Monday, March 4, 2013

Global Supply chains and an international agreement

I have blogged about global supply chains here and here. Richard Baldwin has argued that the present multilateral trade arrangement or WTO 1.0 is incapable of addressing the reality of international supply chains and a need for WTO 2.0 is evident. He has recently written about it in EastAsiaForum here.

In a recent piece in the NYT Paul Krugman referred to the USITC report on the economic effects of significant import restraints. The USITC report explained the nature of global supply chains:
"The Apple iPod is a prominent example of a good produced via a global supply chain. Apple is headquartered in the United States and most of its R&D, marketing, top management, and corporate functions are located in the United States. The iPod’s hard drive, however, was designed in Japan by Toshiba and built in factories in China and the Philippines. The controller chip was designed by the U.S. firm Portal Player, but is produced by firms in either Taiwan or the United States. Other parts are manufactured in Japan, Thailand, Taiwan, Korea, and Singapore. Finally, the iPod is assembled by Taiwanese manufacturing firms in China."
To what extent are global supply chains impacting world trade? Is a large proportion of world trade a result of international supply chains or is it an insignificant percentage? Which are the countries involved in this supply chain? What is the developed-developing country dynamic here? Will it lead to the enhancement of the industrial base of a developing country? What would the nature of an international agreement covering supply chains be? How different would it be from an existing multilateral trade agreement?


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