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The policy response to global value chain disruption

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  • Uri Dadush

Abstract

This article considers how policymakers should react to the disruption of Global Value Chains, which became dramatically evident during the pandemic. It argues that repeated shocks to GVCs, as seen in recent years, are not purely random and disjointed events. They are the result of fundamental shifts in the geopolitical environment, global economy, and climate. Firms have concluded that international supply chains have become endemically riskier, and this is changing their risk/efficiency calculus. But there is no reason and – so far – little evidence to suggest that GVCs will stage a large‐scale retreat. Powerful economic forces are at work that will prompt increased reliance on GVCs and improve their operability in the future. Governments tend to overreact when faced with supply shocks, and unnecessarily impede GVCs; more nuanced and coordinated responses are needed. The WTO can play an important role, promoting the resilience of GVCs.

Suggested Citation

  • Uri Dadush, 2023. "The policy response to global value chain disruption," Global Policy, London School of Economics and Political Science, vol. 14(3), pages 548-557, June.
    • Handle: RePEc:bla:glopol:v:14:y:2023:i:3:p:548-557
    DOI: 10.1111/1758-5899.13220
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    References listed on IDEAS

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    1. Gary Clyde Hufbauer & Megan Hogan & Yilin Wang, 2022. "For inflation relief, the United States should look to trade liberalization," Policy Briefs PB22-4, Peterson Institute for International Economics.
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    Cited by:

    1. Federico Steinberg & Guntram Wolff, 2024. "Dealing with Europe's economic (in‐)security," Global Policy, London School of Economics and Political Science, vol. 15(1), pages 183-192, February.
    2. Xian‐nan Cheng & Shuhui Wen & Nuobing Fan & Yuwei Liu & Yujing Wang, 2024. "What's the influence of input's variation? Estimating the input elasticity in the global value chain," The World Economy, Wiley Blackwell, vol. 47(5), pages 2034-2062, May.

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