Global Value Chains and the Slowing Down of Globalisation

Abstract

Global value chains (GVCs) have been a major feature of the phase of economic globalisation that began after the 1980s. After the global financial crisis of 2007-08, however, this phase has come to an end, being replaced by one characterized by a significant slowdown in the degree of international economic openness, due to not only economic but also geopolitical reasons.. GVCs have also shown a slowing growth trend after then. The future scenarios for GVCs, however, suggest the possibility that they may be more resilient than expected. A first theoretical explanation provided in the literature argues that the reshoring of foreign intermediate production would be prevented by the high sunk costs that would have to be incurred. However, an additional possible reason for GVCs resilience - this is the main theoretical contribution of this article - is due to the option of friendshoring or nearshoring, rather than reshoring. Moving the production to more suitable foreign destinations, characterized by a political or geographical proximity with the domestic one, would avoid the newly perceived strategic and geopolitical costs, while retaining the economic benefits of offshoring, thereby making GVCs resilient.