Download Slides Escaith

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project

Document related concepts

Nouriel Roubini wikipedia , lookup

International monetary systems wikipedia , lookup

Competition (companies) wikipedia , lookup

Transcript
WIOD Conference on Industry-Level
Analyses of Globalization and its Consequences
26-28 May, Vienna
Trade in Value Added and Global
Production Networks:
Contribution to a Structural Interpretation
of the Great Trade Collapse
Hubert Escaith
Outline of the presentation
1. Before the Crisis
1. Supply Chains crawling on the Flat World
2. Supply Chains inflating the Bubble
2. During the Crisis
a. Supply Chains as Transmission Channels
b. Supply Chains and Trade Elasticity
3. After the Crisis: Exit scenarios
a. The role of Supply Chain in Global Rebalancing
b. From Global to Regional Supply Chains?
4. Concluding remarks: Back to Business As Usual?
H. Escaith
2
1. Before the Crisis:
Supply Chains: Determining Contemporaneous Globalization
•
Flattening of the World:
– 1989: Berlin Wall and Brady Bonds
– IT Revolution, transport and communication
– New Business Management Models
– Governance: Uruguay Round and Trade Liberalization,
structural reforms in FDI recipient countries
•
Trading in a Flat World:
– Convergence of Tastes and Standards vs. Preference for
Diversity: Mass Marketing vs. Mass Production.
– The end of the Fordist model, the rise of Wall-Martism
– Foreign Direct Investment and International Supply Chains:
Towards Global Manufacturing
– Global Manufacturing: Trade in Intermediate Goods
H. Escaith
3
1. Before the Crisis:
Supply Chains Contributing to the Financial Bubble?
Hypothesis:
(A) Thanks to Global Outsourcing, large firms in developed countries
1. Gained productivity; and
2. Were able to lower the price of their final products.
(B) Central Banks under inflation targeting maintained a lax stance
because (i) potential output was up, and (ii) underlying inflation
was low.
(C) Accumulated liquidity led to asset-price inflation and credit boom.
But this hypothesis remains to be fully tested
Evidences at firm level but no strong empirical basis
relating offshore outsourcing and aggregate
productivity
(work in progress...)
H. Escaith
4
2. During the Crisis
a. Supply Chains as Transmission Channels
– The old story: the macroeconomics of shocks
•
•
Real Side: Final Demand Effects
Financial Side: Sudden Stops and Interest Rate
– The new story: industrial linkages and the
microeconomics of shocks
•
•
H. Escaith
Demand shocks and the “Bullwhip Effect”: from
slowdown to complete stand-still (backward effects)
Supply shocks and network disruption (forward
effects)
– Isolated credit shortage (e.g., trade finance) can
affect several firms across several countries.
5
2. During the Crisis:
b. Supply Chains and Trade Elasticity
The Great Recession and the Trade Collapse of 2008-2009
19
90
19
92
19
94
19
19
96
98
20
00
20
02
20
04
20
20
06
08
15
10
5
0
-5
-10
Exports total
-15
Quarter/Sectors (world trade, QoQ, nominal)
Q1/08
Q2/08
GDP
Q3/08
Q4/08
Q1/09
Q2/09
Q3/09
Q4/09
Manufactures
-1
9
-2
-15
-21
7
9
9
Office and telecom equipment
-12
5
5
-10
-27
13
14
16
Automotive products
1
6
-14
-18
-33
14
13
21
Iron and steel
11
23
7
-34
-31
-8
10
10
Ores and other minerals
10
20
4
-33
-35
13
24
7
H. Escaith
6
Why this jump in elasticity in 2008-2009?
• Goods dominate Trade; Services dominate GDP (especially for
OECD countries)
• Double counting of trade in intermediate goods
– Parts and components cross several borders: Accounting bias
Value-Added vs. Gross CIF valuation
• Inventory effect intensifying backwards along the supply chain
• Composition effect:
– Lags between Short and Long Term effect; risk of “W” profile:
• Credit squeeze and initial shock on manufactures and
trade finance: Strong trade effect
• Then spreading to all sectors as recession hurts
employment and investment: Secondary shock
See an example of lag between industrial production and GDP:
H. Escaith
7
Two questions to conclude:
1. Global Supply Chains and Trade Elasticity:
Are we facing a Structural Shift in World Trade?
2. Crisis and Exit scenarios:
Does this crisis lead to deglobalization and the breaking down
of Global Supply Chains?
H. Escaith
9
1. Are we facing a Structural Shift due to Global Supply Chains?
a. STRUCTURAL SHIFTS AND WORLD TRADE-GDP ELASTICITY:
Transition period
3.5
3.0
2.5
2.0
1.5
Ten year average Trade-GDP elasticity
1.0
1990
1995
2000
2005
2009
b. GLOBAL SUPPLY CHAINS ALONE CANNOT EXPLAIN THE STRUCTURAL SHIFT:
Vertical Specialization unable to explain by itself the country/sectoral heterogeneity
(i) Many of the participants in Global Supply Chains follow this transition pattern of Trade Elasticity
… But others don’t : Germany, China or Mexico.
(ii) Error Correction Model: Shows “overshooting of trade”…
1% decrease in GDP translates into a 3% decrease in imports in year 1. Trade recovers in the 2nd and 3rd years;
4 years after the shock the decrease in trade is about 2%.
H. Escaith
… But fails to relate it to Vertical Specialization
10 index
After the Crisis: Exit scenarios
a. The role of Supply Chain in Global Rebalancing
V.A.
BOP
Because the Value Added content of trade is less than BOP data,
some bilateral imbalances will be easier to correct
Billion USD
1. US exports to China
2. Chinese exports to USA
Balance (1-2)
3. US-VA exports to China
4. Chinese VA exports to USA
Balance (3-4)
5. Ratio (3-4)/(1-2)
2000
19
80
(61)
18
40
(22)
0.4
2008
77
305
(228)
70
152
(83)
0.4
But total trade deficit
remains unchanged:
The macro issue still
need to be addressed
Preliminary estimate based on input-output matrices,
adjusted for Export Processing Zones and HK effect
H. Escaith
11
After the Crisis: Exit scenarios
a.
The role of Supply Chain in Global Rebalancing (cont.)
Rebalancing is more difficult:
Traditional exchange rate policy is partially affected by
GSC
1. Because the domestic content of exports is less than the gross commercial
value, traditional exchange rate policy does not work as expected to
correct bilateral trade deficits
- No asymmetry between revaluation of the surplus country or devaluation of the
deficit country.
- The pass-through effect of exporters is limited to their domestic content: need
for higher revaluation, but ...
- Alternative suppliers can substitute the exporter if appreciation is too high.
2. Exchange rate policy still effective to reduce global imbalances: ceteris
paribus, a devaluation tends to reduce the demand for all imports, while
revaluation increases the demand for imports.
But not all, and total BOP deficits will still need to be addressed
H. Escaith
12
Exit scenarios: b. The Future of
Global Supply Chains After the Crisis
Towards smaller and more regional supply chains?
•
–
–
•
–
–
–
–
Increase in transaction costs
Murky Protectionism (tariffs, NTBs, “Buy Domestic”)
Oil and other transportation costs
Systemic risks related to offshoring
Consumer preferences may move towards “economic
nationalism”
Environment concerns (e.g.: buy local to limit CO2 emissions)
Flexibility of supply chains vs. rapid changes in economic
environment ?
Offshoring complex industrial processes has its limits
If true, serious challenge for peripheral developing and
LDCs:
Policy options for the resource constrained least
advanced developing countries away from main regional
supply networks? (Trade facilitation, A4T, ...)
H. Escaith
13
Concluding Remarks:
The Risks of Deglobalization after the Great Recession
Probably not
 The recent drop in trade flows is due to “magnification-effects”; not to
be related to deglobalization per se.
 New markets are appearing in emerging countries
 Offshoring has often been used to get closer to final demand rather
than simply reducing costs
 Technical trends are positive:
 Offshore plants often more efficient ones: no incentive to close/sell
them
 Continuous reduction of transaction costs by new technologies
 The improvements in IT and business practices enlarge the pool of
“out-sourceable” tasks
 Demographic trends in most developed countries favour offshoring
 Emerging countries engaged in global manufacturing are acting as
poles for FDI in partner countries.
H. Escaith
14
Concluding Remarks:
The Risks of Deglobalization after the Great Recession
Probably not ...
But it will not be “Back to Business As Usual”
 New centres
 Traditional markets for consumer durables entering into debt-deflation
 Final demand in emerging countries not a substitute in near future
 New players
 New global governance (?)
The future of Global Manufacturing: Moving from
a Global Network to a Network of Networks?
H. Escaith
15
Trade in Value Added
and Global Production Networks:
Contribution to a Structural Interpretation
of the Great Trade Collapse
WIOD Conference on Industry-Level
Analyses of Globalization and its Consequences
26-28 May, Vienna
Thank you!
Sources:
“Global Supply Chains And The Great Trade Collapse: Guilty Or Casualty?” H. Escaith (2010,
forthcoming in the first issue of TPREF Journal).
“International Supply Chains and Trade Elasticity in Times of Global Crisis” H. Escaith,
N. Lindenberg and S. Miroudot (2010, WTO)
Acknowledgments and disclaimer:
This presentation builds on a series of related works which benefited from the contribution of Ch.
Degain, F. Gonguet, S. Inomata, N. Lindenberg, A. Maurer and S. Miroudot.
The views expressed are mine and do not represent a position, official or unofficial, of the WTO .