Comprehensive Responses to Global Value Chains in the Era of Mega FTAs: From the perspective of trade strategy

Author Name NAKATOMI Michitaka  (Consulting Fellow, RIETI)
Creation Date/NO. August 2013 13-P-016
Research Project Pressing Problems of International Investment Law
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Active international research and discussions on global value chains (GVCs) have been triggered by the recent development of value-added analyses which clarify the interdependence of economies, as well as the stalemate of the World Trade Organization (WTO) and the Doha Round, the emergence of mega free trade agreements (FTAs), and heightened interest in the behind-the-border measures and services trade. Serious frustration with the present trading system, which is unable to respond to the challenges of GVCs, and strong wishes for reform have been stimulating interest in GVC studies. As a "holistic approach" for the facilitation of GVCs, issue-based, multi-issue plurilateral agreements such as the International Supply Chain Agreement (ISCA) can be an effective choice, in addition to mega FTAs. Close collaboration between governments and industries is key for the success of the plurilateral agreements. Mega FTAs, which are likely to be driving forces of rulemaking in GVCs in the coming years, do not automatically guarantee the creation of an ideal global trade system. Rather, there is a clear danger that they may create indigestible "spaghetti bowls in rules".

In order to avoid this situation, countries should develop policies aiming at a "global solution" and possess a philosophy focusing on "global value chains" as well as "issue-based global rulemaking" (e.g. ISCA) based on transparency and information sharing. With these in mind, Japan is expected to consolidate "unified axes" on trade issues and propose and move actively to realize them.