with aggregate analysis of capital flows.

 

 

From UNCTAD World Investment Report 2017

FDI2

 

 

Key Sources of Research:

 

2017 AT Kearney FDI Confidence Index

http://www.iberglobal.com/files/2017/fdi_index_atkearney.pdf

 

UNCTAD World Investment Report 2017

http://unctad.org/en/PublicationsLibrary/wir2017_en.pdf

 

 

Recent Developments in Trade and Investment

Pierre Sauvé
Trade and Competitiveness Global Practice
World Bank Group
MIKTA Workshop on Trade and Investment
Session 2
Geneva, 20 March 2017

https://www.wto.org/english/forums_e/business_e/pierre_sauve_world_bank.pdf

 

 

OECD FDI Data

https://data.oecd.org/fdi/fdi-flows.htm

 

 

UNCTAD FDI Data

http://unctad.org/en/Pages/DIAE/FDI%20Statistics/Interactive-database.aspx

 

 

GLOBAL FDI FLOWS SLIP IN 2016, MODEST RECOVERY EXPECTED IN 2017

http://unctad.org/en/PublicationsLibrary/webdiaeia2017d1_en.pdf

 

 

Cross border mergers make India favoured FDI route: UNCTAD

June 2017

 

http://www.deccanchronicle.com/business/economy/080617/cross-border-mergers-make-india-favoured-fdi-route-unctad.html

 

 

Cross-border M&As push global FDI flows to $1.76 trillion

June 2016

http://economictimes.indiatimes.com/news/international/business/cross-border-mas-push-global-fdi-flows-to-1-76-trillion/articleshow/52860326.cms

 

 

OECD Bilateral FDI Data

http://stats.oecd.org/index.aspx?DataSetCode=FDI_FLOW_PARTNER

 

 

UNCTAD Bilateral FDI Data

http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx

 

 

World Bank FDI Database

https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD

 

 

FDI Markets

https://www.fdimarkets.com

 

 

FDI Reports

http://www.fdireports.com/home/index.cfm?CFID=16605395&CFTOKEN=534deb8f9bfff240-CA8D9CBD-9042-6C79-7D3F0DD68E9B6616&jsessionid=2030aa76f30310567d2372163935674e554c

 

 

Determinants of Foreign Direct Investment (FDI)

Yi Feng

Online Publication Date: Jun 2017

http://politics.oxfordre.com/view/10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637-e-559?print=pdf

Economics of Digital Globalization and Information Data Flows

Economics of Digital Globalization and Information Data Flows

 

Please see this link below for changes in global data flows between 2005 and 2014.

Source: McKinsey & Company.

McKinsey Global Flows of Data

 

digitalglobal

 

 

People and Businesses are using internet and other data and communications technologies in variety of ways.  Some are listed below.

  • e-commerce
  • Social networking
  • Digital media
  • Blogging
  • Online eduction
  • Online entertainment
  • Business Communications
  • Online Capital
  • Online Organizing
  • Online Markets (Amazon, Ebay, Alibaba)

 

Governments and Trade organizations are catching up to these trends. Several research reports have been published recently.  Trade agreements are being negotiated which include means to reduce barriers to digital trade.

 

From DIGITAL GLOBALIZATION: THE NEW ERA OF GLOBAL FLOWS

Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information.

Remarkably, digital flows—which were practically nonexistent just 15 years ago—now exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well.

The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

Trade was once largely confined to advanced economies and their large multinational companies. Today, a more digital form of globalization has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten. Approximately 12 percent of the global goods trade is conducted via international e-commerce. Even the smallest enterprises can be born global: 86 percent of tech-based start-ups surveyed by MGI report some type of cross-border activity. Today, even the smallest firms can compete with the largest multinationals.

Individuals are using global digital platforms to learn, find work, showcase their talent, and build personal networks. Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce. Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labor market.

In this increasingly digital era of globalization, large companies can manage their international operations in a leaner, more efficient ways. Using digital platforms and tools, they can sell in fast-growing markets while keeping virtual teams connected in real time. This is a moment for companies to rethink their organizational structures, products, assets, and competitors.

Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.

Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index—which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data—finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.

Lagging countries are closing the gaps with the leaders at a very slow pace, and their limited participation has had a real cost to the world economy. If the rest of the world had increased its participation in global flows at the same rate as the top quartile over the past decade, world GDP would be $10 trillion, or 13 percent, higher today. For countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore.

 

 

From Why globalization isn’t it in retreat, it’s gone digital

A hand is silhouetted in front of a computer screen in this picture illustration taken in Berlin May 21, 2013. The Financial Times’ website and Twitter feeds were hacked May 17, 2013, renewing questions about whether the popular social media service has done enough to tighten security as cyber-attacks on the news media intensify. The attack is the latest in which hackers commandeered the Twitter account of a prominent news organization to push their agenda. Twitter’s 200 million users worldwide send out more than 400 million tweets a day, making it a potent distributor of news.

Around the world, countries are rethinking the terms of engagement in global trade. This is not all bad; in fact, acknowledgement of globalization’s disruptive effects on millions of advanced-economy workers is long overdue. But new trade policies must be based on a clear-eyed understanding of how globalization is evolving, not on a backward-looking vision based on the last 30 years.

Globalization has done the world a lot of good. Research from the McKinsey Global Institute shows that, thanks to global flows of goods, services, finance, data, and people, world GDP is more than 10% higher – some $7.8 trillion in 2014 alone – than it would have been had economies remained closed.

More interconnected countries capture the largest share of this added value. For example, the United States, which ranks third among 195 countries on MGI’s Connectedness Index, has done rather well. Emerging-market economies have also reaped major gains, using export-oriented industrialization as a springboard for rapid growth.

Yet, even as globalization has narrowed inequality among countries, it has aggravated income inequality within them. From 1998 to 2008, the middle class in advanced economies experienced no income growth, while incomes soared by nearly 70% for those at the top of the global income distribution. Top earners in the US, accounting for half of the global top 1%, reaped a significant share of globalization’s benefits.

To be sure, this isn’t all, or even mostly, a result of globalization. The main culprit is technological change that automates routine manual and cognitive tasks, while increasing demand (and wages) for highly skilled workers. But import competition and labor arbitrage from emerging economies have also played a role. Perhaps more important, they have proved more salient targets of voters’ fear and resentment.

Indeed, in the industries and regions hit hardest by import competition, years of simmering discontent have now boiled over, fueling support for populists promising to roll back globalization. But, as the advanced economies reformulate trade policy, it is critical that they understand that globalization was already undergoing a major structural transformation.

Since the global financial crisis, cross-border capital flows have plummeted, with banks pulling back in response to new regulation. From 1990 to 2007, global trade grew twice as fast as global GDP; since 2010, GDP growth has outpaced that of trade.

Both cyclical and secular forces are behind the trade slowdown. Investment has been anemic for years. China’s growth has slowed – a secular trend that is unlikely to be reversed. And the expansion of global supply chains seems to have reached the frontier of efficiency. In short, slower global trade is likely to be the new normal.

None of this is to say that globalization is in retreat. Rather, it is becoming a more digital phenomenon. Just 15 years ago, cross-border digital flows were almost non-existent; today, they have a larger impact on global economic growth than traditional flows of traded goods.

The volume of cross-border data flows has soared 45-fold since 2005, and is expected to grow another nine-fold over the next five years. Users worldwide can stream Beyoncé’s latest single immediately upon its release. A manufacturer in South Carolina can use the e-commerce platform Alibaba to buy components from a Chinese supplier. A young girl in Kenya can learn math through Khan Academy. Eighty percent of students taking Coursera’s online courses live outside the US.

This new form of digital globalization is more knowledge-intensive than capital- or labor-intensive. It requires broadband connections, rather than shipping lanes. It reduces barriers to entry, strengthens competition, and changes the rules governing how business is done.

Consider export activities, which once seemed out of reach for small businesses lacking the resources to scout out international prospects or navigate cross-border paperwork. Now, digital platforms like Alibaba and Amazon enable even small-scale entrepreneurs to connect directly with customers and suppliers around the world, transforming themselves into “micro multinationals.” Facebook estimates that 50 million small businesses are on its platform, up from 25 million in 2013; 30% of these companies’ Facebook fans, on average, are from other countries.

While digital technologies open the door for small companies and individuals to participate in the global economy, there is no guarantee that sufficient numbers will walk through it. That will require policies that help them take advantage of new global market opportunities.

The US has pulled out of the Trans-Pacific Partnership (TPP) deal, but many of the issues it addressed still require global rules. Data localization requirements and protectionism are on the rise, and data privacy and cyber-security are pressing concerns. In the absence of the TPP, it will be critical to find some other vehicle for establishing new principles for digital trade in the twenty-first century, with a greater emphasis on intellectual property protection, cross-border data flows, and trade in services.

At the same time, advanced economies must help workers acquire the skills needed to fill high-quality jobs in the digital economy. Lifelong learning cannot just be a slogan; it must become a reality. Mid-career retraining must be made available not only to those who have lost their jobs to foreign competition, but also to those facing disruption from the continuing march of automation. Training programs should be able to impart new skills in a matter of months, not years, and they should be complemented by programs that support workers’ incomes during retraining, and that help them relocate for more productive work.

Most of the advanced economies, including the US, have not adequately responded to the needs of the communities and individuals left behind by globalization. Addressing these needs is now of paramount importance. Effective responses will require policies that help people adapt to the present and take advantage of future opportunities in the next phase of digital globalization.

 

From The ascendancy of international data flows

We compiled data for more than 150 countries for 20 years regarding six types of cross-border flows: physical flows of goods and services, FDI flows, financial flows, labour migration flows, and data flows measured in bits. As flows are most likely correlated to each other, we first resorted to a principal component analysis of flows and found that the largest factor accounted for up to 60% of the variance among flows, with all flows being positively correlated to the factor. Among the factors, this primary factor was also the only one to be statistically (and, as expected, positively) associated with a country’s economic growth.

Estimating a pooled cross-section, time series co-integration model of country GDP growth, we find that, together, global flows of goods, services, finance, people, and data have raised world GDP by at least 10% in the past decade, adding US$8 trillion of GDP by 2015. More crucially, and in part driven by the material growth in cross-border data bits internationally, the value of data flows has nearly matched the value of global trade in physical goods. By 2014, cross-border data flows accounted for $2.3 trillion of this value, or roughly 3.5% of total world GDP.

This estimate is only a first benchmark which will require further verification. But it underscores the importance of global data flows for economies at large. It also highlights new elements of consideration for economists, for policymakers, and for business. Given the significant contribution to GDP, governments must address pending issues such as free flows of data, cybersecurity, and privacy. They must also harness flows better through international standardisation of single payment systems, standardisation of internet of things protocols, coordination of tax issues, and integrated logistics. On the business side, the world’s biggest digital platforms – from e-commerce marketplaces to social media network – have become global in a matter of a few years, but though their concentration may be a concern, they have also amassed hundreds of millions of companies that can benefit from improved export opportunities and achieve major productivity gains.

Furthermore, the international flow of information facilitated by these digital technologies is a powerful driver of new performance for global firms, for example in optimising distributed R&D and innovation. Ultimately, everyone will need to go with the flow.

 

Key Terms:

 

  • GATS (General Agreement on Trade in Services)
  • ICT (information and communications technology)
  • IPR (intellectual property rights)
  • ITA (International Technology Agreement)
  • NTIA (National Telecommunications and Information Administration)
  • OECD (Organization for Economic Co-operation and Development)
  • TPP (Trans-Pacific Partnership)
  • TTIP (Transatlantic Trade and Investment Partnership)
  • TiSA (Trade in Services Agreement)
  • USITC (United States International Trade Commission)
  • USTR (United States Trade Representative)
  • WTO (World Trade Organization)
  • Digital Trade

 

 

Key Sources of Research:

 

DIGITAL GLOBALIZATION: THE NEW ERA OF GLOBAL FLOWS

2016

MGI

http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows

 

 

Global flows in a digital age

How trade, finance, people, and data connect the world economy

By James Manyika, Jacques Bughin, Susan Lund, Olivia Nottebohm, David Poulter, Sebastian Jauch, and Sree Ramaswamy

McKinsey 2014

http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/global-flows-in-a-digital-age

 

 

Harnessing the power of shifting global flows

By Jacques Bughin, Susan Lund, and James Manyika

McKinsey

2015

http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/harnessing-the-power-of-shifting-global-flows

 

 

Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity

By Matthieu Pélissié du Rausas, James Manyika, Eric Hazan, Jacques Bughin, Michael Chui, Rémi Said

McKinsey 2011

http://www.mckinsey.com/industries/high-tech/our-insights/internet-matters

 

 

Online and Upcoming:  Internet’s Impact on India

McKinsey 2012

Click to access Internets%20impact%20on%20India.pdf

 

 

Online and upcoming: The Internet’s impact on aspiring countries

January 2012

Olivia Nottebohm James Manyika Jacques Bughin Michael Chui Abdur-Rahim Syed

Click to access Internet.pdf

 

 

The Importance of The Internet and Transatlantic data flows for U.S. and EU Trade and Investment

Joshua p. meltzer

2014

Brookings

Click to access internet-transatlantic-data-flows-version-2.pdf

 

 

ASEF OUTLOOK REPORT 2016/2017

 

Asia Europe Foundation

Click to access 1.%20Measuring%20Connectivity.pdf

Click to access ASEF%20Outlook%20Report%202016-2017%20Vol2.pdf

Click to access ASEF%20Outlook%20Report%202016-2017%20Vol1.pdf

 

 

Mega-trends 2015 Making sense of a world in motion

EY

Click to access ey-megatrends-report-2015.pdf

Click to access ey-making-sense-of-a-world-in-motion.pdf

 

 

Cross-Border Data Flows, Digital Innovation, and Economic Growth

Robert Pepper John Garrity Connie LaSalle

2016

WEF

 

Click to access WEF_GITR_Chapter1.2_2016.pdf

Click to access PDF_Notas_Prensa_Int_Gen_07_Jul_2016.pdf

 

 

Business Without Borders: The Importance of Cross-Border Data Transfers to Global Prosperity

US Chamber of Commerce

2014

Click to access Business_without_Borders.pdf

Click to access 021384_BusinessWOBorders_final.pdf

 

 

The Digital Revolution in Banking

Gail Kelly

Group of Thirty

 

Click to access OP89.pdf

 

 

Digital Trade and U.S. Trade Policy

Rachel F. Fefer

Shayerah Ilias Akhtar

Wayne M. Morrison

US Congress Research

January 13, 2017

Click to access R44565.pdf

 

 

Measuring the Value of Cross-Border Data Flows

US Deptt of Commerce

2016

Click to access measuring_cross_border_data_flows.pdf

 

Transatlantic Digital Economy and Data Protection: State-of-Play and Future Implications for the EU’s External Policies

EU Parliament

 

Click to access EXPO_STU(2016)535006_EN.pdf

 

 

Why globalization isn’t it in retreat, it’s gone digital

WEF

https://www.weforum.org/agenda/2017/02/why-globalization-isnt-it-in-retreat-its-gone-digital

 

 

The ascendancy of international data flows

Jacques Bughin, Susan Lund

09 January 2017

http://voxeu.org/article/ascendancy-international-data-flows

 

 

DIGITAL TRADE AND THE TPP HOW ASIA-PACIFIC BENEFITS

 

Click to access digital+trade+and+the+TPP_v2_DIGITAL.pdf

 

 

The Digital Trade Imbalance and Its Implications for Internet Governance

Susan Ariel Aaronson

2016

 

Click to access gcig_no25_web_0.pdf

Click to access AaronsonIIEPWP2016-7.pdf

 

 

Solutions to the digital trade imbalance

Susan Ariel Aaronson

07 March 2016

http://voxeu.org/article/solutions-digital-trade-imbalance

http://www.worldcommercereview.com/publications/article_pdf/1049

 

 

Digital Trade in the U.S. and Global Economies, Part 2

USITC

2014

 

Click to access pub4485.pdf

 

 

Digital Trade in the U.S. and Global Economies, Part 1

USITC

2013

Click to access pub4415.pdf

 

 

Enter the Data Economy : EU Policies for a Thriving Data Ecosystem

European Commission

2017

 

Click to access strategic_note_issue_21.pdf

 

 

Data, Trade and Growth

BY DR. MICHAEL MANDEL

2014

Click to access 2014.04-Mandel_Data-Trade-and-Growth.pdf

 

 

Bridging the Data Gap How Digital Innovation Can Drive Growth and Create Jobs

By Paul Hofheinz and Michael Mandel

2014

 

Click to access LISBON_COUNCIL_PPI_Bridging_the_Data_Gap2.pdf

 

 

Measuring the Economic Value of Cross-Border Data Flows

April 22, 2016

Jessica R. Nicholson

UNCTAD

 

Click to access dtl_eweek2016_JNicholson_en.pdf

 

 

Trends in Digitally-Enabled Trade in Services

by Maria Borga and Jennifer Koncz-Bruner

 

Click to access trends_in_digitally_enabled_services.pdf

 

 

Digital Economy and Cross-Border Trade: The Value of Digitally-Deliverable Services

Jessica R. Nicholson and Ryan Noonan

2014

U.S. Department of Commerce / Economics and Statistics Administration

 

Click to access digitaleconomyandtrade2014-1-27final.pdf

 

 

World Development Report 2016: Digital Dividends

World Bank 2016

http://www.worldbank.org/en/publication/wdr2016

 

 

Cross-Border Data Flows Enable Growth in All Industries

BY DANIEL CASTRO AND ALAN MCQUINN

| FEBRUARY 2015

 

http://www2.itif.org/2015-cross-border-data-flows.pdf?_ga=1.64526831.1959464330.1454009762

 

 

Addressing Barriers to Digital Trade

Usman Ahmed and Grant Aldonas

WEF

E15 Initiative

December 2015

http://e15initiative.org/publications/addressing-barriers-to-digital-trade/

 

 

The Internet Economy in the G-20

The $4.2 Trillion Growth Opportunity

 

Click to access file100409.pdf

Development of Global Trade and Production Accounts: UN SEIGA Initiative

Development of Global Trade and Production Accounts: UN SEIGA Initiative

 

UNSD is developing a handbook on

System of Extended International and Global Accounts (SEIGA)

Statistics to guide policy making has lagged behind dramatic changes in interconnectedness among nations.

  • Financial Globalization
  • Trade Globalization
  • Climate and Environmental Globalization
  • Economic Integration
  • Digital Globalization – Data and Information Flows
  • People Movements Globalization

Efforts are underway to correct data and statistics measurement and collection.

  • OECD/WTO Trade in Value Added
  • EU/EUROSTAT Multi Country Input-Output Tables
  • UN SEEA
  • UN SEIGA
  • UNECE Global Production
  • EUROSTAT FIGARO
  • EUROSTAT IGA

 

From 2014 International Conference on Measurement of Trade and Economic Globalization

Measurement of International Trade and Economic Globalization

Concept Note

In recent years, concerns were raised about the shortcomings of the existing official trade statistics for the purpose of reflecting bilateral economic relations. The high level of import content in exports makes gross bilateral trade statistics unsuitable for bilateral trade negotiations. Trade analysis requires new measures which better reflect the level of interdependencies among countries engaged in global value chains (GVCs). In order to understand the true nature of trade relationships, we need to know what each country along a global value chain contributes to the value of a final product. We also need to know how that contribution is linked to those of other suppliers in other countries coming before and after along the chain, and how much employment and income is generated through this value addition.

The statistical community responded to these concerns through a number of initiatives, such as the UN/Eurostat/WTO Global Forum on Trade Statistics in 2011, the OECD-WTO initiative on Trade in Value-Added launched in 2012, and the 2013 Eurostat report on Global Value Chains. An official response was delivered by bringing the measurement of international trade and economic globalization to the agenda of the UN Statistical Commission in 20131 and again in 20142. The corresponding decisions of the Commission stress the need for a measurement framework and a mechanism for coordination. Specifically, in Decision 44/1063 of its session in 2013, the Commission recognized the need for an overarching measurement framework for international trade and economic globalization, taking into account the existing frameworks and guidelines of the System of National Accounts, Balance of Payments, and the Guidelines on Integrated Economic Statistics, as well as the research and studies done by Eurostat, the OECD, the IMF and various working groups. The Commission also recognized the need for an appropriate mechanism for coordination of the work in this field, ensuring that the functions of the existing expert groups, working groups and task forces are accounted for at the international and regional levels. In the same decision, the Commission agreed to the creation of a “friends of the chair” (FOC) group tasked with preparing a concept paper on the scope and content of the framework, and on the appropriate mechanism for coordination of the work in this area.

The global economy is increasingly structured around GVCs that account for a rising share of international trade, global GDP and employment. GVCs link firms, workers and consumers around the world and often provide a stepping stone for firms and workers in developing countries to integrate into the global economy. A GVC describes the full range of activities that firms and workers perform to bring a product from its conception to end use. This includes activities such as design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. In the context of globalization, the activities that constitute a value chain have generally been carried out in inter-firm networks on a global scale. The dependency structures of the firms in the GVC networks are of crucial importance in order to measure where income, knowledge and employment are generated, and to understand potential risk and vulnerabilities in case of a future financial crisis. Within this changed economic landscape, more complex measures of trade and production are necessary both on micro-and macro-economic level.

In other words, national economies relate to one another in a number of ways be it through trade in goods, trade in services, tourism, foreign direct investment, establishment of foreign affiliates, transfer of knowledge, creation of jobs, redistribution of income, migrant workers, emissions of CO2 or in other ways. A comprehensive way of charting those interdependencies is through a global Supply and Use table (SUT), in which countries connect through imports and exports of goods and services into and out of specific industries. Ideally, the global SUT contains for each international flow an export of a product from an industry of one country into an industry (or into final consumption) of another country, as the corresponding and matching import. In principle, only one global SUT should exist to be used by all national and international agencies for the analysis of trade and globalization. Besides the implicitly mentioned matching of bilateral trade flows (both for goods and services), further refinement may be necessary regarding the use of inputs by type of enterprise for either the domestic or the international market, including the special cases of multi-national enterprises and their foreign affiliates, goods for processing (manufacturing services) and re-exports. Further details on such global SUT were described in a recent paper of the OECD.

Compiling a global SUT requires a very close alignment and harmonization of national SUTs, price statistics and trade statistics. To achieve this in the short term, some practical decisions need to be taken and agreed upon internationally for the creation of a symmetrical and fully balanced bilateral trade matrix at the global level, which would have buy-in, cooperation and endorsement of all concerned countries. This matrix would be built strictly for the purpose of compiling an internationally recognized and accepted SUT. In the longer term, the existing recommendations for international trade statistics would need to be reviewed with the purpose of making them more symmetrical in terms of the reporting of exports and imports, and thus more suitable for the compilation of a global SUT.

A System of International Accounts.

The implications of building a global SUT [for the purpose of deriving, for instance, indicators for Trade in Value Added or Trade in Jobs] are farther reaching than just addressing asymmetries in trade and heterogeneity in firms. The underlying concepts and definitions as basis for measurement of these international statistics would need to be reviewed as well. In terms of the System of National Accounts, the Rest of the World Account would need to be more explicitly defined, especially since a global SUT implies a perfect alignment of international flows, and some international recommendations regarding heterogeneity of firms (where economically relevant). In the longer term, this set of new concepts and definitions could form a System of International Accounts, as the measurement framework for international trade and economic globalization.

 

From The relevance of multi-country input-output tables in measuring emissions trade balance of countries: the case of Spain

Background and statistical context

The latest meeting of the Group of Experts on National Accounts of the United Nations Economic Commission for Europe (UNECE, 7-9 July 2015), was devoted to data collection and compilation methods in respect to global production activities. It was jointly organized with Eurostat and the Organization for Economic Co-operation and Development (OECD). The meeting was attended by representatives from more than thirty countries worldwide and representatives from the European Commission (EC), International Monetary Fund (IMF), OECD, the United Nations Conference on Trade and Development (UNCTAD), United Nations Statistics Division (UNSD) and World Trade Organization (WTO), among others.

According to the experts at this UNECE meeting, in order to measure global production and global value chains it is no longer sufficient to look only at what a firm does, but to also to consider how the firm does its activities and with whom. For instance, linking business statistics and trade statistics on a micro level should provide new dimensions to the data as long as new balancing challenges at the macro level data (e.g. national accounts). Indeed, statisticians have not always been able to keep up to date with business practices and must find ways to be forward looking and provide the information that meets future policy needs. Traditional measures of trade in goods and services have to be progressively supplemented with information on income and financial flows. Foreign direct investment statistics (FDI) should be further developed and complemented with foreign affiliate statistics (FATS) in order to improve their clarity, usefulness and coverage, and to provide better insights into global value chains.

In this respect, the UNECE Report emanating from this meeting supported new global initiatives, such as the extensions to Trade in Value Added and Global Input- Output Tables (OECD), the construction of the European Multi-Country Input-Output Framework (EC and Eurostat) as well as the elaboration of a new Handbook on a System of Extended International and Global Accounts (UNSD).

Hence, there is no doubt that globalization is currently affecting the way statisticians are measuring national production of countries and international statistical organizations are indeed very busy working on it in order to meet the policy needs at the worldwide level. As national accounts and input-output tables became an integral part of the production activities of national statistical institutes in the past, very soon multi-country and international input-output tables will become a crucial statistical tool to measure global production, trade in value added, environmental footprints and/or employment effects of export activities with official statistics (e.g. carbon footprint estimated by Eurostat).

Bearing all this in mind, we would like to illustrate in this paper the usefulness of global/world input-output tables in measuring the greenhouse gas footprints of individual countries and its external emission trade balance with respect to others. Hopefully, these types of indicators will soon become regularly produced in the future by statisticians using official global input-output tables instead of using other databases produced as one-off projects (e.g. World Input-Output Database, WIOD – http://www.wiod.org).

 

From 2016 Meeting of the UN Expert Group on International Trade and Globalization Statistics

Concept Note

Following Decision 46/107 taken by the Statistical Commission at its 46th session in 2015, a handbook on a system of extended international and global accounts will be prepared, which will serve as the measurement framework for international trade and economic globalization. This handbook will build on existing work in this area, in particular by the UNECE, the OECD and Eurostat, and address issues of micro-data linking of business and trade statistics, as well as address the integration of economic, environmental and social dimensions of trade and globalization as an extension of the System of National Accounts 2008 (2008 SNA) and the System of Environmental-Economic Accounting 2012 (SEEA 2012).

The first meeting of the expert group is scheduled to take place on 26-28 January 2016 at the UN headquarters in New York. The Handbook is of course the main topic of discussion at this meeting.

The Handbook will refer to and build upon the work of the Friend of the Chair group, which concluded that improved statistics are necessary and should bring a better understanding of the role of the external sector in an economy, the openness of its domestic and foreign markets and the impact of openness on social, economic and environmental upgrading, including the level and quality of employment. More and better data is needed in developed, emerging and developing economies alike: interconnected economies require interconnected statistics and all economies can benefit from a better understanding of these relationships.

As stated in the 2015 FOC report, policymakers and trade negotiators need to understand the cross-country benefits and risks by being able to “look through” the global value chains and see the specific contributions other countries are making to production networks involving their domestic firms. The GVC approach was suggested by the international statistical community as the preferred way of measuring the interconnectedness of economies with respect to jobs, skills, international competitiveness and the creation of value added, income and jobs. The activities involved in GVCs can be grouped into broad stages of production from upstream research and design, through manufacturing, to downstream logistics, marketing and sales. In a GVC, many of the tasks are “offshored”, either through an enterprise’s own affiliates located in foreign countries or through independent contractors. It is this newly emerged international economic integration of production and trade and their governance that has to be better measured and analyzed, including in respect of the benefits, costs and risks associated with engaging in GVCs.

The Handbook can build upon the recommendations and guidelines provided in UNECE’s Guide to Measuring Global Production. This Guide was released at the end of 2015 and provides valuable insights in the functioning and measurement of global value chains. The Guide provides a typology of global production arrangements and describes the principles of ownership inside a multi-national enterprise, as well as ownership of intellectual property products inside global production. In addition, data source and compilation challenges are addressed with special attention to large and complex enterprises.

The Handbook can also build on work presented at the International Conference on Measurement of Trade and Economic Globalization in Mexico in 2014. For example, it could use the value chain reference model to establish alternative aggregations of basic ISIC categories. Those aggregations can be based on enterprise activities in the offshoring of business functions, the use of intermediate inputs, the kinds of basic classes of goods produced and the variety of end markets. The reason for making those distinctions is that it is not possible, in the current ISIC, to distinguish the significant differences between enterprises that operate domestically and those that operate globally. Harmonization of enterprises into groups of similar make-up could significantly improve the accounting structure of the supply and use tables for the analysis of global value chains; harmonization could be achieved in terms of industry, supply chain position, end markets and the extent of the use of business functions being outsourced.

The OECD expert group on extended Supply-Use Tables addresses the estimation methods of trade in value added. The terms of reference of the group states among others that globalization is rapidly changing long-standing assumptions about the relative homogeneity of the production functions (Input-Output technical coefficients) of units classified to a given industrial activity, which is, implicitly, an underlying assumption used in creating input-output based indicators. The increasing prevalence of new types of firms such as factoryless producers and contract processing firms, and the increasing tendency for horizontal, as opposed to vertical, specialization, particularly for multinational affiliates, has fundamentally challenged these assumptions. Therefore, the OECD expert group is looking for the best ways to breakdown firms by specific characteristics (such as involvement in GVCs) which will make the sub-groups more homogeneous.

A GVC approach seems appropriate for the Handbook on a system of extended international and global accounts, since GVCs cut across geographic borders and bring together those global economic activities, goods and services, which belong together. Measurement of economic interdependencies (involving investment, job creation, income and intellectual property) within and across countries — between upstream design and downstream assembly — requires measurement of GVCs. Similarly, if we want to understand the interdependencies within and across countries for global retailers, financial and nonfinancial service providers, as well as horizontally-integrated enterprises, the GVC is the appropriate organizing framework.

This focus on GVCs has important implications for the unit of measurement and related data collection and estimation procedures. Most of the key decisions made by global manufacturers and global service providers are made at the enterprise rather than the establishment, or plant, level. This implies that for multi-national enterprises data on profits, research and development, transfer pricing, final product pricing, design, financing, advertising, and the rest of the links in GVCs are only available at the global enterprise level.

 

How to Integrate National SUIOTS into Global MCIO tables

globalaccounts

 

Key Terms:

  • SUTs (Supply and Use Tables)
  • GVCs (Global Value Chains)
  • UN SEIGA (System of Extended International and Global Accounts)
  • UN SEEA (System of Environment Economic Accounts)
  • Bilateral Trade Matrix
  • TIVA ( Trade in Value Added)
  • MCIO (Multi Country Input Output Tables)
  • SUIOT ( Supply and Use Input Output Tables)
  • UN SNA (System of National Accounts)
  • UNSD ( United Nations Statistical Division)
  • UNECE ( United Nations Economic Commission for Europe)
  • EUROSTAT ( European Statistics Division)
  • IMF
  • UNCTAD (UN Conference on Trade and Development)
  • WTO ( World Trade Organization)
  • OECD
  • UN ITEGS (International Trade and Economic Globalization Statistics)
  • WIOD ( World Input Output Database)
  • FIGARO (Full International and Global Accounts for Research in

    Input-Output Analysis)

 

 

Key Sources of Research:

 

Global Forum on Trade Statistics
Measuring Global Trade — Do We Have the Right Numbers?

Geneva 2011

https://www.wto.org/english/res_e/statis_e/forum_feb11_e/forum_feb11_e.htm

 

 

Eurostat Seminar: Global value chains and economic globalization:

The Eurostat initiative

Dublin Ireland

Date: 18th April 2013

http://www.cso.ie/en/newsandevents/eventsconferencesseminars/eurostatseminarglobalvaluechainsandeconomicglobalizationtheeurostatinitiative/

 

 

International Conference on Measurement of Trade and Economic Globalization

Organized by UNSD and INEGI in cooperation with OECD, WTO and EUROSTAT

Mexico

2014

International Conference on Measurement of Trade and Economic Globalization

 

 

UN Economic Commission for Europe (UNECE) Conference

July 2015 

Geneva

Group of Experts on National Accounts: Measuring Global Production

 

 

UN Conference on developing System of Extended International and Global Accounts

January 2016

New York

System of Extended International and Global Accounts

 

 

 

UN Expert Group on International Trade and Economic Globalization Statistics

Conference November 2016

New York

UN Expert Group on International Trade and Economic Globalization Statistics

 

 

Global Forum on International Trade Statisticsand Economic Globalization

Global Forum on International Trade Statistics and Economic Globalization

 

 

Proposed Outline for a System of Extended International and Global Accounts

 

Click to access Outline%20for%20a%20System%20of%20Extended%20International%20and%20Global%20Accounts%20-%20Oct%202015.pdf

 

 

Meeting of the UN Expert Group on International Trade and Globalization Statistics

 

Click to access Concept%20Note.pdf

 

 

The relevance of multi-country input-output tables in measuring emissions trade balance of countries: the case of Spain

Teresa Sanz1,∗, Roc ́ıo Yn ̃iguez1 and Jose ́ Manuel Rueda-Cantuche

2016

 

Click to access 40.1.1.sanz-etal.pdf

 

 

Handbook for a System of Extended International and Global Accounts (SEIGA)

Overview of Major Issues

November 23, 2015 (Revised)

By J. Steven Landefel

 

Click to access Overview%20of%20Major%20of%20Issues%20for%20SEIGA%20-%20Nov%202015.pdf

 

 

Report of the first meeting of the Expert Group on international trade and economic globalization statistics

 

Click to access BG-2016-23-international-trade-and-economic-globalization-statisitcs-E.pdf

 

 

Background and context

First meeting of the UN Expert Group on international trade and economic globalization statistics,

26-28 January 2016, New York

 

Click to access UNSD%20-%20Background%20and%20context.pdf

 

 

Developing A System of Extended International and Global Accounts

Steve Landefeld

 

Click to access Item_5_SEIGA_Presentation_SEIGA_new.pdf

 

 

Measurement framework for international trade and economic globalization

Group of Experts on National Accounts

18-20 May 2016

Geneva, Switzerland

Herman Smith

 

Click to access Item_4d_UNSD_framework_for_international_trade_and_economic_globalization.pdf

 

 

Conference of European Statisticians

Group of Experts on National Accounts Fourteenth session
Geneva, 7-9 July 2015

 

Distr.: General 14 April 2015
Annotated provisional agenda for the fourteenth session

Click to access Agenda_ENG.pdf

 

 

Measuring International Trade and Economic Globalization

Muscat, Oman, Feb 2016

 

Click to access Pre-Session-UNSD-IT-EconomicGlobalisation.pdf

 

 

Overview of the Implementation of National Accounts at Global Level

United Nations Statistics Division

 

Click to access 2015-semcn-s2-unsd-ilaria-di-matteo.pdf

 

 

Guide to Measuring Global Production

 

Click to access UNECE%20-%202015%20-%20Draft%20Guide%20to%20Measuring%20Global%20Production%20-%20Sep%202015.pdf

 

 

GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND

OUTLOOK

Arnold Tukker a b & Erik Dietzenbacher

 

Click to access Tukker%20and%20Dietzenbacher%20-%202013%20-%20Overview%20on%20International%20IO%20Tables.pdf

 

 

TRADE IN VALUE-ADDED: CONCEPTS, METHODOLOGIES AND CHALLENGES (JOINT OECD-WTO NOTE)

 

Click to access OECD-WTO%20-%202012%20-%20Joint%20note%20on%20TiVA.pdf

 

 

OECD EXPERT GROUP ON EXTENDED SUPPLY-USE TABLES

TERMS OF REFERENCE

 

Click to access OECD%20-%202015%20-%20eSUTs_TOR.pdf

 

 

Mapping Global Value Chains

Koen De Backer, Sébastien Miroudot

Click to access OECD%20-%202013%20-%20GVC%20Mappings.pdf

 

 

 

GLOBAL VALUE CHAIN ANALYSIS: A PRIMER

Gary Gereffi
&
Karina Fernandez-Stark

Click to access Duke%20-%202011%20-%20GVC_analysis_a_primer.pdf

 

 

CONNECTING LOCAL PRODUCERS IN DEVELOPING COUNTRIES TO REGIONAL AND GLOBAL VALUE CHAINS – UPDATE

Penny Bamber, Karina Fernandez-Stark, Gary Gereffi and Andrew Guinn

Click to access Duke%20-%202013%20-%20Developing%20countries%20and%20GVCs.pdf

 

 

Global Value Chain Analysis on Samsung Electronics

 

Click to access Canada%20-%202012%20-%20GVC%20Analysis%20of%20Samsung%20Electronics.pdf

 

 

Global Value Chains in official business statistics

Martin Luppes, Statistics Netherlands

Peter Bøegh Nielsen, Statistics Danmark

Click to access Luppes%20and%20Nielsen%20-%202015%20-%20Global%20Value%20Chains%20in%20official%20business%20statistics.pdf

 

 

Global Value Chains and Economic Globalization – Towards a New Measurement Framework

Click to access Eurostat%20-%202013%20-%20GVCs%20and%20Economic%20Globalization%20-%20Sturgeon%20report.pdf

 

 

International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions

Rui Albuquerque, Luis Brandao-Marques, Miguel A. Ferreira, Pedro Matos

 

Click to access IMF%20-%202013%20-%20International%20Corporate%20Governance%20Spillovers.pdf

 

 

Trade Linkages, Balance Sheets, and Spillovers: The Germany-Central European Supply Chain

Selim Elekdag and Dirk Muir

Click to access IMF%20-%202013%20-%20Trade%20Linkages,%20Balance%20Sheets,%20and%20Spillovers.pdf

 

 

THE PRODUCTIVITY ADVANTAGE AND GLOBAL SCOPE OF U.S. MULTINATIONAL FIRMS

Raymond Mataloni, Jr.

 

Click to access US%20Census%20-%202011%20-%20US%20Multinationals.pdf

 

 

Effects of the Crisis on the Automotive Industry in Developing Countries

A Global Value Chain Perspective

Timothy J. Sturgeon Johannes Van Biesebroeck

Click to access Automotive%20Industry%20and%20Crisis%20(Sturgeon%20-%20Jun%202010).pdf

 

 

Value chains, networks and clusters: reframing the global automotive industry

 

Timothy Sturgeon  Johannes Van Biesebroeck and Gary Gereffi

Click to access Automotive%20Industry%20(Sturgeon%20-%20Apr%202008).pdf

 

 

The PhiliPPines in the aUtoMotiVe global ValUe chain

2016

Click to access 2016_Philippines_Automotive_Global_Value_Chain.pdf

 

 

Upgrading and restructuring in the global apparel value chain: why China and Asia are outperforming Mexico and Central America

Stacey Frederick

Gary Gereffi

2011

http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/10701/2011-08-03_Frederick%20&%20GEREFFI_apparel%20article%20-%20China%20&%20Mexico.pdf;sequence=1

 

 

Combining the Global Value Chain and global I-O approaches

Discussion paper

Dr. Stacey Frederick

2014

 

Click to access 2014-09-29_Frederick,%20Stacey_Combining%20GVC%20and%20global%20I-O%20approaches.pdf

 

 

Sewing Success?

Employment, Wages, and Poverty following the End of the Multi-fibre Arrangement

Editors
Gladys Lopez-Acevedo Raymond Robertson

2012

 

Click to access SewingSuccess_FullReport.pdf

 

 

A measurement framework and a narrative on global value chains and economic globalization

Merja Hult and Pekka Alajääskö

Timothy J. Sturgeon

Click to access STS024-P1-S.pdf

 

 

TRADE INTERCONNECTEDNESS: THE WORLD WITH GLOBAL VALUE CHAINS

IMF

2013

 

Click to access 082613.pdf

 

 

Global Value Chains

https://www.oecd.org/sti/ind/global-value-chains.htm

 

 

Global value chains

http://ec.europa.eu/eurostat/statistics-explained/index.php/Global_value_chains

 

 

GLOBAL VALUE CHAINS AND Development

INVESTMENT AND VALUE ADDED TRADE IN THE GLOBAL ECONOMY

 

Click to access diae2013d1_en.pdf

 

 

 

Competing in Global Value Chains

EU Industrial Structure Report 2013

 

Click to access EKTHESEIS-6.pdf

 

 

Global Value Chains: Development Challenges and Policy Options

Proposals and Analysis

December 2013

Click to access E15-Global-Value-Chains-Compliation-Report-FINAL.pdf

 

 

Global Value Chains: The New Reality of International Trade

Sherry Stephenson

December 2013

Click to access E15-GVCs-Stephenson-Final.pdf

 

 

World Investment Report 2013: Global Value Chains: Investment and Trade for Development

2013

 

Click to access wir2013_en.pdf

 

 

Global Production Networks: Theorizing Economic Development in aninterconnected world

By Neil M. Coe, Henry Wai-Chung Yeung

 

 

TRADE IN VALUE ADDED (TIVA) INDICATORS GUIDE TO COUNTRY NOTES

Click to access TiVA_2015_Guide_to_Country_Notes.pdf

 

 

 

TRADE IN VALUE-ADDED: CONCEPTS, METHODOLOGIES AND CHALLENGES

(JOINT OECD-WTO NOTE)

 

Click to access 49894138.pdf

 

 

Global value chains in a changing world

Edited by Deborah K. Elms and Patrick Low

WTO 2013

 

Click to access aid4tradeglobalvalue13_e.pdf

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz

2010

 

https://openknowledge.worldbank.org/bitstream/handle/10986/2509/569230PUB0glob1C0disclosed010151101.pdf?sequence=1&isAllowed=y

 

 

Making Global Value Chains Work for Development

Daria Taglioni

Deborah Winkler

Economics of Trade Finance

Economics of Trade Finance

 

Matrix of trade finance instruments

  • Raising working capital for exports: Debt financing; Asset-based financing; Export factoring; and Leasing
  • Facilitating payments: Cash-in-advance; Letter of Credit(L/C); Documentary collection; and Open accounts
  • Mitigating risks: Export credit guarantee; Export credit insurance; Forfeiting; and Hedging.

 

Trade Finance is the lubricant in Global Trade.  The concentration of banks providing Trade Finance is very high.  So are the risks if a bank fails or withdraws credit due to regulations.

Questions:

  • How many Banks provide Trade Finance?
  • What happens when Banks withdraw credit due to Financial Crisis?
  • What other alternatives are there for Trade Finance ?  GTLP?
  • What is the role of increased regulations on Trade Finance? BASEL III

 

From Trade finance around the world

tradefin2tradefin3

 

Decline in Trade Finance as a cause of Global Trade Collapse

  • Concentration of Banks providing Trade Finance
  • De-risking by EU Banks to EMEs due to BASEL III requirement
  • Backlash against Trade

 

From DE-RISKING BY BANKS IN EMERGING MARKETS – EFFECTS AND RESPONSES FOR TRADE / IFC EMCOMPASS

Emerging evidence suggests that de-risking is a reality. Increased capital requirements, coupled with rising Know-Your-Customer, Anti-Money-Laundering, and Combating-the-Financing-of-Terrorism compliance costs have resulted in the exit of several global banks from cross-border relationships with many emerging market clients and markets, particularly in the correspondent banking business. A subset of this business, trade finance, is also at risk, with potential consequences for segments of emerging market trade. The emerging market trade finance gap was significant before the crisis and has since likely expanded. Those involved in addressing the de-risking challenge must focus on compliance consistency and effective adaptation of technological innovations.

 

From ADB 2016 Trade Finance Gaps, Growth, and Jobs Survey

  • The estimated global trade finance gap is $1.6 trillion.
  • $692 billion of the gap is in developing Asia (including India and the People’s Republic of China).
  • 56% of SME trade finance proposals are rejected, while large corporates face rejection rates of 34% and multinational corporations are rejected only 10% of the time.
  • Firms report that 25% more trade finance would enable them to hire 20% more people.
  • Woman-owned firms face higher than average rejection rates.
  • 70% of surveyed firms are unfamiliar with digital finance, uptake rates highest in peer-to-peer lending.

 

From ADDRESSING THE GLOBAL SHORTAGE OF TRADE FINANCE

The International Chamber of Commerce (ICC) 2016 Global Survey on Trade Finance reveals that 61 percent of respondents cited a global shortage of trade finance—a figure that is particularly concerning as we continue to observe a period of prolonged sluggishness when it comes to global trade growth. But hope is not lost. Doina Buruiana, Project Manager at ICC Banking Commission, explains the various ways that the trade-finance gap can be filled.

For the fifth consecutive year, trade growth has been reported at below 3 percent and has not recovered to pre-crisis levels—with a global trade-finance shortage estimated to have reached US$1.6 trillion in 2016, according to the Asian Development Bank (ADB). Such figures certainly make for grim reading. And what’s more, the findings from the International Chamber of Commerce’s (ICC) 2016 Global Survey on Trade Finance—an annual report reflecting the issues and trends on the trade-finance landscape—are also providing cause for concern. Sixty-one percent of respondents—national, regional and global banks providing trade finance—reported a global shortage of trade finance.

There are various reasons for this. Ninety percent cited the cost or complexity of compliance requirements relating to anti-money laundering (AML), know your customer (KYC) and sanctions as a chief barrier to the provision of trade finance. Furthermore, 77 percent of respondents to the Global Survey cited Basel III regulatory requirements as a significant impediment to trade finance. Many global banks are withdrawing from several emerging-market regions dependent on trade and trade finance, partly due to pressures to favour domestic clients following some banks’ bailouts by taxpayers.

And the fallout can be severe. A shortage of trade finance impacts the growth of businesses worldwide. In particular, small to medium-sized enterprises (SMEs) are being affected by the shortage of bank liquidity. According to the Global Survey, 58 percent of rejected trade-finance proposals were SME applications, despite the sector submitting 44 percent of all trade-finance proposals.

Yet hope is not lost. There are various ways in which the industry can adapt to not only bridge the gap in unmet demand for finance and help revive global growth, but also to evolve the industry, to drive healthy competition and to remove the focus from being global-bank dependent.

Backlash against trade

Improving understanding and attitudes toward trade, and awareness around trade finance, would be a good place to start. Across the world, many have attacked trade and globalisation for threatening jobs and benefitting only big businesses—sentiments that have been evident across the European Union (EU) during Transatlantic Trade and Investment Partnership (TTIP) negotiations, and also during the recent US presidential election campaigns.

Indeed, we’ve seen a clear rise in protectionist and populist policies—a recent World Trade Organization (WTO) report cited that between mid-October 2015 and mid-May 2016, G20 economies had introduced new protectionist trade measures at the fastest pace since 2008. To address this, we need to first make the case for trade itself in order to highlight the importance of trade finance. It is therefore crucial that businesses and trade-finance industry stakeholders reinvigorate the narrative around global trade, relaying its significance to the public and ensuring that trade is on the agenda of policymakers worldwide.

Understanding trade finance.

Next, enhancing awareness around trade finance should also remain a top priority. While there has already been significant progress in the dialogue between trade-finance practitioners and regulators, and a noticeable shift towards a more suitable risk-aligned treatment of trade finance, it is crucial that we continue to emphasise the low risk nature of trade-finance instruments.

Indeed, ICC’s 2015 Trade Register report highlights the low risk nature of trade-finance products—with favourable credit and default-risk experience. For instance, the Trade Register shows that there is a low default rate across all short-term trade-finance products, with the average expected loss for short-term trade finance lower than typical corporate exposures. In particular, traditional documentary trade-finance products such as letters of credit (LC) are low risk. Remarkably, the transaction default rate for export LCs between 2008 and 2014 was 0.01 percent. Medium- to long-term products also fare well, with a low loss nature due to the export credit agency’s (ECA) guarantee—normally with investment-grade ratings and backed by high-income Organisation for Economic Co-operation and Development (OECD) governments.

The need for increased awareness around trade finance extends well beyond traditional trade finance and also includes newer techniques and instruments under the supply-chain finance umbrella. We also need to raise industry understanding around compliance measures—differentiating between client KYC and non-client KYC, for instance, in order to ease processes. In addition, enhanced awareness and understanding in relatively unsettled areas in trade finance, such as trade-based money laundering, would help direct compliance measures. Despite common belief, for instance, only a small proportion of trade-based money laundering actually occurs in trade-finance transactions.

Collaboration

Yet while progress has certainly been made with regulation and compliance proposals, the Global Survey suggests that the costs associated with such measures are still, and will perhaps continue to be, prohibitive. As such, if we want to close the trade-finance gap, we need to move slightly away from a global bank-dominated financial landscape and embrace collaboration.

Financial-technology firms (fintechs) are increasingly shaping the future of trade finance, and make an obvious banking partner, with both parties bringing strengths and expertise to such arrangements. Indeed, many fintechs are looking to partner with—rather than compete with—banks due to balance-sheet requirements, the regulatory framework to navigate, and the industry expertise required to bring new concepts to fruition. Certainly, partnerships between the two players could drive additional efficiencies and the capacity of banks to conduct business—perhaps eventually reducing the trade-finance shortage.

Fintechs aren’t the only players that could potentially collaborate with banks—or even fill the trade-finance gap independently. The Global Survey found that export credit agencies (ECAs) are increasingly supporting export finance, with alternative liquidity flowing into the ECA space. Thirty-seven percent of respondents reported that they had successfully concluded business with institutional investors in ECA finance, up from 30 percent in the previous survey in 2015, reflective of the growing role of alternative investors.

The Global Survey also highlighted the important role of multilateral development banks (MDBs), with 75 percent of respondents agreeing that MDBs (and ECAs) help reduce trade-finance gaps. In particular, MDBs provide financial assistance to emerging markets for investment projects and policy-based loans. This can prove crucial for enabling access to trade finance in general, and for SMEs.

The ADB’s Trade Finance Program (TFP), for instance, fills market gaps for trade finance by providing guarantees and loans through more than 200 banks. The TFP has supported more than 12,000 transactions across Asia, valued at over US$23.1 billion—of which more than 7,700 involved SMEs. What’s more, the TFP focuses on markets in which the private sector has less capacity to provide trade finance, and where there are large trade-finance gaps.

However, the Global Survey also indicated that MDB and ECA support varies by region—with respondents deeming it most effective in advanced Asia, Russia and sub-Saharan Africa, and less effective in Commonwealth of Independent States (CIS) countries, India and Central America and the Caribbean. Clearly, an increase in the envelope and effectiveness of MDB trade-finance provision in these regions will help further reduce the gap. In order to counter geographical disparities, the next step for MDBs is to consider any structural limitations in existing trade-finance programmes—or contextual difficulties in particular markets.

Finally, non-bank capital provides another useful source of trade finance, particularly from private-sector sources of finance—such as specialist financiers or alternative-finance providers. Since the financial crisis, these players have played an increasingly crucial role in meeting unmet demand, and have experienced considerable growth. What’s more, specialist financing is growing increasingly popular among companies in emerging markets, in which trade-finance demand is most acute.

Revamping trade finance.

Of course, one way to possibly boost the provision of trade finance is to make it more efficient and attractive. Certainly, the digitisation of trade finance holds huge potential. Automating trade finance can make overall processes more effective and reliable, increasing capacity for banks, corporates and other stakeholders along the supply chain. For instance, eDocs (paperless documents) streamline processes, with the ability for multiple parties to access, review and collaborate at any one time. The resulting operational improvements in turn reduce errors, maintain data integrity and accelerate the completion of agreements.

Despite the clear benefits, the Global Survey shows that there has been a slow uptake of digitisation. In fact, one-fifth of respondents reported that there is no evident digitisation at all, two-thirds saw very little impact of technology on trade finance, and just over 7 percent saw digitisation as being widespread. The slow uptake is likely due to the challenges of digitising trade—including the considerable scale and complexity of the task at hand, for instance. Banks should play a key role in advocating the benefits of digitisation and help their corporate clients adapt to new systems.

We cannot let the trade-finance gap incapacitate trade. Clearly, there are steps that the trade-finance industry can take to help meet unmet demand. Looking ahead, improving attitudes and raising understanding, encouraging collaboration and making progress towards innovation in the industry will support the growth of businesses of all sizes—and the economy—worldwide.

 

From Global Trade Liquidity Program /IFC

The Global Trade Liquidity Program (GTLP) is a unique, coordinated global initiative that brings together governments, development finance institutions (DFIs), and private sector banks to support trade in developing markets and address the shortage of trade finance resulting from the global financial crisis.

With targeted commitments of $4 billion from public sector sources, the program has supported nearly $20 billion of trade since its inception. It raises funds from international finance and development institutions, governments, and banks, and it works through global and regional banks to extend trade finance to importers and exporters in developing countries. IFC’s commitment to the program is $1 billion.

GTLP began its operations in May 2009, channeling much-needed funds to back trade in developing countries. Phase 2 was launched in January 2010 with an unfunded solution, based on the existing GTLP platform, to support trade finance directed at the food and agribusiness sectors. The program was extended in January 2012 to continue to stabilize and foster trade and commodity finance to emerging markets.

Since its launch, GTLP has been acknowledged in the financial industry as an innovative structure to help infuse much needed liquidity into the trade finance market, thereby catalyzing global trade growth. The solution also represents a win-win proposition: for the banks it provides an opportunity to continue supporting clients through these difficult times; for IFC and its partners, it affords the ability to channel liquidity and credit into markets to help revitalize trade flows by leveraging on the banks’ vast networks across emerging markets in Asia, Africa, Middle East, Europe, and Latin America.

The program is already benefiting thousands of importers and exporters and small- and medium-sized enterprises.

 

From ADB Trade Finance Program

ADB’s Trade Finance Program (TFP) fills market gaps for trade finance by providing guarantees and loans to banks to support trade.

Backed by its AAA credit rating, ADB’s TFP works with over 200 partner banks to provide companies with the financial support they need to engage in import and export activities in Asia’s most challenging markets. With dedicated trade finance specialists and a response time of 24 hours, the TFP has established itself as a key player in the international trade community, providing fast, reliable, and responsive trade finance support to fill market gaps.

A substantial portion of TFP’s portfolio supports small and medium-sized enterprises (SMEs), and many transactions occur either intra-regionally or between ADB’s developing member countries. The program supports a wide range of transactions, from commodities and capital goods to medical supplies and consumer goods.

The TFP continues to grow, supporting billions of dollars of trade throughout the region, which in turn helps create sustainable jobs and economic growth in Asia’s developing countries.

 

 

Key Terms:

  • IFC GTFP (Global Trade Finance Program)
  • IFC GTLP (Global Trade Liquidity Program)
  • IFC GTSF (Global Trade Supplier Finance)
  • IFC GWFP (Global Warehouse Finance Program)
  • SME ( Small and Medium Enterprises)
  • LC (Letter of Credit)
  • DC (Documentary Collections)
  • IFC ( International Finance Corporation)
  • WTO (World Trade Organization)
  • ADB (Asian Development Bank)
  • WB (World Bank)
  • MDB ( Multilateral Development Banks)
  • ECA (Export Credit Agency)
  • Structured Trade
  • Aid for Trade
  • SWIFT
  • BRICS NDB (New Development Bank)
  • ADB TFP (Trade Finance Program)

 

 

Key Sources of Research:

 

Global Trade Liquidity Program

IFC

http://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Financial+Markets/Trade+and+Supply+Chain/GTLP/

 

 

Trade Finance Program

ADB

https://www.adb.org/site/trade-finance-program

 

 

EXPORTS AND FINANCIAL SHOCKS

Mary Amiti David E. Weinstein

Click to access amiti.pdf

 

 

Why Boosting the Availability of Trade Finance Became a Priority during the 2008–09 Crisis

Jean-Jacques Hallaert

 

Click to access TradeFinancech14.pdf

 

 

International Trade, Risk, and the Role of Banks

Friederike Niepmann Tim Schmidt-Eisenlohr

September 2013

Revised November 2014

 

Click to access sr633.pdf

 

 

International Trade Risk and the Role of Banks

Niepmann, Friederike and Tim Schmidt-Eisenlohr

2015

Click to access ifdp1151.pdf

 

 

 

Trade finance: developments and issues

Report submitted by a Study Group established by the Committee on the Global Financial System

The Group was chaired by John J Clark, Federal Reserve Bank of New York

January 2014

 

Click to access cgfs50.pdf

 

 

Trade finance and SMEs

WTO

 

Click to access tradefinsme_e.pdf

 

 

Improving the Availability of Trade Finance during Financial Crises

Marc Auboin

Moritz Meier-Ewert

2003

Click to access dis02_e.pdf

 

 

Trade Finance in Financial Crises: Assessment of Key Issues

December 9, 2003

 

Click to access 120903.pdf

 

 

US Trade Finance Guide 2008

Click to access tfg2008.pdf

 

 

ADDRESSING THE GLOBAL SHORTAGE OF TRADE FINANCE

Doina Buruiana, Project Manager at ICC Banking Commission

December 15, 2016

https://internationalbanker.com/finance/addressing-global-shortage-trade-finance/

 

 

Trade finance around the world

Friederike Niepmann, Tim Schmidt-Eisenlohr

11 June 2016

http://voxeu.org/article/trade-finance-around-world

 

 

The challenges of trade financing

Marc Auboin

28 January 2009

http://voxeu.org/article/challenges-trade-financing

 

 

The role of trade credit financing in international trade

Katharina Eck, Martina Engemann, Monika Schnitzer

20 April 2015

http://voxeu.org/article/role-trade-credit-financing-international-trade

 

 

The global financial crisis: A wake-up call for trade finance capacity building in emerging Asia

Wei Liu, Yann Duval

19 June 2009

http://voxeu.org/article/trade-finance-emerging-asian-economies

 

 

The role of bank guarantees in international trade

Tim Schmidt-Eisenlohr, Friederike Niepmann

26 November 2014

http://voxeu.org/article/role-bank-guarantees-international-trade

 

 

Why does finance matter for trade? Evidence from new data

Marc Auboin, Martina Engemann

03 December 2012

http://voxeu.org/article/why-does-finance-matter-trade-evidence-new-data

 

 

Trade and Trade Finance in the 2008-09 Financial Crisis

Prepared by Irena Asmundson, Thomas Dorsey, Armine Khachatryan, Ioana Niculcea,

and Mika Saito

January 2011

Click to access 07364.pdf

Click to access wp1116.pdf

 

 

 

Enhanced Attention for Trade Finance

Andrew Cornford

 

Click to access Trade_Finance.pdf

 

 

Trade finance: The landscape is changing— are you?

Accenture

Click to access Accenture-Trade-Finance.pdf

 

 

RETHINKING TRADE & FINANCE 2016

ICC Global Survey on Trade Finance

 

Click to access ICC_Global_Trade_and_Finance_Survey_2016.pdf

 

 

2016 TRaDE FINaNCE GaPS, GROwTh, aND JObS SURvEY

 

alisa Di Caprio Ying Yao Steven beck Fahad Khan

ADB

 

Click to access trade-finance-gaps.pdf

 

 

Articles on Trade Finance

The Banker.com

http://www.thebanker.com/Transactions-Technology/Trade-Finance

 

 

2016 State of Supply Chain Finance Industry

 

Click to access 2016-State-of-SCF-April-15.pdf

 

 

ICC Global Survey on Trade Finance

 

http://www.iccwbo.org/Products-and-Services/Trade-facilitation/ICC-Global-Survey-on-Trade-Finance/

 

 

 

 

TRADE AND DEVELOPMENT REPORT, 2016

UNCTAD

 

Click to access tdr2016_en.pdf

 

 

No Guarantees, No Trade: How Banks Affect Export Patterns

Friederike Niepmann Tim Schmidt-Eisenlohr

2016

 

Click to access ifdp1158.pdf

 

 

Understanding Trade Finance: Theory and Evidence from Transaction-level Data

Jae Bin Ahn

International Monetary Fund

August, 2015

 

 

Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis

Davin Chor Kalina Manova

2010

Click to access manova_presentation.pdf

Click to access w16174.pdf

 

 

Trade Finance during the Great Trade Collapse

Jean-Pierre Chauffour and Mariem Malouche

2011

 

Click to access Trade-Finance-finalpdf.pdf

 

 

Why Trade Finance matters for Trade

WTO/IFC

 

Click to access ifcwks3.pdf

 

 

TRADE FINANCE IN PERIODS OF CRISIS: WHAT HAVE WE LEARNED IN RECENT YEARS?

Marc Auboin and Martina Engemann

2013

Click to access ersd201301_e.pdf

 

 

Global Finance Names The World’s Best Trade Finance Providers 2016

https://www.gfmag.com/media/press-releases/global-finance-names-worlds-best-trade-finance-providers-2016

https://www.gfmag.com/magazine/february-2016/worlds-best-trade-finance-providers-2016-table-contents

 

 

The Trade Finance Business of U.S. Banks

Friederike Niepmann and Tim Schmidt-Eisenlohr

MAY 19, 2014

http://libertystreeteconomics.newyorkfed.org/2014/05/the-trade-finance-business-of-us-banks.html

 

 

Why U.S. Exporters Use Letters of Credit

Friederike Niepmann and Tim Schmidt-Eisenlohr

2014

http://libertystreeteconomics.newyorkfed.org/2014/05/why-us-exporters-use-letters-of-credit.html

 

 

WHAT DRIVES BANK-INTERMEDIATED TRADE FINANCE? EVIDENCE FROM CROSS-COUNTRY ANALYSIS 

José María Serena Garralda

Garima Vasishtha

2015

Click to access dt1524e.pdf

 

 

The impact of Basel III on trade finance

Author: Bc. Jana Malešová

Masters Thesis

 

 

 

The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action

Prepared by Michaela Erbenová, Yan Liu, Nadim Kyriakos-Saad, Alejandro López-Mejía, Giancarlo Gasha, Emmanuel Mathias, Mohamed Norat, Francisca Fernando, and Yasmin Almeida1

2016

 

Click to access sdn1606.pdf

 

 

Leveraging Supply Chain Finance for Development

Alexander R. Malaket

September 2015

 

Click to access E15-Finance-Malaket-final.pdf

 

 

 

Trade Finance: A Catalyst for Asian Growth

Claude Lopez

2015

 

Click to access MPRA_paper_66250.pdf

 

 

 

Trade Flows in Developing Countries: What is the Role of Trade Finance?

 

Clara Brandi Birgit Schmitz

 

Click to access DP_13.2015.pdf

 

 

Financing Global Development: The Potential of Trade Finance

Click to access 13_BP_10.2015.pdf

Understanding Global Value Chains – G20/OECD/WB Initiative

Understanding Global Value Chains – G20/OECD/WB Initiative

 

There is lot of opacity in understanding of GVCs.  Efforts are underway since last few years to get better analytical and statistical tools to understand International Trade and Global Value Chains.

Globalization in Trade and Finance encouraged by International organizations such as IMF/WB/OECD/WTO/UNCTAD/UNIDO and others has changed the landscape of Trade.

There is still a long way to go to make better sense of issues and concerns for policy makers.

OECD/WB/WTO along with G20 Trade Ministers have initiated efforts since 2012.

 

From Global Value Chains 

Introduction to GVCs

International production, trade and investments are increasingly organised within so-called global value chains (GVCs) where the different stages of the production process are located across different countries. Globalisation motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.

Firms try to optimise their production processes by locating the various stages across different sites. The past decades have witnessed a strong trend towards the international dispersion of value chain activities such as design, production, marketing, distribution, etc.

This emergence of GVCs challenges conventional wisdom on how we look at economic globalisation and in particular, the policies that we develop around it.

 

Trade in Value Added

The goods and services we buy are composed of inputs from various countries around the world. However, the flows of goods and services within these global production chains are not always reflected in conventional measures of international trade. The joint OECD – WTO Trade in Value-Added (TiVA) initiative addresses this issue by considering the value added by each country in the production of goods and services that are consumed worldwide. TiVA indicators are designed to better inform policy makers by providing new insights into the commercial relations between nations.

 

GVCs and Trade Policy

Global value chains (GVCs) have become a dominant feature of world trade, encompassing developing, emerging, and developed economies. The whole process of producing goods, from raw materials to finished products, is increasingly carried out wherever the necessary skills and materials are available at competitive cost and quality. Similarly, trade in services is essential for the efficient functioning of GVCs, not only because services link activities across countries but also because they help companies to increase the value of their products. This fragmentation highlights the importance of an ambitious complementary policy agenda to leverage engagement in GVCs into more inclusive growth and employment and the OECD is currently undertaking comprehensive statistical and analytical work that aims to shed light on the scale, nature and consequences of international production sharing.

 

From Global Value Chains/Global Production Networks: Organizing the Global Economy

The key organizational feature of the global economy?

  • “Global Value Chains are defined by fragmented supply chains, with internationally dispersed tasks and activities coordinated by a lead firm (a TNC)” (UNCTAD, 2013, p.125; original italics).
  • Data gathering exercises:UNCTAD,OECD,WTO,JETRO…
  • Now firmly on the agenda among leading international economic organizations
  • The international division of labour:imperial/colonialsystems and exchanges of raw materials and finished goods
  • The new international division of labour(NIDL):establishment of overseas production bases of core country TNCs
  • The global division of labour:much more complex global networks lying behind the production of different goods and services

The phenomenon

  • About 60% of global trade, which today amounts to more than $20 trillion, consists of trade in intermediate goods and services that are incorporated at various stages in the production process of goods and services for final consumption” (UNCTAD, 2013, p. 122)
  • Not new, but since 2000 trade and FDI have increased exponentially, and ahead of GDP growth, highlighting a growth in TNC coordinated global value chains
  • Double counting – approx. 25-30% of value of world trade, e.g. the iPhone example. Not just trade from China to US, but incorporates high value components from Japan, South Korea etc.
  • Beyond national economies and basic trade data, and beyond TNCs and FDI, to more complex organizational structures involving intra-firm trade, arm’s length trade and non-equity modes e.g. subcontracting

 

 

From GLOBAL VALUE CHAIN ANALYSIS: A PRIMER

gvc5

 

From Global Capitalism and Commodity Chains: Looking Back, Going Forward

gvc4

 

From Global Value Chains/Global Production Networks: Organizing the Global Economy

gvc1gvc-2gvc3

 

Key Terms

  • Global Commodities Chains (GCCs)
  • Global Production Networks (GPNs)
  • Global Value Chains (GVCs)
  • Strategic Coupling
  • Economic Deepening
  • Trans National Corporation (TNC)
  • Multi National Corporation (MNC)
  • Multi National Enterprises (MNE)
  • SMILE curve
  • Economic Clusters
  • UNIDO (United Nations Industrial Development Organization)
  • OECD (Organization for Economic Cooperation and Development)
  • WTO (World Trade Organization)
  • WB (World Bank)
  • UNESCAP (Economic and Social Commission for Asia and Pacific)
  • UNCTAD ( United Nations Commission for Trade and Development)
  • ILO ( International Labor Organization)
  • G20 ( Group of 20 Nations)
  • TIVA ( Trade in Value Added)
  • On shoring
  • Off shoring
  • Outsourcing

 

 

Key People

  • Gary Gereffi
  • Neil M Coe
  • Jennifer Bair
  • Henry Wai-chung Yeung
  • Timothy Sturgeon

 

 

Key Sources of Research:

 

Measuring Trade in Value Added: An OECD-WTO joint initiative

https://www.oecd.org/tad/measuringtradeinvalue-addedanoecd-wtojointinitiative.htm

 

 

Global Value Chains

https://www.oecd.org/about/g20-oecd-global-value-chains.htm

https://www.oecd.org/sti/ind/global-value-chains.htm

 

 

OECD Stocktaking Seminar on Global Value Chains 2014

https://www.oecd.org/g20/topics/trade-and-investment/g20-oecd-global-value-chains-2014.htm

 

 

IMPLICATIONS OF GLOBAL VALUE CHAINS
FOR TRADE, INVESTMENT, DEVELOPMENT AND JOBS

OECD, WTO, UNCTAD 6 August 2013

Prepared for the
G-20 Leaders Summit
Saint Petersburg (Russian Federation) September 2013

 

Click to access G20-Global-Value-Chains-2013.pdf

 

 

Inclusive Global Value Chains

Policy options in trade and complementary areas for GVC Integration by small and medium enterprises and low-income developing countries

OECD and World Bank Group

Report prepared for submission to G20 Trade Ministers Meeting Istanbul, Turkey, 6 October 2015

 

Click to access Participation-Developing-Countries-GVCs-Summary-Paper-April-2015.pdf

 

 

GLOBAL VALUE CHAINS: CHALLENGES, OPPORTUNITIES, AND IMPLICATIONS FOR POLICY

OECD, WTO and World Bank Group

Report prepared for submission to the G20 Trade Ministers Meeting Sydney, Australia, 19 July 2014

 

Click to access gvc_report_g20_july_2014.pdf

 

 

Making Global Value Chains (GVCs) Accessible to All

Progress Report
Meeting of the Council at Ministerial Level

6-7 May 2014

 

Click to access MCM-GVC-Progress-Report-May-2014.pdf

 

 

Inclusive Global Value Chains

Policy Options for Small and Medium Enterprises and Low-Income Countries

Ana Paula Cusolito, Raed Safadi, and Daria Taglioni

2016

Click to access 9781464808425.pdf

 

 

Global value chains in a changing world

Edited by Deborah K. Elms and Patrick Low

2013

 

Click to access aid4tradeglobalvalue13_e.pdf

 

 

The rise of global value chains

WORLD TRADE REPORT 2014

 

Click to access wtr14-2c_e.pdf

 

 

Who Captures the Value in the Global Value Chain? High Level Implications for the World Trade Organization

Peter Draper and Andreas Freytag

July 2014

 

Click to access E15-Global-Value-Chains-DraperFreytag-FINAL.pdf

 

 

Joining, Upgrading and Being Competitive in Global Value Chains: 

A Strategic Framework

 

O. Cattaneo G. Gereffi S. Miroudot D. Taglioni

 

Click to access 2013-04_WorldBank_wps6406_Cattaneo_Gereffi_Miroudot_Taglioni_Competitiveness_GVCs.pdf

 

 

Global value chains, development and emerging economies

Gary Gereffi

2015

Click to access WP_18.pdf

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD A DEVELOPMENT PERSPECTIVE

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz

2010

Click to access Gereffi_GVCs_in_the_Postcrisis_World_Book.pdf

 

 

 

Global value chains and global production networks in the changing international political economy: An introduction

Jeffrey Neilson1, Bill Pritchard1 and Henry Wai-chung Yeung

2014

http://www.tandfonline.com/doi/pdf/10.1080/09692290.2013.873369

 

 

Combining the Global Value Chain and global I-O approaches

 

 

 

Global value chains and world trade : Prospects and challenges for Latin America

René A. Hernández
Jorge Mario Martínez-Piva Nanno Mulder

 

http://repositorio.cepal.org/bitstream/handle/11362/37176/S2014061_en.pdf?sequence=1

 

 

 

Global value chains in a post-Washington Consensus world

Gary Gereffi

2014

 

https://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/10696/2014%20Feb_RIPE_Gereffi,%20Gary_GVCs%20in%20a%20post-Washington%20Consensus%20world.pdf?sequence=1

 

 

GLOBAL VALUE CHAINS AND DEVELOPMENT: Governance, Upgrading & Emerging Economies

Gary Gereffi

Director, Duke CGGC Duke University

2016

Click to access 697_10587.pdf

 

 

 

MaPPing gLoBaL VaLUe CHainS

Koen De Backer and Sébastien Miroudot

2014

Click to access ecbwp1677.pdf

 

 

 

Global Value Chains/Global Production Networks: Organizing the Global Economy

Neil M. Coe

2013

Click to access DrCoe.pdf

 

 

 

GLOBAL VALUE CHAIN ANALYSIS: A PRIMER

Gary Gereffi
Karina Fernandez-Stark

July 2016

 

http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/12488/2016-07-28_GVC%20Primer%202016_2nd%20edition.pdf?sequence=1

 

 

 

WHY THE WORLD SUDDENLY CARES ABOUT GLOBAL SUPPLY CHAINS

GARY GEREFFI AND JOONKOO LEE

Duke University

http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/10699/2012-07_JSCM_Gereffi%20&%20Lee_Why%20the%20world%20suddenly%20cares%20about%20global%20supply%20chains.pdf?sequence=1

 

 

 

The Economic Crisis: A Global Value Chain Perspective

 

Gary Gereffi

 

Click to access a-global-value-chain-perspective.pdf

 

 

The governance of global value chains

Gary Gereffi John Humphrey Timothy Sturgeon

2005

 

Click to access sturgeon2005.pdf

 

 

Global production networks and the analysis of economic development

Jeffrey Henderson, Peter Dicken, Martin Hess, Neil Coe and Henry Wai-Chung Yeung

2002

Click to access 2002_RIPE.pdf

 

 

GLOBAL VALUE CHAINS: INVESTMENT AND TRADE FOR DEVELOPMENT

UNCTAD 2013

Click to access wir2013_en.pdf

 

 

Asia and Global Production Networks

Implications for Trade, Incomes and Economic Vulnerability

Benno Ferrarini David Hummels

2014

Click to access asia-and-global-production-networks.pdf

 

 

 

Global Production Networks: Theorizing Economic Development in an Interconnected World

By Neil M. Coe, Henry Wai-Chung Yeung

2015

 

 

Toward a Dynamic Theory of Global Production Networks

Henry Wai-chung Yeung

Neil M. Coe

 

Click to access 2015_GPN_theory_paper_EG%20Vol91(1)_29-58.pdf

 

 

Global Value Chains and deVelopment

unido’s support towards inclusive and sustainable industrial development

2015

Click to access GVC_REPORT_FINAL.PDF

 

 

Global Value Chains: The New Reality of International Trade

Sherry Stephenson

December 2013

Click to access E15_GVCs_BP_Stephenson_FINAL.pdf

 

 

GLOBAL VALUE CHAINS SURVEYING DRIVERS AND MEASURES

João Amador and Sónia Cabral

2014

Click to access ecbwp1739.en.pdf

 

 

GLOBAL VALUE CHAINS AND INTERCONNECTEDNESS OF ASIA-PACIFIC ECONOMIES

Asia Pacific Trade and Investment Report

2015

 

Click to access Chapter%207%20-%20GVCs%20in%20the%20Asia-Pacific.pdf

Click to access Full%20Report%20%20-%20APTIR%202015.pdf

 

 

Global Capitalism and Commodity Chains: Looking Back, Going Forward

JENNIFER BAIR

2005

COMPETITION & CHANGE, Vol. 9, No. 2, June 2005 153–180

 

 

Global Value Chains: Development Challenges and Policy Options

Proposals and Analysis

December 2013

Click to access E15-Global-Value-Chains-Compliation-Report-FINAL.pdf

 

 

Globalizing’ regional development: a global production networks perspective

Neil M Coe, Martin Hess, Henry Wai-chung Yeung, Peter Dicken and Jeffrey Henderson

Click to access 2004_TIBG.pdf

 

 

Multilateral approaches to Global Supply Chains

 

International Labour Office

2014

 

Click to access wcms_485351.pdf

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

There are three broad categories of global Trade.

  • Trade in Commodities
  • Trade in Manufactured Goods
  • Trade in Services

During the Financial Crisis, Trade in commodities declined due to increase in Prices.

Trade in Services were largely unaffected.

Trade in Manufactured goods declined sharply for variety of reasons not yet entirely clear.

 

Potential Causes for decline

  • Fall in Aggregate Demand of goods
  • Constrained Trade Finance
  • Increase in Trade Barriers
  • Impact of Global Value Chains

 

From GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD A DEVELOPMENT PERSPECTIVE

The global economic crisis of 2008–09 has revealed the interdependence of the world economy. The financial crisis originated in the United States, but the resulting economic downturn quickly spread to the rest of the world. Trade, along with finance, was one of the main vectors of transmission of the crisis. In 2009, there was a massive contraction in global trade—minus 13 percent. The contraction was largely a reflection of a drop in demand, especially for durable goods. The fact that the shock was transmitted very rapidly reflects the increasing reliance by businesses on so-called global value chains (GVCs)—the process of ever-finer specialization and geographic fragmentation of production, with the more labor-intensive parts of the production process transferred to developing countries. In a world where GVCs are the prevalent business model for multinational corporations, a reduction in demand for final products by global buyers implies that demand shocks are immediately transmitted “upstream” to subcontractors in developing countries.

 

From Resilient to the crisis? Global supply chains and trade flows

According to the most recent IMF estimates (IMF 2009), the ongoing recovery will drive a wedge between output and trade. Output is supposed to shrink by ‘only’ 1.1% at the end of 2009 (-3.4% in advanced economies), but world trade is forecast to still experience a drop of -11.9%. While other estimates put the latter figure at –9% (WTO, World Bank), it is indisputable that during 2009 official figures recording trade flows will fall much more than GDP.

Apart from its magnitude, the fall in trade in 2009 has also been quite homogeneous across all countries (more than 90% of OECD countries have exhibited simultaneously a decline in exports and imports exceeding 10%, as noted by Araujo and Olivera Martins 2009). This fall has also been very fast, with trade virtually grinding to a halt in the last month of 2008.1 These facts led Baldwin and Evenett (2009) to qualify the drop in trade during the crisis as “severe, sudden and synchronised”.

A number of transmission mechanisms have recently been proposed to account for these three attributes of the contraction of trade flows, many of which impinge upon the role that global supply chains might have played in exacerbating the drop in global demand.

The basic argument is that in a world characterised increasingly by vertical specialisation, goods are produced sequentially in stages across different countries – so-called international supply chains. The constituent parts and components of a final good crosses borders several times before the final product reaches the consumer; at each border crossing, the full value of the partially assembled good is recorded as trade. As a result, for a given reduction in world income, trade should decline “not only by the value of the finished product, but also by the value of all the intermediate trade flows that went into creating it”.

This implies that the extensive presence of supply chains does not automatically explain why world trade overshot the world GDP drop; other explanatory factors are needed. These may include:

  • The collapse in internal demand and production, affecting current and future level of (tradable) inventories worldwide;
  • Fiscal stimulus plans with a relatively stronger support of non-tradable sectors, like construction and infrastructures (Bénassy-Quéré et al. 2009);
  • The rise of ‘murky’ protectionism; and
  • The problems of trade finance with financial spreads still well-above ‘normal’ (i.e. pre-crisis) market rates (Auboin, 2009).

Do the above arguments mean that global supply chains are totally neutral as a transmission mechanism of the crisis from GDP to trade? Of course not. In all likelihood, however, the channels are much more complex than originally thought, and entail important compositional effects.

For the sake of argument, let us take the following story based on the idea that a relatively large part of the overreaction of trade has been caused by the sudden drying up of liquidity in trade finance. Auboin (2009) notes that, in the second part of 2008, spreads on short-term trade credit facilities suddenly soared to between 300 to 600 basis points above LIBOR, compared to 10 to 20 basis points in normal times, leading to a virtual freeze of important trade deals throughout the globe, with supply chain operations being disrupted by lack of financing, especially for developing country suppliers.

Under this assumption we would have a scenario in which the liquidity channel has led trade to overshoot the fall in demand, with the effect being larger within supply chains, as the trade financing of these operations is typically managed by large international financial institutions, particularly hit by the crisis.3

In this scenario, we would still obtain a severe, sudden and synchronised drop in trade flows, with the effects correlated with (but not caused by) the behaviour of global supply chains.

Moreover, under the same scenario, we would also observe that, during the crisis,trade falls more along the intensive margin (i.e. value per trade) than the extensive margins (i.e. number of traders). The reason being that, if the overreaction of trade was caused relatively more by liquidity constraints than by a disruption of supply chains, the above effects would lead to a reduction in the volume of trade, but not necessarily to a similar reduction in the number of traders worldwide.

This is exactly what Bricongne et al. (2009) find in a paper analysing the behaviour of French exporters during the crisis. Relying on monthly data for individual French exporters observed until April 2009, the authors find that the drop in French exports is mainly due to the intensive margin of large exporters, with small and large firms evenly affected once sectoral and geographical specialisation are controlled for. Interestingly, they also find that firms (small and large) in sectors more dependent on external finance are the most affected by the crisis.

While any conclusion must wait for more data to become available, there are good reasons to believe that the rise of global supply chains has not necessarily been the main cause of the recent “severe, sudden and synchronised” fall in global trade flows. Based on the available evidence, one may even be tempted to conclude that, under certain circumstances, international networks of production may also display some degree of ‘resilience’ to adverse shocks like the current crisis: supply-chain-related trade flows may react later (rather than sooner) to an adverse shock. Their fall may be smaller and, eventually, their recovery may happen faster relative to overall trade flows.

The observed resilience of supply chains may arise from some intrinsic attribute of production chains, as argued above. Alternatively, it may be the outcome of the political economy. Fearing that a collapse of supply chains would set off a sudden process of de-globalisation and implosion of international trade, governments may intervene in favour of supply chains. For example, the massive bail-outs of large financial institutions have helped their best customers, among them the big players within supply chains. Finally, of course, this indirect support of supply chains may have also been an unintended consequence of financial bailouts implemented for very different reasons.

 

From UNCTAD Global Value Chains: Investment and Trade for Development

gvc

 

Key Terms

  • BLS ( Bureau of Labor Statistics)
  • UNCTAD ( United Nations Conference on Trade and Development)
  • NIPAs ( National Income and Product Accounts)
  • OECD ( Organization for Economic Cooperation and Development)
  • EBRD (European Bank for Reconstruction and Development)
  • WTO (world Trade Organization)
  • GATT (General Agreement on Trade and Tariffs)
  • ILO (International Labor Organization)
  • ADB (Asian Development Bank)
  • UNIDO ( United Nations Industrial Development Organization)
  • BEA ( Bureau of Economic Analysis)
  • Production Networks
  • Vertical Specialization
  • Production Fragmentation
  • Intermediate Goods
  • Network Linkages
  • Global Supply Chains
  • Global Value Chains (GVCs)
  • Production Sharing
  • Inter Industry Input Output Tables
  • Inter Country Input Output Tables
  • Global Networks
  • Multi National Companies ( MNCs)
  • Regional Economic Integration
  • Trade Globalization
  • Trade in Goods and Services
  • Trade in Value Added (TIVA)
  • World Input Output Database (WIOD)
  • OECD-WTO TIVA Database
  • UNCTAD-EORA GVC Database
  • Global Trade Analysis Project (GTAP) Database
  • Institute of Developing Economies (IDE-JETRO) Asian IO Tables
  • World Input Output Network (WION)
  • Global Multi Regional Input Output (GMRIO) Framework
  • EXIOBASE/EXIOPOL EXIOBASE is a global, detailed Multi-regional Environmentally Extended Supply and Use / Input Output (MR EE SUT/IOT) database.

 

 

Key Sources of Research:

 

The Global Trade Slowdown: Cyclical or Structural?

Cristina Constantinescu, Aaditya Mattoo, and Michele Ruta

2015

Click to access wp1506.pdf

 

 

The future of global trade: Where are we heading and should we be concerned?

Gaaitzen de Vries
Bart Los
Robert Stehrer
Marcel Timmer

2016

https://www.weforum.org/agenda/2016/11/the-future-of-global-trade-where-are-we-heading

 

 

Demand Spillovers and the Collapse of Trade in the Global Recession

Rudolfs Bems Robert C. Johnson

Kei-Mu Yi

2010

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.186.7680&rep=rep1&type=pdf

 

 

Vertical Linkages and the Collapse of Global Trade

Rudolfs Bems
Robert C. Johnson
Kei-Mu Yi

AMERICAN ECONOMIC REVIEW
VOL. 101, NO. 3, MAY 2011

Click to access 600661c5f17781a38ca3168026b8663b8ebb.pdf

 

 

The Role of Vertical Linkages in the Propagation of the Global Downturn of 2008

Rudolfs Bems Robert C. Johnson

Kei-Mu Yi

2010

 

Click to access 0e43be03f9da1c48a385b94fbcc4904a3fb0.pdf

 

 

The Great Trade Collapse

Rudolfs Bems, Robert C. Johnson and Kei-Mu Yi

Annual Review of Economics
Vol.5:1-549 (Volume publication date August 2013)

 

 

GLOBAL VALUE CHAINS DURING THE GREAT TRADE COLLAPSE

A BULLWHIP EFFECT?

by Carlo Altomonte, Filippo Di Mauro, Gianmarco Ottaviano, Armando Rungi and Vincent Vicard

2012

 

Click to access 169822.pdf

 

 

The bullwhip effect and the Great Trade Collapse

Veronika Zavacka

 

Click to access wp0148.pdf

 

 

Trade Finance and the Great Trade Collapse

By JaeBin Ahn, Mary Amiti, and David E. Weinstein

2011

 

Click to access Ahn-Amiti-WeinsteinAERPP.pdf

 

 

Economic Crisis and Global Supply Chains 

Agnès Bénassy-Quéré, Yvan Decreux, Lionel Fontagné & David Khoudour-Casteras

Click to access wp2009-15.pdf

 

 

 

The Financial Crisis and Global Supply Chains

 

Robert N. Mefford, University of San Francisco, USA

http://repository.usfca.edu/cgi/viewcontent.cgi?article=1010&context=fe

 

 

International Supply Chains and Trade Elasticity in Times of Global Crisis

Click to access ersd201008_e.pdf

 

 

GLOBAL SUPPLY CHAINS: TRADE AND ECONOMIC POLICIES FOR DEVELOPING COUNTRIES

Alessandro Nicita Victor Ognivtsev Miho Shirotori

 

Click to access itcdtab56_en.pdf

 

 

The Great Trade Collapse: Shock Amplifiers and Absorbers in Global Value Chains

Zhengqi Pan

June 2016

 

Click to access Zhengqi%20Pan_GPN2016_008.pdf

 

 

The Age of Global Value Chains: Maps and Policy Issues

 

Click to access JACB201530.pdf

 

 

Asia and Global Production Networks Implications for Trade, Incomes and Economic Vulnerability

 

Click to access asia-and-global-production-networks.pdf

 

 

Mapping globaL Value Chains

Koen De Backer and Sébastien Miroudot

2014

Click to access ecbwp1677.pdf

 

 

Mapping Global Value Chains:

Intermediate Goods Trade and Structural Change in the World Economy

Timothy J. Sturgeon

Olga Memedovic

2011

 

Click to access WP%2005%20Mapping%20Glocal%20Value%20Chains.pdf

 

 

 

World Investment Report 2013:

Global Value Chains: Investment and Trade for Development

2013

 

Click to access wir2013_en.pdf

 

 

Trade finance: developments and issues

Report submitted by a Study Group established by the Committee on the Global Financial System

The Group was chaired by John J Clark, Federal Reserve Bank of New York

January 2014

 

Click to access cgfs50.pdf

 

 

East Asian Value Chains and the Global Financial Crisis

Genet Zinabou

2010

Click to access FR4-14-8-2010-eng.pdf

 

 

The collapse of global trade, murky protectionism, Recommendations for the G20

and the crisis

 

Edited by: Richard Baldwin and Simon Evenett

2009

Click to access 2009-03-murky-protectionism.pdf

 

 

Production Sharing in East Asia: Who Does What for Whom and Why?

 

Francis Ng and Alexander Yeats

1999

 

Click to access multi-page.pdf

 

 

PRODUCTION SHARING IN EAST ASIA: CHINA’S POSITION, TRADE PATTERN AND TECHNOLOGY UPGRADING

Laike Yang

 

Click to access gdsmdp20152yang_en.pdf

 

 

GLOBAL VALUE CHAINS SURVEYING DRIVERS AND MEASURES

João Amador and Sónia Cabral

2014

 

Click to access ecbwp1739.en.pdf

 

 

A New Measurement for International Fragmentation of the Production Process: An International Input-Output Approach

Satoshi Inomata

October 2008

 

Click to access 175.pdf

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD

A DEVELOPMENT PERSPECTIVE

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz Editors

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.364.8729&rep=rep1&type=pdf#page=97

 

 

THE NATURE AND GROWTH OF VERTICAL SPECIALIZATION IN WORLD TRADE

David Hummels Jun Ishii Kei-Mu Yi

March 1999

 

Click to access sr72.pdf

 

 

TRADE INTEGRATION IN EAST ASIA:
THE ROLE OF CHINA AND PRODUCTION NETWORKS

MONA HADDAD

2007

Click to access wps4160.pdf

 

 

Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?

Prema-chandra Athukorala

No. 56 | August 2010

Click to access wp56-trade-patterns-east-asia.pdf

 

 

Trade Integration and Production Network in East Asia

Pornnapa Leelapornchai

August 2007

 

Click to access Pornnapa.pdf

 

 

Trade patterns and global value chains in East Asia:
From trade in goods to trade in tasks

 

Click to access stat_tradepat_globvalchains_e.pdf

 

 

Global production sharing and trade patterns in East Asia

Prema-chandra Athukorala

June 2013

Click to access TU_VIROT,%20Ali_Reading2_Global%20Production%20Sharing%20and%20Trade%20Patterns%20in%20East%20Asia.pdf

 

 

Global Production Networks in Electronics and Intra-Asian Trade

Byron Gangnes

Ari Van Assche

2010

 

Click to access WP_2010-4.pdf

 

 

The Role of China, Japan, and Korea in Machinery Production Networks

Ayako OBASHI†

Fukunari KIMURA

March 2016

 

Click to access ERIA-DP-2016-10.pdf

 

 

China’s evolving role in global production networks: the decoupling debate revisited

Prema-chandra Athukorala

John Ravenhill

 

Click to access 2016-12_athukorala_ravenhill_wp_june_2016.pdf

 

 

International Production Networks And Changing Trade Patterns In East Asia: The Case Of The Electronics Industry

Dieter Ernst & Paolo Guerrieri

May 1997

Click to access 19970007.pdf

 

 

UNDERSTANDING THE WORLD TRADE COLLAPSE

Calista Cheung and Stéphanie Guichard

2009

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=eco/wkp(2009)70

 

 

GLOBAL TRADE: WHAT’S BEHIND THE SLOWDOWN?

IMF World Economic Outlook Report October 2016

 

Click to access c2.pdf

 

 

A Theory of Domestic and International Trade Finance

JaeBin Ahn

2011

Click to access 0c96052274d4abea86000000.pdf

 

 

The Great Trade Collapse: Causes, Consequences and Prospects

 

Edited by Richard Baldwin

2009

 

Click to access great_trade_collapse.pdf

 

 

Understanding the Weakness in World Trade

2015

 

Click to access eb201503_article01.en.pdf

 

 

The mystery of the missing world trade growth after the global financial crisis

Hanna armelius, Carl-JoHan Belfrage and Hanna stenBaCka

2014

 

Click to access rap_pov_artikel_1_141121_eng.pdf

 

 

Resilient to the crisis? Global supply chains and trade flows

Carlo Altomonte, Gianmarco Ottaviano

27 November 2009

http://voxeu.org/article/resilient-crisis-global-supply-chains-and-trade-flows

 

 

The great trade collapse: What caused it and what does it mean?

Richard Baldwin

27 November 2009

 

 

The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun

Andrei A. Levchenko

Logan T. Lewis

Linda L. Tesar

2009

 

 

Off the Clif  and Back? Credit Conditions and International Trade during the Global Financial Crisis

Davin Chory

Kalina Manova

This version: December 2009

 

 

WHY THE WORLD SUDDENLY CARES ABOUT GLOBAL SUPPLY CHAINS

GARY GEREFFI AND JOONKOO LEE

2012

 

 

China’s Slowdown: The First Stage of the Bullwhip Effect

Yossi Sheffi

September 09, 2015

 

 

Financial Crisis and Supply-Chain Financing

Leora Klapper and Douglas Randall

 

 

The mystery of the missing world trade growth after the global financial crisis

Hanna Armelius, Carl-Johan Belfrage and Hanna Stenbacka

2014

 

 

Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession

Escaith, Hubert

OECD, DEFI, WTO

28. October 2009

 

 

SPIDERS AND SNAKES: OFFSHORING AND AGGLOMERATION IN THE GLOBAL ECONOMY

Richard Baldwin Anthony Venables

Working Paper 16611

2010

 

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD A DEVELOPMENT PERSPECTIVE

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz

2010

 

 

Accounting relations in bilateral value added trade

Robert Stehrer

2013

 

Click to access wiod14.pdf

 

 

NETWORKS OF VALUE ADDED TRADE

Working Papers 2015

João Amador | Sónia Cabral

 

 

Trade patterns and global value chains in East Asia: From trade in goods to trade in tasks

WTO Report

 

 

Counting borders in global value chains

Kirill Muradov:

May 2016

 

 

Using Average Propagation Lengths to Identify Production Chains in the Andalusian Economy

ERIK DIETZENBACHER*, ISIDORO ROMERO LUNA** AND NIELS S. BOSMA

2005

https://idus.us.es/xmlui/bitstream/handle/11441/17372/file_1.pdf?sequence=1

 

 

Trade in Value Added: An East Asian Perspective

Satoshi Inomata

No. 451 December 2013

 

Click to access adbi-wp451.pdf

 

 

TRADE INTERCONNECTEDNESS: THE WORLD WITH GLOBAL VALUE CHAINS

2013

 

 

The globalisation of inflation: the growing importance of global value chains

by Raphael Auer, Claudio Borio and Andrew Filardo

 

 

 

 

GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND OUTLOOK

Arnold Tukker a b & Erik Dietzenbacher

2013

Click to access UNSD%20-%20Tukker%20-%20Overview%20on%20International%20IO%20Tables%20-%202013.pdf