Monday, 12 November 2018

Global Value Chains and Digital Trade Restrictions Part II

Last month, I wrote about how digital trade restrictiveness of countries is associated with how much countries participate in Global Value Chains (GVCs). This follow-up column explains how digital trade restrictions are also strongly associated with where countries participate in GVCs.

In another blog post, I made clear that the use of ICT in GVCs is unrelated with the complexity of value chains. Instead, ICT-intensity of GVCs relates better with the relative position of industries in value chains. That is, where industries are most active in GVCs. In fact, industries closer to consumers are often industries that are also relatively more ICT-intense. They are placed more downstream. Vice versa, industries that are more upstream often appear less ICT-intense.  

Now, this pattern is also reflected with regards to countries’ digital trade policy framework: countries that are less restricted across the whole range of digital trade policies are more active in supply chains that are closer to the final consumer, i.e. more downstream. On the other hand, countries that are more restricted with digital trade policies are often trading more in upstream value chains, being further away from final consumers.

This can be seen in the figure below. The vertical axis plots a measure of the relative position of countries in their supply chains. Higher values on this indicator means higher GVC “upstreamness” of countries, trading more in GVS that are more upstream. The horizontal axis plots ECIPE’s Digital Trade Restrictiveness Index (DTRI) with higher values reflecting greater digital trade restrictiveness. 

The graph shows that countries such as Indonesia, India, Brazil and Turkey are more restricted regarding digital trade policies whilst also trading more upstream in GVCs. Contrary, countries which are less restricted in digital trade policies are trading more downstream in their supply chains. They are closer to the final destination of the good (or service), i.e. the consumer.