Economic links between countries declined relative to world GDP between 2011 and 2016. But is 'slowbalisation' still going on?
up in every atom. Proton cars are not quite so ubiquitous. Founded in 1983 by Malaysia’s government, the Proton company strove to build a truly “national car”, but its parent lost over 1bn ringgit in the two financial years before it sold a stake to Geely, a Chinese carmaker, in 2017. Neighbouring Thailand, in contrast, lacks a national car, but boasts a thriving car industry.
Thailand’s cosmopolitan car industry illustrates the potential of “global value chains”, which link several countries in the production of a good or service. Unfortunately, these chains declined relative to worldbetween 2011 and 2016, contributing to what has been dubbed “slowbalisation”. But a new report by theUpgrade your inbox and get our Daily Dispatch and Editor's Picks.Meanwhile, the political salience of value chains has shot up, thanks to tax battles and trade wars.
That figure would alarm tax authorities, because multinationals sometimes charge themselves contrived prices to shift profits out of high-tax jurisdictions. But the true percentage is about half that, as Maya Forstater, an independent researcher, and, more recently, Nick Shaxson of the Tax Justice Network, have pointed out. The rest is trade in which a multinational stands at one end of the transaction but not both.
China’s position near the end of many chains has also inflamed the trade war. America’s prodigious imports from China contain many parts created elsewhere, including in America itself. This mongrel merchandise quickly penetrated America’s markets after China joined thein 2001, inflicting what some scholars call a “China shock” on blue-collar workers.
China may have had a bigger impact on Mexico. Back in 2000, the lucrative bits of its information and communication technologies industry were clustered close to either end of the value chain: upstream, in components and chemicals, or downstream, close to the customer in retail. The pattern thus resembled the “smile curve” invented by Stan Shih, a Taiwanese electronics magnate: value-added turns up at each corner . But China’s entry into the industry has transformed that expression.
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