Accurate, Focused Research on Law, Technology and Knowledge Discovery Since 2002

Global Value Chains: Overview and Issues for Congress

CRS report via LC – Global Value Chains: Overview and Issues for Congress, December 16, 2020: “…Despite the growing presence of [Global value chains] GVCs in the global economy, recent events have highlighted the potential risks and vulnerabilities of GVCs, particularly those that are concentrated in a particular region or reliant on a single supplier. Worldwide natural disasters, emergencies, and other policy-driven circumstances, such as the Coronavirus Disease 2019 (COVID-19) pandemic, have shown that GVC links integrate and create interdependence between economies, which can leave companies vulnerable to external shocks, including interruptions in other countries. At the same time, interdependence can create broader economic growth and strengthened relationships among nations. After a period of rapid globalization through the 1990sand early 2000s, the growth of GVCs has slowed in recent years. Concerns about U.S. value chains and the ongoing COVID-19 pandemic have raised questions about potential risks that GVCs may pose for particular economic sectors, the economy more generally, and, depending on the product and degree of external dependencies, national security. For example, recent events have shown that certain sectors, such as medical supplies and information technology and communications equipment, are susceptible to risks if the production of key components is concentrated in one country or controlled by one company. Some companies are seeking to diversify their supplier base across countries and regions, in part to increase their resilience and to lower their risk exposure. Some analysts foresee greater shifts in the future. To mitigate risks and vulnerabilities, companies may (1) rethink their business models and seek to build in redundancies for resilience, (2) focus more on shorter local or regional value chains, and/or (3) utilize emerging technologies to lower and diversify risks and costs. These shifts will likely vary across industry sectors, depending in part on the location and availability of suppliers and customers, as well as U.S. and foreign trade and investment policies. In response to the risks described above, many policymakers, companies, and other stakeholders are reevaluating the role of GVCs in the economy. Several factors influence the formation and configuration of GVCs, including new and updated FTAs (e.g., the U.S.-Mexico-Canada Agreement), along with changes in import policies, rules of origin, export controls, investment regimes, and labor and manufacturing costs. These factors provide Congress with multiple levers to influence corporate decisions. Some U.S. and foreign policymakers have introduced legislation and other measures to incentivize, or in some cases force, companies or certain industries to shorten their value chains and increase domestic production. Such measures could affect the accessibility, quality, and price of goods sought by U.S. buyers…”

Sorry, comments are closed for this post.