Time to recognise the true value of global supply chains

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Traditional statistics attribute the full commercial value of imports to the last link in the production chain even where the contribution made by that final link has been minimal. The points is made by Pascal Lamy, director-general of the World Trade Organisation.

Speaking in Turkey last week, Lamy argued that most people who speak about global supply and value chains neglect the trade policy side of the debate, but there is a clear link between global value chains and the trade policy environment.

“By virtue of being global, these chains lead to the very same goods or services being produced in multiple geographical locations. It is not only finished products or finished services that cross territorial boundaries, but the vast majority of trade is actually in intermediate products and services.”

As a result, he argues, fewer products are actually “Made in the UK” or “Made in Turkey,” and more are simply “Made in the World”. The average import content of exports is about 40 per cent. Consequently, to export, a country must import as well.

In addition, services like logistics, assembly, distribution, IT, and marketing, are increasingly being sub-contracted. Lamy makes the point that new calculations of the trade in services show that they account for a much larger proportion of world trade than previously thought.

The ramifications of this are significant – not just for companies but for governments. Protectionism is a significant bar to the development of efficient international supply chains. Supply chain professionals have got used to thinking in global terms. It’s time that politicians did the same and recognise the true value of global supply chains.



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