Competitiveness drivers and obstacles, intra-EU linkages and European value chains in GVCs

Client/Funding Institution

European Commission, DG Growth

Abstract

The emergence of international value chains (VCs) and the implied cross-border production sharing between countries has dramatically altered the international trading system. In view of the joint cross-border production processes numerous products would deserve the designation of origin ‘Made in the World’, as suggested by the WTO initiative of the same name – although in general there is the perception that international value chains are predominantly regional in scope. Since the Great Recession, however, there are concerns that the trend towards geographically-dispersed production has come to a halt with, among other factors, re-shoring initiatives and protectionist tendencies. Against this background this report analyses some of the key issues related to international VCs with data from the World Input-Output Database (Release 2016) which covers the period 2010-2014. Based to a large extent on a measure of international value chain (VC) trade termed re-exported domestic value added, which comprises exports of intermediates that cross international borders at least twice, the question whether the world has reached ‘peak value chain trade’ and to what extent VCs have contributed to the decline in the income elasticity of trade is addressed. The research also re-examines whether value chains are predominantly global or regional in scope both worldwide and at the EU level. Furthermore, the extent of regional VC integration across the major regional trading blocs is compared. Finally, some of the implications of value chain trade for structural change and competitiveness are investigated.

Duration

January 2017 - June 2017

wiiw team Leader

Roman Stöllinger

wiiw Staff

Amat Adarov, Manuela Engleitner, Doris Hanzl-Weiss, Sandra M. Leitner, Oliver Reiter, Robert Stehrer

Project Partners

Austrian Institute of Economic Research (WIFO), The Economic and Social Research Institute (ESRI)

Keywords: trade, value chains, VC, Great Recession, Input Output Database, income elasticity, structural change, competitiveness

Countries covered: EU-28

Research Areas: International Trade, Competitiveness and FDI


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