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It is also clear that global-scale regulations, the ‘rules of the game’ as it
were, have a profound effect on the shape and direction of change in global
value chains. In a wide range of industries, from electronics to apparel
to household goods, selective exemptions for duties on value added in
particular locations, such as section 807 and most-favored-nation status
for the United States and outward processing arrangements for Europe,
have encouraged the geographical fragmentation of global value chains,
as we have seen in the apparel case study. Yet political pressures in both
developed and developing nations to retain (or gain) apparel jobs, and
managerial desires to spread risk through geographical diversification, are
likely to keep the apparel value chain more fragmented than it would be
if production decisions were based on economic criteria alone.
While there are a multitude of factors that affect the evolution of the
global economy, we feel confident that the variables internal to our model
influence the shape and governance of global value chains in important
ways, regardless of the institutional context within which they are situated.
The governance framework that we propose takes us part of the way
toward a more systematic understanding of global value chains, but much
remains to be done.17 One of the most pressing areas is the development
of policy tools for industrial upgrading that are consistent with the framework.
One of the key findings of value chain studies is that access to developed
country markets has become increasingly dependent on participating
in global production networks led by firms based in developed countries.
Thus, the governance of global value chains is essential for understanding
how firms in developing countries can gain access to global markets, what
99 the benefits of access and the risks of exclusion might be, and how the net
gains from participation in global value chains might be increased. While
the search for paths of sustainable development in the global economy is
an inherently difficult and elusive objective, our task is greatly facilitated
by having a clearer sense of the various ways in which global value chains
are governed, and the key determinants that shape these outcomes.
It is also clear that global-scale regulations, the ‘rules of the game’ as it
were, have a profound effect on the shape and direction of change in global
value chains. In a wide range of industries, from electronics to apparel
to household goods, selective exemptions for duties on value added in
particular locations, such as section 807 and most-favored-nation status
for the United States and outward processing arrangements for Europe,
have encouraged the geographical fragmentation of global value chains,
as we have seen in the apparel case study. Yet political pressures in both
developed and developing nations to retain (or gain) apparel jobs, and
managerial desires to spread risk through geographical diversification, are
likely to keep the apparel value chain more fragmented than it would be
if production decisions were based on economic criteria alone.
While there are a multitude of factors that affect the evolution of the
global economy, we feel confident that the variables internal to our model
influence the shape and governance of global value chains in important
ways, regardless of the institutional context within which they are situated.
The governance framework that we propose takes us part of the way
toward a more systematic understanding of global value chains, but much
remains to be done.17 One of the most pressing areas is the development
of policy tools for industrial upgrading that are consistent with the framework.
One of the key findings of value chain studies is that access to developed
country markets has become increasingly dependent on participating
in global production networks led by firms based in developed countries.
Thus, the governance of global value chains is essential for understanding
how firms in developing countries can gain access to global markets, what
99 the benefits of access and the risks of exclusion might be, and how the net
gains from participation in global value chains might be increased. While
the search for paths of sustainable development in the global economy is
an inherently difficult and elusive objective, our task is greatly facilitated
by having a clearer sense of the various ways in which global value chains
are governed, and the key determinants that shape these outcomes.
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