Project

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The GVC Revolution: Trade, investment and services

English title The GVC Revolution: Trade, investment and services
Applicant Baldwin Richard Edward
Number 162511
Funding scheme Project funding (Div. I-III)
Research institution Département de Relations internationales et Science politique IHEID, Graduate Institute
Institution of higher education Graduate Institute of International and Development Studies - IHEID
Main discipline Economics
Start/End 01.03.2016 - 31.08.2019
Approved amount 190'349.00
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Keywords (12)

trade governance; protectionism in times of crisis; Global Value Chains; development; internationalisation of the supply chain; regionalism; fragmentation; economic integration; production sharing; global trade liberalisation; production networks; production unbundling

Lay Summary (French)

Lead
Quel est le rôle des fournisseurs des services dans la performance à l'exportation des entreprises? Des chaînes mondiales de valeur (CMVs) signifient des usines qui traversent les frontières Nord-Sud. Nous ferons une étude au niveau des entreprises qui va illuminer comment la dépendance sur des fournisseurs des services locales diffère parmi des compagnies selon leurs caractéristiques. Ce qui, par conséquent, va aider aux décideurs à mieux cibler des politiques en faveur de la participation aux CMVs.
Lay summary

Quel est le rôle des fournisseurs des services dans la performance à l'exportation des entreprises? Des chaînes mondiales de valeur (CMVs) signifient des usines qui traversent les frontières Nord-Sud. Des CMVs permettent aux pays de devenir concurrentiels sur le plan international en se spécialisant non seulement dans des produits dans lesquels ils ont l’avantage comparatif tout au long de la chaîne d'approvisionnement, mais aussi dans des étapes de production, ou des tâches, qui ne font qu’une partie de ces chaînes. La question clé pour les décideurs du 21ème siècle est comment sculpter des politiques nationales et des accords internationaux pour assurer que des CMVs aident des pays en développement à croître. La recherche récente accentue le rôle des services qui, malgré son statut largement non exportable, font une partie importante de la valeur ajoutée des exportations. C’est pourquoi  la qualité et les prix des services sont essentiels pour la compétitivité des entreprises nationales à l'échelle mondiale. Ce projet se penche de plus près sur le rôle des services en tant que des déterminants de la compétitivité à l'échelle mondiale du secteur manufacturier, avec l’accent sur la compétitivité dedans les CMVs. En utilisant des données au niveau de l’industrie pour plusieurs pays, nous envisageons de déterminer pour quels types de la participation aux CMVs les services sont cruciaux, et comment la libéralisation des services impacte cette participation. En plus, nous ferons une étude au niveau des entreprises qui va illuminer comment la dépendance sur des fournisseurs des services locales diffère parmi des compagnies selon leurs caractéristiques. Ce qui, par conséquent, va aider aux décideurs à mieux cibler des politiques en faveur de la participation aux CMVs.

Direct link to Lay Summary Last update: 02.04.2016

Lay Summary (English)

Lead
What is the role of service suppliers for firms’ export performance? Global Value Chains (GVCs) mean factories crossing North-South borders. A key issue for 21st century policy makers is how to craft national policies and international agreements to ensure that GVCs help developing nations grow.
Lay summary

What is the role of service suppliers for firms’ export performance? Global Value Chains (GVCs) mean factories crossing North-South borders. They allow countries to become internationally competitive by specializing not only in the goods in which they have comparative advantage along the entire value chain but also in particular stages of production, or tasks, which constitute only a part of a value chain. A key issue for 21st century policy makers is how to craft national policies and international agreements to ensure that GVCs help developing nations grow. Recent research emphasizes the role of services which, despite being considered largely non-tradable, constitute an important part of the value added in exports and therefore their quality and prices are important determinants of the competitiveness of domestic firms on international markets. This project takes a closer look at the role of services in determining the competitiveness of the manufacturing sector, with an emphasis on the competitiveness within GVCs. Using industry-level data for several countries we aim at determining the type of GVC participation for which services are crucial, and how services liberalization affects such participation. Furthermore, we complement the analysis with a firm-level study which will shed light on how the dependence on domestic service suppliers varies among firms according to their characteristics. This will in turn help decision-makers target GVC-oriented policies.

Direct link to Lay Summary Last update: 02.04.2016

Responsible applicant and co-applicants

Employees

Publications

Publication
Services liberalization and global value chain participation: New evidence for heterogeneous effects by income level and provisions
Lee Woori (2019), Services liberalization and global value chain participation: New evidence for heterogeneous effects by income level and provisions, in Review of International Economics, roie.12402-roie.12402.
Preferential Trade Agreements and Multinational Production
MIROUDOT Sebastien, RIGODavide (2019), Preferential Trade Agreements and Multinational Production, in RSCAS EUI Working Papers, 2019/14, 1.
Beyond tariff reductions: What extra boost to trade from agreement provisions?
DHINGRASwati, FREEMANRebecca, MAVROEIDIEleonora (2018), Beyond tariff reductions: What extra boost to trade from agreement provisions?, Centre for Economic Performance LSE, London.
Services liberalization and GVC participation: New evidence for heterogeneous effects by income level and provisions
LEE Woori (2018), Services liberalization and GVC participation: New evidence for heterogeneous effects by income level and provisions, World Bank Policy Research Working Paper, Washington, USA.

Collaboration

Group / person Country
Types of collaboration
Organisation for Economic Cooperation and Development France (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Exchange of personnel
Asian Development Bank Philippines (Asia)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Exchange of personnel
Belgian National Bank Belgium (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Exchange of personnel
World Bank United States of America (North America)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Exchange of personnel
Bank of England Great Britain and Northern Ireland (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Publication
- Exchange of personnel

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
Empirical Micro PhD Students Workshop Talk given at a conference The role of customer base in exporter dynamics 07.06.2019 University of Cambridge, Cambridge, Great Britain and Northern Ireland Rigo Davide;
10th Research Workshop on International Trade Talk given at a conference The role of customer base in exporter dynamics 31.01.2019 Villars-sur-Ollon, Switzerland Rigo Davide;
OECD Workshop on Multinational Production Talk given at a conference Preferential Trade Agreements and Multinational Production 12.11.2018 Paris, France Rigo Davide;
DEGIT XXIII: Dynamics, Economic Growth and International Trade Talk given at a conference Preferential Trade Agreements and Multinational Production 06.09.2018 Moscow, Russia Rigo Davide;
Empirical Investigations in Services Trade: Third Biennial Conference Talk given at a conference Beyond tariff reductions: What extra boost to trade from agreement provisions? 09.07.2018 Florence, Italy Freeman Rebecca;
Forum for Research in Empirical International Talk given at a conference Trade Beyond tariff reductions: What extra boost to trade from agreement provisions? 07.06.2018 Izola, Slovenia Freeman Rebecca;
European Trade Study Group Talk given at a conference Ad-valorem equivalents of trade agreement provisions: What implications for UK trade negotiations? 14.09.2017 Florence, Italy Freeman Rebecca;
European Trade Study Group Talk given at a conference Services liberalization and GVC participation: Heterogeneous effects by income level and provisions 14.09.2017 Florence, Italy Lee Woori;
DEGIT XXII: Dynamics, Economic Growth and International Trade Talk given at a conference Services liberalization and GVC participation: New evidence for heterogeneous effects by income level and provisions 07.09.2017 Paris, France Lee Woori;
DEGIT XXII: Dynamics, Economic Growth and International Trade Talk given at a conference Ad-valorem equivalents of trade agreement provisions: What implications for UK trade negotiations? 07.09.2017 Paris, France Freeman Rebecca;
International Conference on Services, Investment and Global Value Chains Talk given at a conference The impact of services liberalization on GVC participation 28.07.2016 New Delhi, India Lee Woori;
International Input-Output Conference (IIOA) Talk given at a conference The impact of services liberalization on GVC participation 04.07.2016 Seoul, Korean Republic (South Korea) Lee Woori;


Communication with the public

Communication Title Media Place Year
New media (web, blogs, podcasts, news feeds etc.) Beyond tariff reductions: What extra boost to trade from agreement provisions? Vox EU International 2018
New media (web, blogs, podcasts, news feeds etc.) Services liberalisation and global value chain participation: Heterogeneous effects by income level Vox EU International 2018

Associated projects

Number Title Start Funding scheme
159346 Global Value Chains and Firm Performance in Developing Countries 01.09.2015 Project funding (Div. I-III)
135148 Production Sharing, Global Trade and Trade Governance 01.09.2011 ProDoc

Abstract

The ‘Global Value Chain (GVC) Revolution’ transformed trade and development since the late 1980s by internationalizing production across North-South borders. Before 1985, trade mostly meant made-here-sold-there parts and final goods crossing borders. Now it also means factories crossing borders, so flows that used to take place only inside G7 factories - flows of goods, knowhow, investment, training, ideas, and people - are now key parts of international commerce. Firms from high-wage nations could combine their firm-specific know-how with low wages in developing nations and this partly de-nationalised comparative advantage. It also transformed development. Instead of having to build a whole domestic supply chain, developing nations can now industrialise by joining a GVC. This project gathers four sub-projects that empirically investigate distinct aspects of this transformation with the goal of better understanding the overall phenomenon and its implications for trade and development. Sub-project A looks for interactions between GVC participation and firm-level margins of adjustment using the 2008-09 Great Trade Collapse as the exogenous variation that enables identification. The study is inspired by the cutting-edge article on adjustment margins in Argentina (Gopinath and Neiman, 2014), but goes further since it uses uniquely detailed Turkish data. We have information on exports and imports by all Turkish firms distinguished by destination/origin and by product (i.e. 12-digit HS level), and can match this with firm-performance measures (e.g. sales, employment, salaries, value added, investment, foreign stake, the age and location of the firm, etc.). The goal is to identify the determinants of the intensive and various extensive margins of adjustment in Turkish exports, imports and production with special emphasis on the role of GVC-participation. Specifically, we test whether GVC participation allowed Turkish exporters to better weather the Trade Collapse. Sub-project B, which is also based on a unique dataset, studies the domestic and foreign supplier networks of Belgian exporters. The phenomenally detailed data, based on VAT information and held by the National Bank of Belgium, has annual data on all business-to-business transactions among all firms in Belgium from 2002-2012, including information on imports and exports. Firm-identifiers match this to the detailed Belgian data on firm characteristics. As no previous study has had access to such detailed data, this will be the first research paper to track all domestic business-to-business transactions among the whole population of firms in an economy while still being able to know important firm-level characteristics. After identifying suppliers to direct exporters, and the supplier of the suppliers, etc., we will test whether the standard Melitz size/productivity effects for direct exporters also holds for their domestic suppliers, i.e. for indirect exporters. Special emphasis will be placed on interaction effects involving GVC participation by Belgian firms.Sub-project C will study the empirical impact of GVC-linked FDI on development-relevant outcomes (firm productivity and export performance). The key value added turns on two novel indicators that measure the GVC engagement of FDI and foreign affiliates. The first is constructed by combining ORBIS information on corporate linkages with information from input-output tables. The second uses foreign-affiliate information on domestic and foreign sourcing and selling. Sub-project D concentrates on the role of services in GVCs and trade more broadly in developing nations. It seeks to identify the determinants of services-value-added embedded in exports, with special emphasis on GVC participation; this uses public TiVA data augmented by special access stemming a Memorandum of Understanding between the OECD TiVA team and the Graduate Institute, signed last year. It also quantifies the impact of services trade liberalization on developing nations’ GVC participation. Finally, it uses the detailed Belgian data to study the impact of domestic services on firms’ export competitiveness in foreign markets and GVC participation.
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