Globalization and International Value Chains: 2000-2021

Abstract

In this paper we utilize data capturing value-added linkages in global value chains (GVCs) to
characterize the evolution of globalization from 2000 through 2021. Our analysis addresses the
following three questions: 1) To what extent have North America and China decoupled their supply chains? 2) Has regionalization ("nearshoring") increased significantly in recent years? 3) What is the role of Free Trade Agreements (FTAs) in shaping bilateral production linkages? Our quantitative analysis provides evidence that value-added trade supporting the production of goods and services did not recede during 2000-2021, nor was there evidence of a global trend toward reshoring. Instead, the evidence suggests that 2021 was a high mark for the global exchange of goods and services as measured by international value-added production linkages. Regarding the question of whether there has been a decoupling between North America and China, our analysis finds no evidence of decoupling of value-added production linkages. In fact, we find that China and North America increased their value-added production linkages between 2017 and 2021, implying significantly greater linkages than those that could be estimated using gross trade statistics. Finally, we find that impact of trade agreements on GVC linkages varies across regions and by trade agreement, and that much of the world's trade agreement-influenced growth in GVC networks is occurring outside of North America. We conclude that forging new agreements with trading partners in Asia and Europe should be a top priority if the U.S. wants to play a significant role in the next phase of GVC growth.

Keywords: Global value chains, trade policy, international trade, nearshoring, decoupling, globalization

JEL Classification: F1, F2, F4, F5, F6