The Impact of Global Supply Chains on Trade

January 31, 2013
Categories: Supply Chain

International institutions, including the World Economic Forum, the Organization for Economic Cooperation and Development, and the World Trade Organization, have recently made progress on ambitious projects to help us think about international trade in the 21st century. Trade has grown exponentially over the past several decades and the globalization of supply chains have led to benefits such as lowered production costs, consumer access to a wide variety of goods, and increased employment.

Last week, the World Economic Forum released a report titled, Enabling Trade: Valuing Growth Opportunities, highlighting research that shows lowering supply chain barriers to trade would increase global GDP six times more than eliminating trade tariffs alone, and would increase trade by 15%. Reducing supply chain barriers is more effective because it “eliminates resource waste, whereas abolishing tariffs mainly reallocates resources.”

The report recommends:

  • Collaboration between business and governments to determine priority supply chain factors and relevant policies to address them;
  • Creation of a high-level government body to oversee supply chain regulation;
  • Prioritization of SME input on policy recommendations;
  • Pursuance of a whole of supply chain approach through multilaterals or regional bodies; and
  • A global effort to adopt electronic customs systems in an agreed upon data format.

Additionally, in March 2012, the Organization for Economic Cooperation and Development (OECD) in partnership with the World Trade Organization (WTO) announced a new initiative that would help modernize trade statistics from traditional measurements, to an approach that addresses value-added trade. The initiative seeks to analyze Global Value Chains and develop a database of Trade in Value indicators (TiVA). Recently, they released their first iteration of the database presenting indicators such as foreign value added embodied in gross exports and value added in final demand. The goal of this database is to better inform trade policy decisions and regional negotiations. A comprehensive report on policy implications from the research will be released in May 2013 ahead of the OECD Ministerial meeting.

The Center for Responsible Enterprise and Trade ( recognizes that many companies, including SME’s, have global supply chains which span multiple countries and regulatory environments. Although sharing best practices and achieving international standards is a goal many multilateral trade institutions and business organizations strive to achieve, that outcome has not been fully realized. Often, global companies rely heavily on suppliers and business partners based in countries where the rule of law and a culture of compliance with local laws and international practices are weak. These same countries are increasingly important markets for global brands’ revenue and profit growth. A single product has components and parts that are developed, manufactured and assembled — and often also sold — in a number of countries, all which have different standards and operate under different rules and business norms.

Toward the goal of maturing business practices across geographies, CREATe offers companies and their suppliers a practical, scalable and cost-effective framework for implementing management systems to better protect intellectual property and prevent corruption. CREATe Leading Practices features online assessments, training and other resources designed to benchmark and improve processes for safeguarding IP and preventing corruption.

Download the World Economic Forum report: Enabling Trade: Valuing Growth Opportunities

Access the OECD-WTO TiVA Database

Learn more about CREATe Leading Practices; e-mail for more information.