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Global supply chains: Why they emerged, why they matter, and where they are going

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  • Baldwin, Richard

Abstract

Global supply chains (GSCs) are transforming the world. This paper explores why they emerged, why they are significant and future directions they are likely to take along with some implications for policy. After putting global supply chains into an historical perspective, the paper presents an economic framework for understanding the functional and geographical unbundling of production. The fundamental trade off in supply chain fractionalisation is between specialisation gains and coordination costs. The key trade-off in supply chain dispersion is between dispersion and agglomeration forces. Supply-chain trade should be not viewed as standard trade in parts and components rather than final goods. Production sharing has linked cross-border flows of goods, investment, services, know-how and people in novel ways. The paper suggest that future of global supply chains will be influenced by: 1) improvements in coordination technology that lowers the cost of functional and geographical unbundling, 2) improvements in computer integrated manufacturing that lowers the benefits of specialisation and shifts stages toward greater skill-, capital, and technology-intensity, 3) narrowing of wage gaps that reduces the benefit of North-South offshoring to nations like China, and 4) the price of oil that raises the cost of unbundling.

Suggested Citation

  • Baldwin, Richard, 2012. "Global supply chains: Why they emerged, why they matter, and where they are going," CEPR Discussion Papers 9103, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9103
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    References listed on IDEAS

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    1. Henrik Horn & Petros C. Mavroidis & André Sapir, 2010. "Beyond the WTO? An Anatomy of EU and US Preferential Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1565-1588, November.
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    1. Institutions of capitalism
      by Diane Coyle in The Enlightened Economist on 2013-04-02 11:05:21

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    Cited by:

    1. Anna Valero & John Van Reenen, 2016. "The Economic Impact of Universities: Evidence from Across the Globe," NBER Working Papers 22501, National Bureau of Economic Research, Inc.
    2. Kym Anderson, 2016. "Contributions Of The Gatt/Wto To Global Economic Welfare: Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 56-92, February.
    3. Manova, Kalina & Yu, Zhihong, 2016. "How firms export: Processing vs. ordinary trade with financial frictions," Journal of International Economics, Elsevier, pages 120-137.
    4. repec:rif:bbooks:275 is not listed on IDEAS
    5. Emanuela Todeva & Ruslan Rakhmatullin, 2016. "Industry Global Value Chains, Connectivity and Regional Smart Specialisation in Europe. An Overview of Theoretical Approaches and Mapping Methodologies," JRC Working Papers JRC102801, Joint Research Centre (Seville site).
    6. Taguchi, Hiroyuki & Murofushi, Harutaka, 2014. "International production networks in ASEAN economies," MPRA Paper 64409, University Library of Munich, Germany.
    7. Fernández-Amador, Octavio & Francois, Joseph F. & Tomberger, Patrick, 2016. "Carbon dioxide emissions and international trade at the turn of the millennium," Ecological Economics, Elsevier, vol. 125(C), pages 14-26.
    8. repec:oup:erevae:v:44:y:2017:i:4:p:592-633. is not listed on IDEAS
    9. Fally,Thibault & Hillberry,Russell Henry, 2015. "A Coasian model of international production chains," Policy Research Working Paper Series 7434, The World Bank.
    10. Anderson, Kym & Strutt, Anna, 2014. "Impacts of Asia’s Rise on African and Latin American Trade: Projections to 2030," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165805, Australian Agricultural and Resource Economics Society.
    11. Lionel Fontagné & Ann Harrison, 2017. "The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry," NBER Working Papers 23016, National Bureau of Economic Research, Inc.
    12. Bernard Hoekman & Ben Shepherd, 2013. "Who Profits From Trade Facilitation Initiatives?," RSCAS Working Papers 2013/49, European University Institute.
    13. Maria V. Sokolova, 2016. "Trade Re(Im)Balanced: The Role of Regional Trade Agreements," IHEID Working Papers 06-2016, Economics Section, The Graduate Institute of International Studies.
    14. Maria V. Sokolova, 2016. "Exchange Rates, International Trade and Growth: Re-Evaluation of Undervaluation," IHEID Working Papers 05-2016, Economics Section, The Graduate Institute of International Studies.
    15. Géza Rippel, 2017. "China – Rebalancing and Sustainable Convergence," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(Sepcial I), pages 50-72.
    16. Zhan Qu & Horst Raff & Nicolas Schmitt, 2015. "Inventory Control and Intermediation in Global Supply Chains," CESifo Working Paper Series 5269, CESifo Group Munich.
    17. Ana Luiza Cortez & Mehmet Arda, 2014. "Global trade rules for supporting development in the post-2015 era," CDP Background Papers 019, United Nations, Department of Economics and Social Affairs.
    18. Lionel Fontagné & Gianluca Santoni, 2017. "Value Added in Motion: Determinants of Value Added Location within the EU," Development Working Papers 424, Centro Studi Luca d'Agliano, University of Milano, revised 24 Feb 2017.
    19. J. De Mulder & C. Duprez, 2015. "Has the reorganisation of global production radically changed demand for labour?," Economic Review, National Bank of Belgium, pages 67-81.
    20. Basco, Sergi & Mestieri, Marti, 2013. "Mergers along the Global Supply Chain: Information Technologies and Routineness," TSE Working Papers 13-428, Toulouse School of Economics (TSE), revised Nov 2013.
    21. Tuhkuri, Joonas, 2016. "Trade and Innovation: Matched Worker-Firm-Level Evidence," ETLA Working Papers 39, The Research Institute of the Finnish Economy.
    22. Bernard Hoekman & Ben Shepherd, 2013. "Who Profits From Trade Facilitation Initiatives?," RSCAS Working Papers 2013/49, European University Institute.
    23. Anke Schaffartzik & Dominik Wiedenhofer & Nina Eisenmenger, 2015. "Raw Material Equivalents: The Challenges of Accounting for Sustainability in a Globalized World," Sustainability, MDPI, Open Access Journal, vol. 7(5), pages 1-26, April.
    24. Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.

    More about this item

    Keywords

    global supply chains; globalisation; second unbundling;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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