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Companies spread operations around the world in ways that create serious policy challenges. The declining costs of communication and transportation have encouraged companies to progressively expand the assembly and delivery of goods and services around the world. The World Trade Organization and the Organisation for Economic Co-operation and Development have played important roles in facilitating these global value chains - which pose policy challenges to these same institutions in relation to sustainability, tax structures, and labour markets. They also raise thorny issues when economies turn to protectionism, and in the wake of weighty decisions like the Brexit vote. The complexity of medical supply chains in particular has raised serious concerns amid the COVID-19 crisis, as countries in need have sought goods in times of perceived shortage and amid occasional bidding wars. In the early days of COVID-19, trade was disrupted by export bans, the seizure of goods, and other hiccups in ways that effectively violated commitments under both the WTO and regional structures including the European Union’s single market. The ownership of intellectual property (like vaccines) has also come under heightened scrutiny, in a world where different stages of medical research and related data often cross national borders. Some have suggested that trade negotiations should no longer be pegged to a particular geographic area and should instead focus on trade along a specific supply chain - and even address a single industry, such as clean energy or textiles. Global value chains can help facilitate the integration of developing countries into global markets, by enabling them to specialize in services and semi-finished goods rather than entire products. They also provide a means to spread knowledge and standards, and can propagate more sustainable practices (a report published by the United Nations Global Compact in 2015 called supply chains one of the most important levers for business to create positive impact in the world). However, there is a risk that companies will simply opt to route supply chains through areas where sustainability standards are the lowest; it remains unclear whether the self-regulation of sustainability standards is sufficient to achieve the United Nations’ Sustainable Development Goals. There are also concerns about financial dimensions - value chains have been used to manipulate corporate tax burdens in less-than-equitable ways by reporting profits only in low-tax geographical areas, for example.

Global Value Chains

KEY TRENDS

Trade and Investment