Expansion of global value chain and transformation of multilateral trade system

GUAN Chuanjing1

(1.Institute of Economics, Tsinghua University)
【Knowledge Link】embedded liberalism; Uruguay Round

【Abstract】Rapid development of GVC requires high-quality multilateral trade rules, but multilateral trade rules have continued to stagnate since the 1990s. Besides, the populism has hit major developed countries such as the US since 2016, which makes it more difficult to coordinate international economic policy. It is hard for the existing functionalism theory, incentives for change and deep interdependence to fully reveal the root cause of the mismatch between GVC and multilateral trade rules. GVC is the unity of the production organization and spacial distribution of capital. It raises the bargaining power of the capital factor relative to the labor factor and breaks the political and social basis on which international economic order depends, namely, the political contract of interest reciprocity in international economic negotiations and the social contract that adjusts the impact of economic opening on the interest of different domestic groups. The weakening of reciprocity leads to aggravation of the competition over the path of multilateral trade negotiations, and the decline of social contract impacts free trade norms. New challenges such as high-standard trade agreement negotiations led by the US and EU and the constantly rising trade protectionism show that emerging powers need to adjust strategic thinking in a timely manner when leading the development of economic globalization and maintaining the multilateral trade order. They should change from “expanding the market” to “creating the market” at the international level so as to promote common development, and attach more importance to adjusting wealth distribution and cultivating consumption ability at the domestic level so as to strengthen the international market power and domestic adaptability in the transformation of international trade order.

【Keywords】 global value chain; multilateral trade system; international economic order; reciprocity; social contract; free trade;

【DOI】

【Funds】 Major Project of National Social Science Fund of China (17ZDA169) China Postdoctoral Science Foundation (2018M630131)

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This Article

ISSN:1003-3386

CN: 11-5370/D

Vol 35, No. 06, Pages 31-71

November 2018

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Abstract

  • 1 Introduction
  • 2 Perspectives for analyzing the impact of GVC on the development of multilateral trade system
  • 3 Expansion of GVC, changes in political and social contracts, and transformation of multilateral trade system
  • 4 Shaking of political contract and weakening of reciprocity
  • 5 Decline of social contract and aggravation of protectionism
  • 6 Conclusion
  • Footnote