During the past few decades, a truly
global division of labor has emerged, presenting
opportunities for specialization, collaboration,
and exchange on scales once unimaginable.
The confluence of falling trade
and investment barriers, revolutions in communications
and transportation, the opening
of China to the West, the collapse of
communism, and the disintegration of Cold
War political barriers has spawned a highly
integrated global economy with vast potential
to produce greater wealth and higher living
standards.
The factory floor is no longer contained
within four walls and one roof. Instead, it
spans the globe through a continuum of
production and supply chains, allowing lead
firms to optimize investment and output
decisions by matching production, assembly,
and other functions to the locations best
suited for those activities. Because of foreign
direct investment, joint ventures, and other
equity-sharing arrangements, quite often
“we” are “they” and “they” are “we.” And because
of the proliferation of disaggregated,
transnational production and supply chains,
“we” and “they” often collaborate in the
same endeavor. In the 21st century, competition
is more likely to occur between entities
that defy national identification because
they are truly international in their operations,
creating products and services from
value-added activities in multiple countries.
There is competition between supply chains,
but only after there is cooperation and collaboration
within supply chains.
But trade and investment policy has not
kept pace with these remarkable changes in
commercial reality. Our globally integrated
economy requires policies that are welcoming
of imports and foreign investment and that
minimize regulations or administrative frictions
based on misconceptions about some
vague or ill-defined “national interest.” To
nurture the promise of our highly integrated
global economy, governments should commit
to policies that reduce frictions throughout
the supply chain–from product conception
to consumption–as well as in the flow of services,
investment, and human capital.
During the past few decades, a truly
global division of labor has emerged, presenting
opportunities for specialization, collaboration,
and exchange on scales once unimaginable.
The confluence of falling trade
and investment barriers, revolutions in communications
and transportation, the opening
of China to the West, the collapse of
communism, and the disintegration of Cold
War political barriers has spawned a highly
integrated global economy with vast potential
to produce greater wealth and higher living
standards.
The factory floor is no longer contained
within four walls and one roof. Instead, it
spans the globe through a continuum of
production and supply chains, allowing lead
firms to optimize investment and output
decisions by matching production, assembly,
and other functions to the locations best
suited for those activities. Because of foreign
direct investment, joint ventures, and other
equity-sharing arrangements, quite often
“we” are “they” and “they” are “we.” And because
of the proliferation of disaggregated,
transnational production and supply chains,
“we” and “they” often collaborate in the
same endeavor. In the 21st century, competition
is more likely to occur between entities
that defy national identification because
they are truly international in their operations,
creating products and services from
value-added activities in multiple countries.
There is competition between supply chains,
but only after there is cooperation and collaboration
within supply chains.
But trade and investment policy has not
kept pace with these remarkable changes in
commercial reality. Our globally integrated
economy requires policies that are welcoming
of imports and foreign investment and that
minimize regulations or administrative frictions
based on misconceptions about some
vague or ill-defined “national interest.” To
nurture the promise of our highly integrated
global economy, governments should commit
to policies that reduce frictions throughout
the supply chain–from product conception
to consumption–as well as in the flow of services,
investment, and human capital.
Daniel Ikenson is associate director of the Center for Trade Policy Studies at the Cato Institute and coauthor of Antidumping Exposed: The Devilish Details of Unfair Trade Law (2003).
