Article Type : Research Article
Authors : Puslecki ZW
Keywords : Foreign trade policy; Global supply chains; Anti-protection forces; Cooperation in trade policies; Multilateral trade negotiations; Bilateral trade policy
The main focus of the article is to highlight the rise of global supply chains and the growing importance of bilateral agreements in foreign trade policy. The topic of discussion and theoretical contribution to the research program conducted introduces novelties in international affairs: the rise of global supply chains, the impact of emerging global supply chains on the political economy of trade, the motivations of countries to cooperate in trade policies, the emergence of global supply chains and the growing importance of partnership agreements in foreign trade policy. It is important to point out Few multinationals are responsible for a significant share of global trade and the rise of global supply chains. On the one hand, these companies need to support regulatory coordination between the various preferential trade agreements (PTAs) to reduce trade costs. On the other hand, they can also resist coordination - and encourage some non-tariff measures - to prevent new competitors from entering the markets. This may partly illuminate the persistence of regulatory divergence and propose that the political economy of regulatory convergence, particularly under conditions of increasing global supply chains, may be more complex than is sometimes recommended.
International trade during the emergence of global
supply chains interacts with many other policy areas, such as macroeconomic
policy, intellectual property, environmental protection, health and employment.
In some of these policy areas multilateral systems are well developed, while in
others multilateral cooperation is more active and institutional structures are
less developed. The fragmented, decentralized and non-hierarchical nature of
the international trading system makes it particularly difficult to pursue
consistency, fragmentation has the advantage of allowing experimentation as
different policies can be tested bilaterally, regionally and multilaterally.
There are several political institutions and processes to strengthen exchange
rate control and reduce global imbalances. However, as global supply chains
emerge, the question arises whether they will be used to create a more
cooperative exchange rate system internationally and what role the WTO will
play in this system. There is an increasing number of disputes within the WTO
involving measures relating to environmental goods or policies. The challenge
of getting a deal is heightened by the need to solve difficult questions during
the rise of global supply chains about the effectiveness of various policies
and their impact on trading partners, and their answers depend on several
factors, such as technology involved and the characteristics of the sector and
markets involved.
The article presents new trends in international
affairs, the impact of increasing global supply chains on the political economy
of trade, the motivations of countries to cooperate in trade policies, and the
growing importance of bilateral agreements in foreign trade policy. . The
general theoretical approach will be of broad interest to economists interested
in international and institutional issues, as well as to political scientists.
The main method applied in this research was the scientific study method. The
institutional method, the comparative method, the documentation method and the
statistical methods were used. The descriptive method was also applied. In
addition, he also used deductive and inductive forecasting methods.
The
emergence of global supply chains as a new trend in international affairs
Countries and producers are specializing in some
stages of production depending on their comparative advantage [1,2]. The
significance and scope of this development for foreign trade policy. It is also
important to point out that the costs of transport and energy, for example, are
the reasons why supply chains remain regional rather than global. Combines
increasing returns along with the migration of capital, labour and
transportation costs into a single model. Krugman's model has become the
backbone of economic geography and international trade [3]. The model is too
complex to explain here, but the reasons for this complexity are obvious: when
everything is present the small initial differences become "internal"
which can produce large effects. To reduce transportation costs, for example,
businesses want to locate close to consumers, but consumers want to locate
businesses nearby. Therefore, there are multiple equilibria and, at a critical
point, the positioning decisions of a single company or a single consumer can
have significant effects. A related trend is also the new form of regionalism
sometimes referred to as the development of the integration process [4]. The
main trend of international trade should be the rise of a number of emerging
markets and the concomitant increase in their shares in world trade. China in
particular, but also India and Brazil have changed the balance of power in the
multilateral trading system. Trends in trade formation show that trade in services
has grown faster than trade in goods over the past two decades. In this
context, it is important how developments in information and communication
technologies have enabled the rapid expansion of trade in services. This trend
in the future could be driven by rising energy costs. Furthermore, the share of
services in the inputs and outputs of manufacturing firms has increased.
Digitization and 3D printing are examples of the growing grey area between
goods and services. Whether they are classified as one or the other is
important as different regulatory systems can be applied. As for natural
resources, it shows that their prices have risen and food prices are becoming
more volatile. The open question is how high and volatile agricultural
commodity prices raise concerns about food security in developing countries and
how these prices affect rising global supply chains. A similar development can
be seen in foreign direct investment. Inflows and outflows from developing
countries now account for a large share of total FDI, and FDI among developing
countries is expanding rapidly. Associated with this development is the
industrialization of developing countries and the deindustrialization of
developed countries which are once again closely linked to global supply
chains. However, this growth is limited to a few. It caused even greater
differences between developing countries, with emerging countries growing and
least developed countries struggling. The distributive effects of trade play an
important role in the broader social and economic context. It is important to
examine how the recent sharp rise in unemployment rates in developed countries
is related to trade and what this could mean for attitudes to trade. While
there is no conclusive evidence that trade contributes significantly to changes
in long-term unemployment or income inequality, public concerns about current
levels of unemployment and income distribution in a number of countries are
likely have an impact on the definition of commercial policies. Another
continuing trend is the growing importance of consumer concerns (regarding the
environment or food safety, for example) which has led to the proliferation of
public policy measures affecting trade [5]. Global supply chains can exacerbate
the problem when large companies impose special standards across all of their
supply chains. Another trend is stiff competition for rare natural materials.
The impact
of increasing global supply chains on the political economy of trade
The industrialization and surprising growth of an
emerging fish, coupled with the rapid expansion of trade in services and
foreign direct investment, are closely related to post-production intensive
growth. The focus here will be on how the emergence of global supply chains
affects the political economy of trade and countries' motivations for
cooperation in trade policies [6]. There are theories and evidence that
participation in global supply chains tends to strengthen anti-protection
forces. These forces have helped promote some multilateral trade openness
within the WTO, both in a specific area and in broader accession negotiations
(with 32 governments joining the WTO since its inception on the 15th April 1995
in Marrakech). However, the main impact has been on unilateral tariff cuts (mostly
between developing countries) and on the spread of PTAs (preferential trade
agreements) and bilateral investment treaties [7,8]. Therefore, a large amount
of trade openings occurred outside the WTO. The internationalization of supply
chains is very important for rapid economic development and industrialization
in developing countries. Before the advent of supply chains - and the
Information and Communication Technology (ICT) revolution on which it was based
- manufacturing involved building a solid industrial base often behind tariff
protection and other non-tariff measures [9]. The disintegration of global
production has allowed countries to industrialize by joining international
supply chains. This process has also changed the political economy of trade
policy, creating a powerful incentive for unilateral tariff cuts in many
developing countries. There are three mechanisms through which deconsolidation
of production can lead to unilateral tariff cuts. First, relocation is likely
to change the pressure on trade policy in the host country. The shift in
production turns importers of the products in question into exporters. As a
result, the pressure for import tariffs on these goods is easing and the
pressure for upstream tariff reductions is increasing. However, this effect is
more limited in cases where governments establish export processing zones to
exploit the increased production opportunities offered by supply chains.
Secondly, lower coordination and communication costs can also have an effect on
lobbying. As trade costs rise, end product manufacturers can support the
protection of the nascent intermediate product industry if they believe it can
lower the price of domestically produced intermediate goods relative to
imports. However, lower coordination and communication costs could break the
alliance of interests behind high trade barriers and induce downstream
producers to lobby against tariffs on intermediate goods. Third, offshoring
improves the competitiveness of developed countries' products by reducing their
costs, thus undermining import substitution strategies in developing countries.
Developing country governments can respond by lowering tariffs on final goods
or, alternatively, by lowering tariffs upstream to improve the competitiveness
of national final goods. Empirical evidence seems to confirm that pressure is
indeed an important determinant of trade policy. There is evidence to suggest
that supply chains may explain why the recent financial crisis has not led to
significant protectionism even though many countries have been careful in their
tariffs, which means they can increase them without violating WTO commitments.
While the unilateral tariff cuts were clearly a positive step in the direction
of more open trade, they It could also have complex multilateral tariff cuts
and reciprocity in the World Trade Organization. It should be emphasized that
those developing countries have already significantly reduced tariffs, forcing
exporters from least developed countries to fight for them in multilateral
negotiations. Developed country exporters also see less value in asking
developing countries to commit to lower tariffs because they do not believe
developing country governments have strong incentives to raise them.
Interestingly, foreign investment can induce governments to unilaterally cut
tariffs, thereby reducing the incentive to share tariff reductions within the
WTO. Current theoretical work suggests that a government's optimal rate
decreases when its constituents hold a stake in an external market, leaving it
with fewer incentives to manipulate terms of trade. Expanding the
terms-of-trade model of trade agreements to include international property
agreements shows that by eroding large countries' incentives to improve terms
of trade by raising tariffs, international ownership can also reduce their
incentive to sign exchanges. It should be emphasized that reciprocity
calculations in tariff negotiations should take into account international
ownership patterns and trade flows. Unilateral tariff cuts, insofar as they are
not binding in the WTO, They tend to increase the level of caution in tariffs
for developing countries - the difference between the level of tariff adherence
and the level of enforcement - which in turn has complicated the Doha Non-Agricultural
Development Agenda. Market access negotiations. In the early days of the DDA, a
discussion focused on whether and how credit should be given to open
independent trade [10]. Even when WTO members agreed to negotiate binding, not
imposed tariff reductions, the underlying problem did not disappear but
re-emerged in a different form. Members began to discuss the value of the
reductions in the tied rates which did not involve reductions equivalent to the
corresponding rate applied. The changing dynamics of trade policy induced by
the internationalization of supply chain agreements have led not only to
unilateral tariff cuts, but also to tariff cuts negotiated within the WTO (for
example, the Information Technology Agreement) and , above all, in trade. Fast
spread differential. While these PTAs in many cases, particularly in Asia, are
aimed at mutual integration and regulation, they usually include a traditional
tariff component as well. In other cases, such as preferential trade agreements
in Africa, tariffs are central to the agreements. Preferential tariffs pose
many challenges to the multilateral trading system. A concern, widely discussed
in the economic literature, about the systemic effects of preferential tariff
cuts, concerns the links between discriminatory and non-discriminatory tariff
cuts. Many different mechanisms have been identified through which preferential
trade agreements promote or hinder multilateral trade openness. Although the
evidence for the relative magnitude of these effects is not conclusive, there
is a common feeling among observers about the need to improve coherence between
the PTAs and the WTO.
Increase the
importance of bilateral agreements in foreign trade policy
Theoretical
approaches that provide a rationale for trade agreements interesting insights
into the impact of emerging new entrepreneurial forces. A first contribution in
this field was made by [11]. It analyses the relationship between the potential
distributions of economic power, defined by the size and level of development
of individual countries, and the structure of the international trade system,
defined in terms of openness. He argues that while a system of hegemony (in
which a dominant player controls smaller states) is likely to result in an open
trading system, a system consisting of very few very large but unequal states
is likely to result in a closed structure [12]. But since Krasner, the
literature on open economy policy has remained largely silent about how the
rise of emerging powers in the twenty -first century will affect international
economic relations. The fact that governments respond to the
internationalization of supply chains by signing deep integration agreements at
the regional level is generally consistent with the limited amount of theory
available on the subject. Importantly, deep rather than superficial integration
agreements and more individual rules are needed to address the political
problems associated with the internationalization of supply chains [13].
Countries heavily involved in supply chain trade may find it difficult to rely
solely on the GATT / WTO general to address their trade-related issues and may
turn to multiple PTAs to get the deep, tailored deals they need. An important
consequence of the terms of trade theory is that surface integration, that is,
tariff commitments, can lead to efficient policies at the international level.
However, believe that this figure does not hold up in the presence of
offshoring and, more generally, when international prices are set by bargaining.
If producers are in business with foreign firms - and prices are set by
bargaining - there are incentives to manipulate both the intermediate and final
product markets to divert the trading surplus. Governments can also attempt to
pursue redistribution goals through trading partner policies. Deep integration
agreements are needed to resist these pressures. However, this in turn means
that negotiations must cover a wider range of national / internal measures than
those normally covered by trade agreements. Therefore, the emergence of
relocation raises a direct and indirect challenge to the WTO. It exerts direct
pressure on the WTO to evolve towards deeper integration and more individual
agreements. It also exerts indirect pressure on the WTO to develop in this
direction, with member governments turning to PTAs to solve their trade-related
problems. It is interesting to explore the impact of the proliferation of deep
regional agreements on cohesion in international trade governance. The WTO has
suggested that the new rules of international trade be negotiated and decided
outside the WTO, where the differences in power are greatest and where the
principles of non-discrimination and reciprocity are absent. He also stated
that the PTAs are here to stay. Governments will need to ensure that regional
agreements and the multilateral trading system are complementary and that
multilateral controls minimize the negative effects of PTAs. Although the
available literature indicates that deep integration rules are often
non-discriminatory - for example, provisions in service areas or competition
policies often extend to non-members. - Some regional provisions may contain
discriminatory aspects contrary to the multilateral trading system. It has been
shown that PTAs that make it more difficult to apply emergency measures to PTA
partners can shift protectionist measures towards non-members [14]. Deep
judgments can also have many negative systemic effects. For example, the
significant effects of regional regulatory coordination can make the
development of multilateral rules more difficult. PTAs may not include third
party most favoured nation (MFN) clauses and thus effectively discriminate
against other countries. Developed country exporters may see bilateral and
regional agreements rather than multilateral agreements as quicker and easier
ways to achieve their goals, further weakening the principle of
non-discrimination. Regarding service supply chains, some argue that their
growth creates an additional need to review and update existing rules for trade
in services, as these rules are designed for a world where services are
exported as products. Endings from domestic companies, not world. Where
multiple companies provide the production stages of services from multiple
locations. Recent research on how differences between firms affect trade
policies has revealed related concerns. Highlights another difference between
deep integration at the regional level and at the multilateral level [15].
While heterogeneous corporate trading patterns suggest that more emphasis
should be placed on broad-spectrum rather than marginal responses to trade
openness, there is evidence to suggest that PTAs have positive effects on
margin intensification and negative effects on broad margin, while vice versa.
He’s right. Openness in a multilateral context [16,17].
During the emergence of global supply chains, the
development of different business models made it possible to explore the
effects of differences in firms on the political economy of trade. It should
not be specified that commercial opening has two opposite effects on national
companies in the same sector. First, the cost of exporting decreases, which
allows more companies to export and increases the sales of certified exporters.
Secondly, competition increases to the detriment of local businesses. Which of
these channels dominate an individual company based on the characteristics of
the company, such as size? As a result, pressure competition arises not only
between sectors, but also within sectors where some firms benefit and others
lose to trade. This effect can occur in particular in the context of fixed
costs because they increase entry costs and thus protect existing producers or
exporters from competition. Businesses increasingly productive during the rise
of global supply chains are opposed to more open trade when it comes to
reducing non-tariff measures because the impact of competition outweighs that
of sales. It is the companies close to the export moratorium, that is, those in
balance considering the costs of exports, which benefit and support the opening
of trade. These findings can be used to explain a constant feature of trade
policy, which is the reluctance to accept the opening of trade in homogeneous
goods and during the rise of global supply chains. The emergence of supply
chains exacerbates the problem and can weaken reciprocity in trade
negotiations. It should be emphasized that the largest companies, being
involved in global production networks, support non-tariff measures to protect
their foreign branches. The mechanism is similar to the one described above:
multinational subsidiaries have fewer problems in overcoming fixed export costs
than less productive competitors. In the conditions of rising global supply
chains, large corporations are promoting non-tariff measures not only to reduce
internal competition, but also to protect their foreign subsidiaries from
export competition. An implication of this argument is that reciprocity rules
based on market access may be insufficient to address the distributive effects
of NTMs because reciprocal tariff concessions cannot explain these effects.
Overall, these theoretical studies suggest that although large firms have cut
tariffs, they may not support a reduction in non-tariff measures affecting
fixed costs. Large companies can more easily pay high costs to adapt products
to different specifications and thus benefit from less competition. The
integration of China and India into the global trading system can increase
aggregate welfare in the rest of the world by 0.4%, but income factors in
individual sectors can decrease or increase by more than 5%. Therefore, it will
be important to address relative wage pressures and structural adjustment needs
due to greater trade integration. The benefits of trade liberalization are
conveyed through various channels, such as the shift of production from low to
high positions, the shift of factors of production to sectors and firms with
higher productivity and income due to the increasing size of the market which
advocates greater specialization, faster deployment of technology and greater
incentives to invest in non-competitive assets. The former mostly include
static effects of international trade in goods, services and factors of
production, while the latter involve dynamic growth effects. Large static and
dynamic gains in efficiency, especially for southern countries, can be achieved
through further liberalization of multilateral trade, while global welfare
gains from regional agreements are very limited by trade diversion. While
promoting multilateral trade liberalization has proved difficult in the recent
past and regional agreements have been frequent, the former should remain a
priority due to these increased benefits and despite the practical challenges
of seeing such reforms in a multipolar world. These results are based on a
scenario of partial liberalization of multilateral trade based on multilateral
reductions in tariffs (50%) and transaction costs (25%) with respect to the
voice line.
Importantly, fiscal consolidation will require
significant efforts in many countries. Fiscal pressures will build up in
opposite areas over the next few decades, unless broad fiscal reforms are
pursued. Growth in Asia could be further hindered by the damage caused by
environmental degradation due, among other things, to climate change, which is
likely to hit this country sooner than expected. By 2060, environmental damage
in South and Southeast Asia could reduce GDP by more than 5%.
The need for companies to regulate their supply chains
in different countries has led to the demand for regional agreements that cover
more than preferential tariffs. Harmonization of investment, intellectual
property and services rules and regulations has become a standard part of new
trade agreements. Differences between companies engaged in trade are also
important for future development. The picture that emerges from trade is that
although many firms are indirectly involved in trade-related activities, only
relatively few firms export or import and these firms tend to be larger and
more productive than others. These companies also play a role in technological
advancement and the dissemination of knowledge across supply chains. It should
be emphasized that if trade during the rise of global supply chains is seen by
a majority of voters as a cause of unemployment and / or growing inequality,
governments can refrain from seeking greater trade openness and may be tempted
by protectionism. As for the growing pressure on protectionism, there is some
evidence that the WTO has played an important role in recent years in
preventing the protection barrier. WTO rules and government commitments,
coupled with strengthened oversight mechanisms, may be at least partly
responsible for limited protectionist responses to the crisis. A question that
may arise in the future is whether governments will resort to measures that are
currently undisciplined or not verified by WTO rules. Pressure on the WTO to impose
or enforce controls in new areas and in rising conditions will increase the
global supply chain, as is the case now with regard to exchange rate
imbalances. Another possibility is that governments use more intensive public
policies for protection purposes. As regards trade negotiations, it may not be
possible to focus solely on the efficiency effect of trade opening. Effects on
distribution and the labour market will also need to be considered, and
accompanying measures may need to be proposed to gain majority voter support
for open trade, especially in the context of increasing global supply chains.
While most accompanying measures are outside the scope of the WTO, mechanisms
available within the WTO to facilitate adaptation, such as implementation periods
and flexibilities, may have a role to play. It should be stressed that in the
new WTO, the different members must find common ground in new areas of
negotiation, especially in the conditions of growing global supply chains. The
process of these negotiations must begin with internal trade adaptation and
development policies and continue exploiting all available incentives, from
regional trade agreements to aid for trade and through new forms of cooperation
between developed, developing and emerging countries. Such as China, India,
Brazil, Mexico and South Africa. The economic incentives to liberalize
multilateral trade during the rise of global supply chains remain strong, and
the new common international economic power is more generally a big win for its
success within the WTO multilateral trading system, but the strength of the WTO
has a symbolic character. As global supply chains emerge, institutional reforms
will be needed to restore the WTO's ability to complete multilateral trade
agreements, including a more flexible application of the consensus rule, a
common understanding among all developed and developing members. Development on
the boundaries of the internal and negotiable political space, and clearer
rules on reciprocity in bilateral and regional trade agreements, which has
emerged as an alternative to WTO multilateral agreements, poses a threat to the
importance of the WTO in trade negotiations, but it is also an opportunity for
a new and deeper international contract. Trade integration in future WTO
agreements. Aid for Trade can also play an effective role in bringing more
developing countries into WTO disciplines. It should be emphasized that WTO
members need to develop new avenues especially with developing countries,
through financial, economic and trade assistance to them also due to the
importance of agriculture, the emergence of global supply chains , to find
common ground of negotiation for the mutual benefit from foreign trade and
especially from New models of foreign trade policy. Current trends in the
global economy and world politics provide evidence that emerging markets have
finally arrived globally, bringing with them new patterns of unequal
development, inequality and injustice. Its newly trusted elites, now fully
involved in global trade, investment and finance circles, as well as global
governance, appear to have given up their former role. The emerging countries
suffered less and recovered more quickly. Furthermore, it now appears that
patterns of political influence are not in the sense of immediate crisis
measures, but that very large long-term changes may be equally important and
unpredictable. The economic crisis of the world economy contributed to the
penetration of the first and second centuries of the 21st century into the
stimulus plans of the countries' economy, which led to the strengthening of
mutual relations. The point of fact are major trends in the trading system.
Their business ties are too important to become hostage to political renewal or
the polite rhetoric of politicians performing in local galleries. Disruption of
this report will have repercussions on sales, growth and employment,
particularly at the time of COVID-19. Commercial interests in authoritarian
regimes cause political dilemmas, especially in the days of COVID-19. Companies
compare the cost savings of global supply chains - the wage differential in
low-wage countries versus local market wages, including transportation costs -
with the cost savings of using robots instead of workers in manufacturing. The
global crisis was a complete shock to this cost-saving comparison. Global
supply chains have become more expensive as the risk of non-delivery of the
input good has increased since the global crisis. Businesses may also have
expected higher tariff rates after the global crisis, which has eroded the
advantage of global value chains where inbound goods cross borders many times
over. At the same time, the global crisis has made it cheaper to build robots,
with interest rates plummeting relative to wages as central banks begin to
fight the negative effects of the crisis. As a result, many companies in rich
countries have started to bring production back to their home countries and
have instead invested in robots. In the wake of COVID-19, uncertainty in the global
economy has led many companies to re-evaluate their business models. Instead of
relying on global supply chains, an increasing number of companies have
invested in robots, which has led to a resurgence of industrialization in
industrialized countries. Changes in the global economy due to COVID-19 make a
V-shaped recovery from the impending emergency, most likely in the U and L
services. Conversely, COVID-19 will accelerate the process that began after the
global crisis by encouraging businesses to resume resettlement activities in
rich countries. In the conflict between Russia and Ukraine, much has depended
on the position of the United States and its allies. If they don't accept a
compromise, which Ukraine will pay for, it will be a long guerrilla war. The
conflict with the West, which has already passed to the military phase in
Ukraine and will continue to play in parallel in the political, diplomatic,
media, economic and virtual world (there, due to the hacking attacks, it
actually lasted a long time) , could eventually deplete Russian forces and
resources. In this scenario, it would push Russia towards a deep crisis, like
the one experienced by the Soviet Union at the end of its existence. Against
this backdrop, the global economy has entered a geopolitical turbulence that
will have enormous economic and financial consequences beyond Ukraine itself.
In the next decade, in particular, a hot war between major powers may be more
likely. It should be emphasized that price shocks will have a negative impact
globally, particularly on poor households, where food and fuel account for a
larger percentage of spending. If the conflict escalates, the damage to the
economy will be even more devastating. Sanctions against Russia will have a
significant impact on the global economy and financial markets, severely
poisoning other countries. Monetary authorities will need to closely monitor
the implications of rising international prices on domestic inflation to
prepare the right answers. State fiscal policies will have to support the most
vulnerable families to offset the rising cost of living.