Global Production Networks, New Trade Technologies and the Challenge for International Institutions

Abstract

In the twenty-first century, production processes and international trade in goods and services are being revolutionized by developments in information and communications technology. For many products, global production networks have rendered the label Made in Country X meaningless. With an increasing number of services, both for end-users and as inputs, being provided online, it becomes increasingly difficult to locate where value-added is being produced. This article seeks to document the impact of new technologies on international trade and to analyse the policy implications at the national and global level. A turning point is identified in the mid-1990s; up to 1995 there is no statistically significant relationship between internet usage and trade, but after 1997 the relationship is statistically significant. Use of the internet reduced trade costs, increased the size of trade flows and permitted greater fragmentation along global value chains. It also created opportunities for new international transactions, for example, based on ‘big data’. The article concludes with analysis of attempts to reach WTO agreements with respect to e-commerce and digitalization and of alternative fora in which these issues are being addressed, and relates the outcomes to the phenomenon of mega-regionalism. JEL Codes: F02, F68, 038