“Blindly” Engaging in Global Supply Chains Can Erode Developing Nations’ Economic Power In a world composed of global value chains, headline global trade data can mask the truth about how much exports are actually benefiting a country, according to professor Xiao Jiang from Denison University. Here’s why: If a country’s imports of semi-finished goods contain significant high-skill labor content, that country will lose will lose domestic share of value-added activities. That means a loss of economic power. Developing countries should therefore engage in global value chains in a “selective, careful, and intelligent way” in the face of market power of foreign-led, high value-added firms. They also need government trade policies that will help prevent “value-added erosion,” says Jiang. Through collective bargaining, unions of small manufacturers could also better “counter the asymmetric power structure” and protect vulnerable workers.
Why Exports Alone Can’t Make Poor Countries Rich
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“Blindly” Engaging in Global Supply Chains Can Erode Developing Nations’ Economic Power In a world composed of global value chains, headline global trade data can mask the truth about how much exports are actually benefiting a country, according to professor Xiao Jiang from Denison University. Here’s why: If a country’s imports of semi-finished goods contain significant high-skill labor content, that country will lose will lose domestic share of value-added activities. That means a loss of economic power. Developing countries should therefore engage in global value chains in a “selective, careful, and intelligent way” in the face of market power of foreign-led, high value-added firms. They also need government trade policies that will help prevent “value-added erosion,” says Jiang. Through collective bargaining, unions of small manufacturers could also better “counter the asymmetric power structure” and protect vulnerable workers.