Global value chains and its policy implications
Interim Report
Edited
by
ITO
Tadashi
Published
in
March
2016
Cover / Contents (98KB)
Heckscher-Ohlin:Evidence from virtual trade in value added (377KB) / Tadashi Ito, Lorenzo Rotunno, Pierre-Louis Vézina
The
fragmentation
of
production
chains
across
borders
is
one
of
the
most
distinctive
feature
of
the
last
30
years
of
globalization.
Nonetheless,
our
understanding
of
its
implications
for
trade
theory
and
policy
is
only
in
its
infancy.
We
suggest
that
trade
in
value
added
should
follow
theories
of
comparative
advantage
more
closely
than
gross
trade,
as
value-added
flows
capture
where
factors
of
production,
e.g.
skilled
and
unskilled
labor,
are
used
along
the
global
value
chain.
We
find
empirical
evidence
that
Heckscher-Ohlin
theory
does
predict
manufacturing
trade
in
value-added,
and
it
does
so
better
than
for
gross
shipment
flows.
While
countries
exports
across
a
broad
range
of
sectors,
they
contribute
more
value-added
in
techniques
using
their
abundant
factor
intensively.
International supply chains and tariff cuts:Evidence from Factory Asia (372KB) / Lorenzo Rotunno
Governments
in
developing
countries
have
substantially
reduced
import
tariffs
during
the
last
three
decades.
At
the
same
time,
some
of
these
countries
have
gained
a
major
role
within
global
supply
chains.
In
this
paper,
I
examine
how
the
rise
of
production
sharing
across
countries
shapes
incentives
to
use
protectionist
trade
policy.
As
sectors
integrate
into
domestic
and
international
supply
chains,
they
benefit
from
access
to
cheaper
inputs
and
thus
lobby
for
lower
tariffs
on
these
products.
I
find
empirical
evidence
corroborating
this
idea
in
seven
Asian
countries
at
the
forefront
of
the
so-called
'Factory
Asia'
supply
chain.
Tariff
cuts
are
indeed
significantly
larger
as
imports
embed
a
larger
share
of
re-imported
value
added
that
goes
back
home
through
the
supply
chain.
Tariffs
decrease
also
with
the
importance
of
'back-and-forth'
trade
in
intermediates,
a
salient
feature
of
global
supply
chains.
Results
support
the
view
of
governments
acting
to
maximise
local
value
added
within
the
supply
chain.
Greater
offshoring
can
tilt
trade
preferences
of
domestic
producers
away
from
protectionist
stances.