Global Value Chain Participation and Trade Policies
Xuepeng Liu
Overview
In today’s world economy, production fragmentation allows more in-depth specialization, and allocating segments of a process across countries generates greater efficiency than traditional trade. This new development allows a country to join a supply chain by producing a component rather than an entire product. Countries in East Asia, for example, have enjoyed fast economic growth in recent decades partly because many of their firms are indispensable links in global value chains (GVCs). However, product fragmentation sometimes requires intermediate goods to cross national borders several times. If tariffs apply at each crossing, they quickly compound. In addition, tariffs may be applied to gross imports, even though value added by the direct exporter accounts for only a fraction of this amount. Joining GVCs is critical for an economy’s success, so proper trade policies should be in place. In this project, we investigate how trade policies affect a country’s global value chain participation (GVCPt) and export and economic performance. First, we will analyze China’s trade policies and then study how other countries, including developed countries, should design policies to help firms to integrate further into GVCs to compete globally.
22 | Summer Research Fellowship
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