Tag Archives: protectionism

Beyond facilitator? The state in global value chains and global production networks

 Rory Horner, University of Manchester, United Kingdom

trump

Donald Trump, quoted in The Financial Times (2017). Image available via Pixabay.

Not so long ago, proposed policies to “repatriate international supply chains” as part of national-oriented initiatives openly marketed as protectionist, would have been quite difficult to imagine. Yet, like in many issue areas, Donald Trump’s approach to trade policy is unconventional. His planned trade policies, including import taxes, have been met with widespread condemnation, with many questioning how they may work in an era of global value chains (GVCs).

The irony of Trump advocating protectionism to support American manufacturing while visiting Boeing, which reportedly draws on parts manufactured in over 60 countries, has been pointed to. Former Swedish Prime Minister Carl Bildt has tweeted that: “If Trump wants to close down global value chains he will close down Boeing as well. Among others”.

Meanwhile, in relation to the UK’s planned exit from the European Union, questions have been raised about how the UK’s new proposed trade policies might work in the context of global value chains. Theresa May has advocated sector by sector deals, yet there is scepticism as to the practicalities of how this might work. The automobile industry in the UK, for example, is dependent on products crossing back and forth across borders many times. The effects of any trade barriers are thus magnified.

Such political developments in both the UK and USA are dramatic examples of the increasing empirical relevance of state roles beyond facilitating GVCs (or related global production networks – GPNs). Not so long ago, the dominant emphasis in research on GVCs and GPNs was arguably on how state’s played a facilitator role – whether through choice or seemingly facing little other option – assisting firms (either major global corporations or their suppliers) in relation to the challenges of the global economy.

Indeed, the global organisation of production accelerated greatly over the last two decades during the neoliberal era of market-promotion, falling trade barriers and the belief in limiting state intervention. In this context, research on global value chains and production networks has valuably highlighted the uneven power dynamics in global industries, moving beyond dominant state-centric approaches to understanding economic development.

Yet, increasingly a variety of other state roles beyond facilitator are of increasing prominence, including as regulator, producer (state-owned enterprises) and buyer (public procurement). In a new article in Geography Compass which synthesises a variety of recent research on the role of the state in GVCs and GPNs, I highlight four different such state roles, as indicated in the table below:

Table 1. Typology of state roles within global production networks

Role Definition Examples
Facilitator Assisting firms in GPNs in relation to the challenges of the global economy Tax incentives, subsidies, export processing zones, incentives for R&D, implementing and negotiating favourable trade policies, inter-state lobbying
Regulator Measures that limit and restrict the activities of firms within GPNs State marketing boards, price controls, restrictions on foreign investment, trade policy (tariffs, quotas), patent laws, labour regulation, quality controls, standards implementation
Producer State-owned firms, which compete for market share with other firms within GPNs State-owned companies e.g. in oil, mining.
Buyer State purchases output of a firm Public procurement e.g. of military equipment, pharmaceuticals.

Source: Author’s construction.

While the relevance of roles beyond facilitator is highlighted by, and may get increasing attention with, Donald Trump’s suggested policies and the UK’s planned exit from the European Union and, their relevance is longer-standing. The Economist (2013) highlighted a growth in protectionist measures in 2013, to provide just one example of the relevance of a regulatory role. Meanwhile, state-owned companies are significant actors in the global economy – involving a producer role. Moreover, a buyer role is highlighted through public procurement which has been estimated to comprise an average of between 13% and 20% of GDP worldwide (OECD, 2013).

Future research attention is needed to the influence and viability of the regulator, buyer and producer roles and how they are manifest in a context of a potential retreat from, or even reformulation of, economic globalisation.

Significantly for any current move towards “protectionism”, the location of states within a world of GVCs and GPNs means both that current policy initiatives are likely to vary and to have different implications from earlier eras where states intervened to promote national interests. The implications of growing neo-nationalism for GVCs and GPNs, and vice-versa, are uncertain, but clearly something to watch!

About the author: Rory Horner is a Lecturer in Globalisation and Political Economic, ESRC Future Research Leade,r and Hallworth Research Fellow at the Global Development Institute , University of Manchester.  

books_icon Horner, R. (2017) Beyond facilitator? State roles in global value chains and global production networks, Geography Compass 11(2)

60-world2 OECD (2013). Leading practitioners on public procurement, [Online], Accessed from: http://www.oecd.org/governance/meetingofleadingpractitionersonpublicprocurement.htm (Last accessed 22nd February 2017).

60-world2 The Economist (2013). The gated globe. October 12th. Available from: http://www.economist.com/news/leaders/21587785-gated-globe

60-world2 The Financial Times (2017) Trump’s top trade adviser accuses Germany of currency exploitation, January 31 2017. Available at: https://www.ft.com/content/57f104d2-e742-11e6-893c-082c54a7f539.