COVID‐19 and global value chains: A discussion of arguments on value chain organisation and the role of the WTO

We conduct an in‐depth analysis of the reasons for changes in global value chains as a result of COVID‐19 both from a positive angle, analysing expected changes in the behaviour of firms, and from a normative angle, assessing the different arguments for policy interventions by governments. The analy...

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Bibliographic Details
Published in:World economy 2024-09, Vol.47 (9), p.3709-3746
Main Authors: Bacchetta, Marc, Bekkers, Eddy, Piermartini, Roberta, Rubinova, Stela, Stolzenburg, Victor, Xu, Ankai
Format: Article
Language:English
Subjects:
Automation
Behavior change
Costs
COVID-19
Diversification
Economies of scale
export restrictions
Global economy
global value chains
Industrialized nations
Innovations
International division of labor
International trade
Organizational behavior
Pandemics
provision of essential goods
Reorganization
Reshoring
Spillover effect
Trade policy
Uncertainty
Value
Value chain
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Summary:We conduct an in‐depth analysis of the reasons for changes in global value chains as a result of COVID‐19 both from a positive angle, analysing expected changes in the behaviour of firms, and from a normative angle, assessing the different arguments for policy interventions by governments. The analysis generates three main conclusions. First, the COVID‐19 pandemic could contribute to diversification of sources of supply whose extent will vary by sector depending on the costs of value chain reorganisation. The pandemic, by contrast, is not likely to contribute much to re‐shoring, the return of manufacturing activities to industrialised countries, which is more likely to be driven by pre‐existing trends such as rising factor costs in emerging countries, increasing uncertainty about trade policy, and robotization and automation of production. Second, the pandemic has led to increased attention to the provision of essential goods in situations of crisis. Third, the largest risk for the global economy in the aftermath of the pandemic is a move away from open, non‐discriminatory trade policies, which would jeopardise the large benefits of open trade regimes in the current global economy characterised by scale economies, innovation spillovers, and a global division of labour.
ISSN:0378-5920
1467-9701
DOI:10.1111/twec.13603