1 of 3: The global crisis due to Covid-19 and its impact on international trade and global value chains (GVCs)

First chapter: From Hyper-Globalization to the Pandemic Crisis: An Analysis of Global Value Chains Before the Spread of Covid-19

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Introduction

?This paper examines the COVID-19 pandemic's impacts on the global economy, especially international trade.?

The focus is on Global Value Chains (GVCs) shaped by globalization in recent decades. Border closures trapped GVCs, causing uncontrollable shocks.

Aim: Analyze pandemic effects on trade, especially GVCs, finding ways to mitigate risks from international value chains disrupted by border closures.

Method:?Desk research using pre- and post-pandemic data, cross-referencing experts, reports, and data.

Structure:?We switched the three chapters into paragraph sections covering the GVC definition, their impact on international trade, pandemic damages to value chains, trends in restructuring, logistics' role, innovation importance, and data utilization.

Conclusions:?Synthesize analyses, offer insights for post-pandemic GVC navigation, and promote innovation to confront economic challenges. Contributes to understanding pandemic-trade-GVC dynamics.

Index

Introduction

First chapter: From Hyper-Globalization to the Pandemic Crisis: An Analysis of Global Value Chains Before the Spread of Covid-19

1.1 ??Leading the way to global integration: long-term trends and catalysts

1.2 The erosion of trade barriers: bridging the gaps through technological evolution

1.3 Policy Inflection Points: Fueling Skilled Workforce Growth in Emerging Economies

1.4 Pandemic and Crises: The Disruptive Impact on Global Value Chains

Second Chapter: The Pandemic's Grip on Global Trade

2.1 The Impact of the Pandemic on Global Trade

2.2 The Differentiated Impact of the Pandemic on the Realm of International Trade

2.3 Increased Uncertainty in International Trade

2.4 Policies Supporting International Trade

2.5 Conclusions

Third Chapter: Unraveling the COVID-19 Pandemic's Effects on Supply Chains and Their Multifaceted Organizational Dimensions

3.1 The Impact of COVID-19, Both Short-Term and Long-Term

3.2 Other Aspects to Explore

3.2.1 The Impact of the Pandemic on Local and Regional Supply

3.2.2 The Impact of the Pandemic on Supply Chain Sustainability

3.2.3 The Impact of the Pandemic on Supply Chain Governance

Conclusion

Main measures

Additional examples of measures

Future Challenges for Businesses

World Trade Organization -World Trade Statistical Review - 2023 in the enclosure

Bibliography

Sitography

First Chapter

From hyper globalization to the pandemic crisis: an analysis of global value chains before the spread of Covid-19.

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This chapter delves into the factors that orchestrated the path to hyper-globalization, which created the conditions for the pandemic-induced global crisis. Inspired by a study by the Bank of Italy and other contemporary authors, the chapter provides essential cues for the subsequent discussion.

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1.1 Leading the way to global integration: long-term trends and catalysts.

Governments worldwide have gradually dismantled trade barriers, fostering an environment of international trade and enhanced capital movements. (Baldwin; 2006) (Rodrik; 1997) (Bank of Italy, 2020)

This process began with the General Agreement on Tariffs and Trade (GATT) in 1947 and gained momentum throughout the 1990s and 2000s. (Feenstra, 2004)

At the same time, there were other important agreements, including the European Community, the creation of the North American Free Trade Area (NAFTA), the formation of Mercosur in South America, and the creation of ASEAN in Asia. (Baldwin, 2016)

Moreover, the Uruguay Round negotiations led the World Trade Organization (WTO) in 1994, with China joining as a member in 2001. (World Trade Organization, 2023)

These institutional advances have reduced global average tariffs on manufactured goods from 13.6% in 1986 to 7.5% in 2008. (World Bank, 2023)

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1.2 The erosion of trade barriers: bridging the gaps through technological evolution.

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The removal of trade barriers coincided with the information and communication technology (ICT) revolution. (Krugman, 1995)

This technological advance has significantly improved the efficiency and accessibility of international trade, fostered better connectivity, and facilitated transactions between nations. (UNCTAD, 2020)

ICTs have improved logistics, communication, and access to information, contributing to greater global economic integration.

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1.3 Policy Inflection Points: Fueling Skilled Workforce Growth in Emerging Economies

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Geopolitical transformations fuel skilled labor reserves in emerging economies. (Rodrik, 2008)

The collapse of economic regimes with state economies and centralized choices in Eastern Europe, China's shift towards "socialism with Chinese characteristics," and India's entry into economic liberalization in the 1990s profoundly shaped the supply of skilled labor. (Lall, 2006)

After the dissolution of communist regimes in Eastern Europe, countries in the region have embraced market-driven economies, received foreign direct investment, and created new trade prospects. This change has triggered the emergence of a skilled workforce. (Djankov et al., 2002)

In the case of China, the model of "socialism with Chinese characteristics" has brought about radical economic reforms, international market integration, and greater involvement in global trade. China's economic expansion drive has created a sizable and skilled labor pool, attracting foreign direct investment. (Djankov et al., 2002), (Krugman, 1995), (Lall, 2006),

At the same time, India's foray into economic liberalization in the 1990s opened new avenues for the infusion of foreign capital, cultivating skilled workforces in crucial sectors such as information technology, engineering, and services. (UNCTAD, 2020), (Rodrik, 2008)

These geopolitical changes have strengthened the availability of skilled labor in emerging economies, making them attractive to international investors and contributing significantly to their economic recovery. (World Economic Forum, 2020)

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1.4 Pandemic and crisis: the disruptive impact on global value chains

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The 2008 global financial crisis was one of the most significant events in recent economic history and had long-lasting consequences on a global scale, affecting the entire GVS.

Officially, everything is from the collapse of the US housing sector and the problems in the mortgage market, which have impacted numerous economic and financial sectors worldwide.

However, the collapse begins with the impossibility of repaying the mortgages due to lower growth in real wages. (Bank of Italy, 2020)

The 2008 crisis was production relocation that made vertical integration irresistible for entrepreneurs by relocating part of their production and activities to low-cost countries, especially in Asia and other emerging economies. The phenomenon of lengthening and interconnecting global value chains (GVC) has made it easier and more profitable to move different stages of production to other parts of the world. Thus, the crisis was a combination of factors, including financial speculation, the collapse of the real estate markets, and the excessive delocalization of production. The latter has made it easier and more profitable for companies to move different stages of production to other parts of the world, a phenomenon known as "offshoring" (Baldwin, 2016).

While offshoring has increased efficiency and productivity in some industries, it has also negatively impacted the workforce in developed countries.

With the offshoring of manufacturing, many companies have closed factories and laid off workers in high-income countries, thus reducing household income and profits. (Feenstra, 2004)

The loss of income, in turn, affected consumption, as households had few disposable incomes.

Furthermore, offshoring has increased unemployment in developed countries, reducing tax revenues and increasing pressure on welfare. (World Trade Organization, 2023)

The 2008 crisis was, therefore, a combination of factors, including financial speculation, the collapse of the real estate markets, and the excessive delocalization of production.

The latter have significantly reduced incomes and profits in advanced economies, contributing to an unstable and recessionary economic environment with negative expectations.

Under these conditions, COVID-19 arrived, which violently impacted global value chains (GVC), causing significant disruptions in worldwide production and distribution, highlighting the critical issues of GVC and their interconnection.

The containment measures have suspended economic activities and production lines in various countries.

The reduced mobility of people and goods has caused a drop in supply and demand, creating severe disruptions in the supply and production chain.

The pandemic has exposed the overdependence of some economies on supply chains and the fragility of global value chains in the event of sudden disruptions. (Lall, 2020)