Contents

Tables, Figures, and Boxes vi

Foreword xiii

Publishing Partners xv

Contributors xvi

Acknowledgments xviii

Abbreviations xix

Editorial and Advisory Committee xxv

Key Messages and Findings xxvi

Executive Summary xxviii

Chapter 1: Examining Global Value Chains in Times of International Shocks 1

1.1 Introduction 1

1.2 Global Value Chains During Periods of Shocks 3

1.3 Dollar Prices and Global Value Chains 12

1.4 Potential Bottleneck Products in International Trade 17

1.5 Geographic Concentration in Value and Frequency of Trade 21

Concentration in Foreign Value-Added Sources 21

Concentration in Frequency of Engagement 24

1.6 Adjusting to Shocks 28

Prospects for Global Value Chain Reconfiguration 30

Localization Policies in the People's Republic of China 39

Conclusion 43

References 45

Chapter 2: Impacts of Trade Tensions and COVID-19 on Global Value Chains 49

2.1 Introduction 49

2.2 Sources of shocks and their propagation in Global Value Chains 50

Sources of Shocks and Mechanisms of Propagation 51

Propagation of Shocks through Tariff Measures in GVCs 52

Propagation of Shocks through Non-Tariff Measures in GVCs 54

2.3 Patterns of Restructuring and Regionalization of Global Trade 56

Global Trade Picture 56

Trade Diversion 57

Reshoring and Regionalization 59

2.4 Trade Tensions and Global Value Chains 62

Trade Among the Major Economies 62

Triangular Trade between the PRC, the US and Third Countries 64

2.5. COVID-19, GVCs and Digitalization 67

The Impact of COVID-19 on Reshaping Global Value Chains 67

Counterfactual Analysis of the Impact of the COVID-19 Pandemic on GVCs 67

Digitalization, Resilience and Recovery 72

Conclusion 76

Appendix 78

1: Changes in the Average Global Value Chain Production Length as a Result of the US–PRC Trade Tension 78

2: Top Five Trading Partners of the World's Main Economies 79

3: Gross Trade between the US and ASEAN Countries 80

4: CGE Model Construction and Scenario Setting 81

5: The Impact of Digital Policy on Global Value Chains 84

References 85

Chapter 3: Toward a Secure and Resilient Energy Supply Chain 90

3.1 The Impact of Rising Geopolitical Tensions on the Rules Underpinning the Multilateral Trading System 91

Why are GVCs, Including Energy Value Chains, Vulnerable to an Erosion of WTO Norms through Geoeconomics? 91

How Geopolitical Crises are Eroding the Legal Fabric of the MTS and of Global Value Chains: The Effects of the Russian War in Ukraine on Energy Supply Chains 93

"Trade Weaponization" and Trade Sanctions are Escalating 94

Possible Legal Responses to Protect the MTS and Global Value Chains Against Geoeconomics 95

3.2 New Dynamics of Global Energy Supply Chains 99

The COVID-19 Shock to Energy Supply Chains 99

The US-PRC Trade Tensions and Its Impact on Energy Supply Chains 100

Geopolitical Tensions and Their Impact on Energy Supply Chains: Energy Geopolitics 101

The Energy Crisis and Energy Security 102

3.3 Geopolitical Changes and New Evolution of Energy Supply Chains 104

Historical Evolution of Energy Domination and Energy Geopolitics 104

The Dynamic Evolution Global Energy Supply Chains 106

CGE Simulation Analysis for the Impact of the Energy Supply Chains Re-Shaping 113

3.4 Renewable Energy and the Future Directions of Energy Supply Chains and Energy Trade 118

Carbon Neutrality, Energy Transition, and Renewable Energy Development 118

Renewable energy supply chains and the new world energy market and trade 119

Challenges facing to renewable energy supply chains 120

3.5 Potential Impact of the Energy Dynamics on the Emission Goals 122

Conclusions 125

References 127

Chapter 4: From Fabless to Fabs Everywhere? Semiconductor Global Value Chains in Transition 132

4.1 Introduction 132

4.2 Semiconductor Global Value Chains: Segments and Value Added Structure 136

4.3 Semiconductor Global Value Chains: Major Economy Participants 141

4.4 Changing Fortunes in the Global Semiconductor Industry: From Integrated Fabs to the "Fabless Revolution" 145

The Rise of the Fabless Firms 148

The Rise of the Dedicated Foundry 151

Overall Specialization in the Semiconductor Market 153

4.5 The Role of the Government in the Development of the Semiconductor Industry 155

Support in Advanced Economies for Semiconductor Production 155

Rise of the East Asian Tigers 156

4.6 The Rise of East Asia in Semiconductor Global Value Chains 164

4.7 Techno-Nationalism: Must Real States Have Fabs? 170

Conclusions 178

References 183

Chapter 5: Tracing Carbon Dioxide Emissions along Global Value Chains 188

5.1 Historical CO₂ Emissions and Climate Change Challenges 189

5.2 Visible Impacts of Climate Change 190

5.3 Historical CO₂ Emissions and Challenges Towards the Achievement of Carbon Neutrality 190

5.4 CO₂ Emissions and Their Responsibilities along Global Value Chains 194

5.5 Tracing CO₂ Emissions in Global Value Chains 194

5.6 Production- vs Consumption-Based Emissions and Emissions Transfers along GVCs 196

5.7 Sharing CO₂ Emissions Responsibilities Across Economies along Global Value Chains 198

5.8 Tracing CO₂ Emissions of Multinational Enterprises in Global Value Chains 201

5.9 Measuring the CO₂ Emissions of MNEs in GVCs 201

5.10 Changing Trends in MNEs' CO₂ Emissions 203

5.11 Decomposing MNEs' CO₂ Emissions by Trade Patterns 205

5.12 Measuring the Carbon Footprints of MNEs in GVCs 208

5.13 Component Structure of MNEs' Carbon Footprints, A Producer Perspective 210

5.14 Component Structure of MNEs' Carbon Footprints, A Consumer Perspective 210

5.15 Re-evaluating the Carbon Mitigation Responsibilities of MNEs in Global Value Chains: From a Factor Income Perspective 212

5.16 Environmental Costs and Economic Benefits of MNEs 213

5.17 Possible Incentive Fund Led by MNEs 219

Conclusion and discussion 220

References 224

Chapter 6: Greening Global Value Chains: A Conceptual Framework for Policy Action 228

6.1 Introduction 228

6.2 The Driving Factors of Global Value Chain Greening 231

6.3 Types of Environmental Innovation 240

6.4 Actors Involved in Environmental Innovation 243

6.5 The Enabling Mechanisms of Environmental Innovation 245

6.6 The Outcomes of Global Value Chain Greening 247

6.7 A Three-Pronged Strategy for GVC Greening 249

Conclusion 253

References 256

Chapter 7: Global Value Chains for Inclusive Development 261

7.1 Introduction 261

7.2 GVCs can Improve the Performance of MSMEs in Developing Economies 263

The Context: MSMEs' Role in Developing Economies and Trends in their GVC Participation 264

GVCs Facilitate Access to International Markets 266

GVCs Facilitate the Transfer of Good Management Practices 267

GVCs Facilitate Quality Upgrading 269

GVCs Facilitate Technology Transfers and Innovation 272

GVCs Facilitate Access to Trade Finance for MSMEs 273

7.3 GVCs Can Help Workers in Developing Economies 275

GVCs Can Support a Shift to Formal Employment 276

GVCs Can Improve Job Quality 278

GVCs Tend to Widen Wage Inequality 280

GVCs Can Support Gender Equality 283

GVCs Can Reduce the Incidence of Child Labour 288

7.4 The Future of Inclusive GVCs 289

Digital Platforms and GVCs 290

Automation and Outsourcing 291

AI and Services GVC 292

7.5 Main Messages and Lessons for Policymakers 293

Conclusion 297

References 299

Appendix

Background Paper and Chapter Authors' Workshop for the Global Value Chain Development Report 2023 313