Global Value Chains and Canada's Trade Policy Business as Usual or Paradigm Shift?

Global value chains are changing the face of international trade, and in order to reap their full economic benefits, Canada needs to broaden the scope of its policy to include factors such as human capital development and innovation.Les chaines de valeur mondiales sont en train de changer les parametres du commerce international. Pour tirer pleinement profit de la nouvelle donne economique, le Canada doit elargir le champ de sa politique commerciale et y integrer des elements comme le capital humain et l'innovation.SummaryThe organization of global production has changed fundamentally in the past few decades. Thanks to reduced costs of communication and transportation and other barriers to trade, many firms have sliced up their supply chains and dispersed their production activities across multiple countries into what are known as global value chains (GVCs).In this study, Ari Van Assche describes the structure and extent of GVCs and examines whether they require a fundamental rethinking of policy. He maintains that in some ways, they are simply a natural progression from trade in goods to trade in that embodies specialization and comparative advantage inherent in standard theory. Nonetheless, GVCs mean that exports from a given country contain increasing proportions of import content, and this phenomenon challenges conventional wisdom about the links between and competitiveness.One consequence of GVCs is that export-based measures of international competitiveness can be severely biased. To demonstrate this, the author shows that although China appears to have a strong competitive advantage in high-technology products, this is a statistical mirage, because most of the content of those exports was manufactured in industrialized nations.In addition, imports within GVCs no longer necessarily reflect foreign competition. On the contrary, imported components are often highly complementary to domestic tasks in the context of global production networks, and they may therefore signal a competitive strength in the domestic sector. The author notes the example of aviation, where imports may be a reflection of strong domestic demand for components rather than of competition from foreign aircraft manufacturers.To improve Canada's competitiveness in this networked environment, policy-makers need to focus on attracting and retaining the highest -valued activities to Canada, while allowing other tasks to be moved to where they can be conducted most efficiently. However, as the author points out, high-value-added activities are also subject to increasing international competition, and policy-makers must realize that allowing Canada to fully reap the economic benefits from participating in GVCs will require adjustments along a number of dimensions that transcend policy, such as human capital and innovation.In his commentary, Todd Evans, director of corporate research at Export Development Canada, examines how cross-border investment and foreign affiliate sales fit into a broader conception of policy. Such activities have been expanding rapidly and are critical to supporting Canadian companies' networks and GVCs.ResumeL'organisation de la production mondiale s'est profondement transformee au cours des dernieres decennies. La baisse des couts de communication et de transport et la levee d'autres barrieres commerciales ont incite nombre d'entreprises a fractionner leurs chaines d'approvisionnement et a repartir leurs activites entre plusieurs pays, formant ce qu'on appelle des chaines de valeur mondiales (CVM).Ari Van Assche decrit dans cette etude la structure et l'etendue des CVM, puis se demande si elles necessitent de repenser l'ensemble de notre politique commerciale. Car a certains egards, avance-t-il, les CVM marquent simplement le passage naturel du « commerce de biens » au « commerce de tâches » englobant la specialisation et les avantages comparatifs propres a la theorie classique du commerce. …

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