Global Supply Chains: Trade And Economic Policies For Developing Countries

Over the last three decades, global supply chains (GSCs) have increasingly gained importance in linking developing countries to international markets. Today a substantial share of the production processes of GSCs is taking place in developing countries. For developing countries and their enterprises, GSCs offer opportunities as well as challenges. While greatly facilitating access to developed countries’ markets, GSCs also demand greater efficiency and competence from suppliers. For developing countries, it is thus important to implement economic policies that while increasing the competitiveness of their enterprises, also improve their reliability and efficiency. In the past, the competitiveness of developing countries’ enterprises was mainly based on trade policies, often in the form of preferential market access. Trade policies, although still important, are no longer sufficient. The reason is not only because of the preference erosion and decline of tariffs, but also because of the GSCs business model itself. In GSCs, competitiveness (and thus delocalization choices) is determined by a wide range of factors, especially by the quality of policies influencing the overall business environment. In this regard, LDCs and other lowincome countries are often confronted with substantial disadvantages as implementing these policies require substantial resources that are lacking. In the absence of business supporting national policies, LDCs and low-income countries would continue to participate in GSCs only as providers of low value added components that have only a limited contribution to their development.