Read more about the article The Automotive Transition on the Road to Decarbonization

The Automotive Transition on the Road to Decarbonization

The road to decarbonizing the planet runs through the energy transition, which includes the shift from fossil-fueled cars to renewable energy vehicles. This automotive transition is unfolding as a true revolution in the industry. The evolution toward electric and hybrid vehicles has come in tandem with the ascent of Chinese producers. In the current context of geopolitical and technological rivalries, the automotive transition has been marked by an intense trade war, with implications for the trajectory of decarbonization.

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Read more about the article Pathways for Reconciling New Industrial Policy and International Cooperation for Global Goods

Pathways for Reconciling New Industrial Policy and International Cooperation for Global Goods

The resurgence of Neo protectionism as a reality is creating a pressing need to establish New Industrial Policies (NIPs) capable of striking a balance between Global Value Chains (GVC) managers' quest for efficiency and policy makers' need for more increasing resilience or national security in a turmoiled geopolitical landscape. Furthermore, although NIPs might pursue legitimate non-economic objectives, they are often captured by vested interests, resulting in protectionist measures. These policies produce negative spillovers, jeopardizing other countries’ development perspectives. This policy brief posits that countries embracing industrial policies with trade diversion components must allocate efforts to implement additional trade liberalization in sectors where the affected exporting countries have comparative advantages as compensation for the negative spillovers their unilateral domestic policies impose on third countries. This highlights the need to establish a structured system that penalizes protectionist countries for exceeding predetermined limits on subsidies and distortive measures. This policy brief also recommends that advanced economies implementing industrial policies with high amounts of embodied subsidies contribute to an international fund dedicated to financing developing economies' access to new green technologies. This approach acknowledges the undeniable push towards aggressive industrial policies, yet simultaneously strives to establish a framework to temper this emerging trend. This mechanism aligns with the principles of economic fairness and encourages nations to adopt less distortive behaviors in their pursuit of economic security or resilience to shocks.

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Read more about the article Resilience and Realignment of Global Trade

Resilience and Realignment of Global Trade

Multiple shocks faced by the global economy over the past three years have apparently shaken the conventional wisdom on gains from economic integration, and have sparked widespread calls for protectionist and nationalist policies. Is there already evidence of some ‘deglobalization’, or do the factors that underlie globalization remain strong enough despite the shocks? So far, there are no signs of an overall reversal in the long-term trend of greater global trade integration. However, a partial realignment seems to be underway, reflecting the more durable side of those recent shocks. This is probably leading to higher costs and prices on the margin, in the case of realignments done to overcome shocks of a geopolitical nature. The answer seems to be that global trade has been resilient, although it is undergoing some realignment.

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Read more about the article Growth Implications of a Fractured Trading System

Growth Implications of a Fractured Trading System

An assessment of the implications for growth—particularly the costs—of moving towards a fractured trading system can use as a benchmark what happened during the period of what is usually called hyper-globalization or globalization 2.0 Substantial growth in GDP per capita in emerging markets and developing economies, as well as reductions in poverty rates and lower per capita GDP inequality among countries were major achievements. The transmission channels of the trade fragmentation will be a reversal of the path by which those gains were attained.

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Read more about the article GVCs, Resilience, and Efficiency Considerations: Improving Trade and Industrial Policy Design and Coordination

GVCs, Resilience, and Efficiency Considerations: Improving Trade and Industrial Policy Design and Coordination

The COVID-19 pandemic and the war in Ukraine have reignited the debate on efficiency versus resilience in international trade and global value chains (GVCs). This policy brief[ (i) explains the contrasting perspectives of the private sector (primarily seeking efficiency) and the public sector (aiming for resilience); (ii) demonstrates that GVCs are still flourishing, despite some mounting signals of a geo-fragmentation leading to a greater reallocation of the GVCs; and (iii) provides recommendations to help the G20 navigate the balancing act between efficiency and resilience considerations. Domestic policy design in the G20 countries and international coordination among these countries is essential.

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Read more about the article Pandemic, War, and Global Value Chains

Pandemic, War, and Global Value Chains

The debate on the viability of industrial policy design based on the fragmentation of global value chains, from a cost optimization perspective, did not arise first in the wake of the Covid-19 crisis but was present long before. This industrial policy design was justified by the great development of logistics and transport across the world’s industrial clusters, which allowed just-in-time manufacturing to become the main adopted production model. However, the disruption of logistics supply chains after the advent of the crisis has multiplied the voices calling for a review of the current model of the organization of value chains, in favor of reshoring or nearshoring. This widely shared perception remains rather unconfirmed by the facts. Indeed, it has been observed that the economic sectors that are most integrated into global value chains have experienced a faster recovery than the remaining sectors, which would mean that integration into global value chains can be a factor that accelerates recovery, and therefore guarantees resilience in the event of a major economic shock.

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Read more about the article Slowbalization, Newbalization, Not Deglobalization

Slowbalization, Newbalization, Not Deglobalization

One can expect slower globalization (“slowbalization”) and a greater degree of regionalization. The term “slowbalization”—slowing growth in cross-border flows—can indeed be applied to the trends for goods, capital, and people after the global financial crisis rather than deglobalization—or outright declines in cross-border flows and stocks. The increases in digital cross-border activity also strengthen the concept of "newbalization": the nature and scope of globalization is evolving in the coming years as flows may continue to slow in tangible areas, like the trade of goods, while speeding up in intangible areas, including trade in services and cross-border data flows. On the other hand, “the death of globalization was an exaggerated announcement”.

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Read more about the article Podcast – There Are No Shortcuts to Economic Development

Podcast – There Are No Shortcuts to Economic Development

The Covid-19 crisis has led to major disruptions in Global Value Chains. In this episode, Otaviano Canuto answers questions about the impact on the design of post-covid industrial policies and underlines the components that should be considered by policymakers to ensure a quick and sound economic recovery along with a regional integration that plays a role in this new industrial organization scheme.

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Read more about the article China’s economic rebalancing

China’s economic rebalancing

China’s growth trajectory in the second decade of the century has been one of a rebalancing toward a new growth pattern, one in which domestic consumption is to rise relative to investments and exports, while a drive toward consolidating local insertion up the ladder of value added in global value chains also takes place. Services should also keep rising relative to manufacturing. Declining GDP growth rates from two digits in previous decades to 6% in 2019 - and likely lower ahead – would be the counterpart to rising wages and domestic mass-consumption, and to the transition toward higher weights of services and high tech. We point out two major challenges in the rebalancing. First, the transition toward a less investment- and export-dependent growth model has been taking place from a starting point of exceptionally low consumption-to-GDP ratios. Besides high profit-to-wages ratios, low levels of public social protection and spending lead to high household savings. An additional challenge comes from the lack of progress in rebalancing between private- and state-owned enterprises, something that is taking a toll on productivity.

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Read more about the article Trade globalization

Trade globalization

In the 1990s and 2000s, the world manufacturing production to a substantial extent moved from advanced countries to some developing countries. This was the result of the combination of an increase of the labor supply in the global market economy, trade opening, and technological transformations that allowed for fragmentation of production processes. As a result, foreign trade expanded, and world poverty diminished. Such trade globalization process stabilized in the 2010s and tends to be partially reversed by the new wave of technological changes.

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Read more about the article Climbing a High Ladder – Development in the Global Economy

Climbing a High Ladder – Development in the Global Economy

This book approaches the opportunities and challenges faced by developing countries to raise their per capita income levels during the recent phase of globalization. After dealing with the post-global financial crisis economic landscape in advanced economies, it deals with the windows of opportunity opened by trade and financial globalization for developing countries to climb the income ladder. Domestic preconditions for a developing country to benefit from those windows are then pointed out. China, Brazil, and Sub-Saharan Africa are presented as case studies. The book ends with an assessment of the impact of the coronavirus crisis on the global economy.

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Read more about the article The pandemic will reshape globalization

The pandemic will reshape globalization

The pandemic is accelerating history, in the sense that some of its recent trends are being sped up. In the case of globalization, the pandemic will not reverse it, but it will reshape it. Here we take a bird’s eye view on global trade during the pandemic, relate it to previous trends, and guess how global value chain managers and governments’ trade policymakers are likely to react.

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Read more about the article Brazil, South Korea, and Global Value Chains: A Tale of Two Countries

Brazil, South Korea, and Global Value Chains: A Tale of Two Countries

South Korea has climbed the income per capita ladder up to high levels, while Brazil may be considered a case of a “middle-income trap”. Such divergence of economic growth performances can be related to their distinctive approaches to global value chains and trade globalization, as well as to domestic accumulation of technological and organizational capabilities.

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