OBLIGATIONS AND CONTRACT LAW II
Week 1: The rise of Global Value Chains
Baldwin, R. 2019. “Global Supply Chains: Why they emerged, why they matter, and where they are
going”, in Elms. D.K.; Low, P., Global Value Chains in a Changing World, World Trade Organization:
Geneva, pp. 13-59, available at:
https://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_e.pdf
▪ The IGLP Law and Global Production Working Group, “The role of law in global value chains: a research
manifesto”, London Review of International Law, Volume 4, Issue 1, March 2016, p. 57–79, available at:
https://academic.oup.com/lril/article/4/1/57/2413108
▪ Anna Beckers, ‘Global value chains in EU law’, Yearbook of European Law, Volume 42,
2023, p. 322–346, https://doi.org/10.1093/yel/yead010
What are GVCs?
- International production networks that are developed and managed by transnational
companies (=multinational companies)
- A way to connect local economies to the global marketplace and to create opportunities
for developing countries to strengthen their national economy by involving local business
in a more profitable global value chain
- "Global investment and trade are inextricably intertwined through the international
production networks of firms investing in productive assets worldwide and trading inputs
and outputs in cross-border value chains of various degrees of complexity. Such value
chains (intra-firm or inter-firm, regional or global in nature, and commonly referred to as
Global Value Chains or VCs) shaped by TNCs (transnational companies) account for
some 80% of global trade."-UNCTAD 2013
- Ex: global chain of Apple’s iPhone – the value chain involves 200 different suppliers
located in 43 countries -> purpose – optimize the value creation in the chain so Apple
could have the biggest economic profit and (2) to optimize the controls over risks that are
associated with production across borders
- Apple needs to make sure that (1) the products it puts on the market are eventually safe
for consumers to use – safety of the products ; (2) the workers from different factories
work in safe and fair working conditions – safety of employees ; (3) not to cause
unlawfully environment damage bc of their production activities – the environmental
risks
1. Value vs supply chain
1
, ➔ Supply chain: focuses on a physical transformation of a good or a thing into a finalized
consumer product
➔ Value chain: stresses the value that is being added along each of the stages of production
from the inception of the product through research and development or the design of the
product until the end consumer that enjoys the good or service
2. Global/ regional/ local scope:
- Only a few chains are transnational and truly global in scope; most of them are
transnational and regional – ex. EU – even a value chain is highly local, with just one
transnational element can be termed a global value chain
3. Intra / inter-firmed:
- The way in which they are organized and structured
➔ Intra-firmed chains: global value chain organized within a corporate structure or a
company group and where the transitional company is in control of the entire chain via its
subsidiaries (ex. Oil, mining, excavation industries like Shell)
➔ Inter-firmed chains: organized via independent contractors; the chain is constituted by
different legal entities that are independent of the transnational corporation controlling
the chain (the firms are not part of the group structure of that corporation) (ex. Zara –
working with wholesalers, importers, manufacturers of the clothing that are outside of
their group structure)
- Important for legal discussions around responsibility and liability that transnational
corporation may carry for damage that occur in the production
4. North / South:
2
, - North: US, Canada and countries in Europe – western industrialized nations mainly
responsible for the 1st stages of the value chain – the development of the product, its
R&D and design
- Global south: associated with countries in which raw materials are found for production
like minerals, cotton, cocoa, coffee, sugar and manual labor -> production risks manifects
more predominantly
5. The chain itself:
- Short / lengthy / straight sequence of notes or messy?
- What defines is the sector, the product and the transnational corporation involved
- iPhone – long – more coordination needs to happen
Genealogy of GVCs
- readings of Boltwin (2011, 2019): talks about two types of unbundling which can explain
the rise of global value chains:
(1) unbundling of transportation in a world free of global value chains
- before industrial revolution – even though international trade existed (spice trade, silk
road, slave trade) the location of bulk of production and that of consumption were closely
related, each village or city was producing for itself so that the consumption was very
close t the place
- after industrial revolution – good produced in great numbers and transported across great
distances bc of (1) development of railways, steamships – dramatic drop in the cost of
transportation that made it possible and profitable -> production local – global
distribution -> the South became market for the North, no need to innovate and develop,
but caused difference in income and economic wealth in the N and S
(2) transmission
- production was unbundled from a single location, could take place at different locations
across the world and different stages of the production could be allocated to diff factories
of the world -> to ensure the production of a good quality product
- behind it: ICT Revolution (internet and communications technology) that was necessary
to create GVCs -> has enabled the coordination of complex means and stages of
production at a distance instructions
- vast wage diff between the global north and the global south that made this economically
profitable for firms based in N -> cut up their production chain and allocate diff stages of
production to diff factories across the world – process called vertical integration
3
, specification & coordination: production is carved up in diff stages and no longer is
overseen by one single company; each firm in the chain is allocated a specific task of
production (World War II)
➔ This specification reduces costs and advances innovation
➔ Drives global offshoring (the outsourcing of production and labor of other countries)
- The geographical scope developed: until 1970 international trade between Europe, US
and Canada
- After 1970: rise of Asia, particularly China as a site of manufacture (phenomenon
explained by the Baldwin’s second unbundling – ICT revolution and transmission)
- Asia surpassed the global north in terms of production capacity -> industrialization of
global south and de-industrialization of the global north -> smaller gap of wealth between
N and S -> due to global value chains that enable countries in S to access global markets
as start to develop more on both economic and social levels
Why do GVCs matter?
- '[GVCs] revolutionized development options facing poor nations; now they can join
supply chains rather than having to invest decades in building their own. The offshoring
of labour-intensive manufacturing stages and the attendant international mobility of
technology launched era-defining growth in emerging markets (...) This reversal of
fortunes constitutes perhaps the most momentous global economic change in the last 100
years.’ – Deborah K. Elms and Patrick Low ; WTO
- 'Although 'everyone can benefit from global value chains... we will all benefit more if
governments take steps to enhance the new business environment.. Encouraging the
development and participation in global value chains is the road to more jobs and
sustainable growth for our economies.' – World Investment report 2013 of the UN
Committee for Trade and Development
➔ Although participation in GVCs are a way to build one’s economy level, wealth is not
equally distributed across nations in terms of their economic abilities and clout;
manufacturing, which creates the least relative value, is still predominantly allocated and
offshored to countries. Law enables this by awarding absolute property rights, in
4
Week 1: The rise of Global Value Chains
Baldwin, R. 2019. “Global Supply Chains: Why they emerged, why they matter, and where they are
going”, in Elms. D.K.; Low, P., Global Value Chains in a Changing World, World Trade Organization:
Geneva, pp. 13-59, available at:
https://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_e.pdf
▪ The IGLP Law and Global Production Working Group, “The role of law in global value chains: a research
manifesto”, London Review of International Law, Volume 4, Issue 1, March 2016, p. 57–79, available at:
https://academic.oup.com/lril/article/4/1/57/2413108
▪ Anna Beckers, ‘Global value chains in EU law’, Yearbook of European Law, Volume 42,
2023, p. 322–346, https://doi.org/10.1093/yel/yead010
What are GVCs?
- International production networks that are developed and managed by transnational
companies (=multinational companies)
- A way to connect local economies to the global marketplace and to create opportunities
for developing countries to strengthen their national economy by involving local business
in a more profitable global value chain
- "Global investment and trade are inextricably intertwined through the international
production networks of firms investing in productive assets worldwide and trading inputs
and outputs in cross-border value chains of various degrees of complexity. Such value
chains (intra-firm or inter-firm, regional or global in nature, and commonly referred to as
Global Value Chains or VCs) shaped by TNCs (transnational companies) account for
some 80% of global trade."-UNCTAD 2013
- Ex: global chain of Apple’s iPhone – the value chain involves 200 different suppliers
located in 43 countries -> purpose – optimize the value creation in the chain so Apple
could have the biggest economic profit and (2) to optimize the controls over risks that are
associated with production across borders
- Apple needs to make sure that (1) the products it puts on the market are eventually safe
for consumers to use – safety of the products ; (2) the workers from different factories
work in safe and fair working conditions – safety of employees ; (3) not to cause
unlawfully environment damage bc of their production activities – the environmental
risks
1. Value vs supply chain
1
, ➔ Supply chain: focuses on a physical transformation of a good or a thing into a finalized
consumer product
➔ Value chain: stresses the value that is being added along each of the stages of production
from the inception of the product through research and development or the design of the
product until the end consumer that enjoys the good or service
2. Global/ regional/ local scope:
- Only a few chains are transnational and truly global in scope; most of them are
transnational and regional – ex. EU – even a value chain is highly local, with just one
transnational element can be termed a global value chain
3. Intra / inter-firmed:
- The way in which they are organized and structured
➔ Intra-firmed chains: global value chain organized within a corporate structure or a
company group and where the transitional company is in control of the entire chain via its
subsidiaries (ex. Oil, mining, excavation industries like Shell)
➔ Inter-firmed chains: organized via independent contractors; the chain is constituted by
different legal entities that are independent of the transnational corporation controlling
the chain (the firms are not part of the group structure of that corporation) (ex. Zara –
working with wholesalers, importers, manufacturers of the clothing that are outside of
their group structure)
- Important for legal discussions around responsibility and liability that transnational
corporation may carry for damage that occur in the production
4. North / South:
2
, - North: US, Canada and countries in Europe – western industrialized nations mainly
responsible for the 1st stages of the value chain – the development of the product, its
R&D and design
- Global south: associated with countries in which raw materials are found for production
like minerals, cotton, cocoa, coffee, sugar and manual labor -> production risks manifects
more predominantly
5. The chain itself:
- Short / lengthy / straight sequence of notes or messy?
- What defines is the sector, the product and the transnational corporation involved
- iPhone – long – more coordination needs to happen
Genealogy of GVCs
- readings of Boltwin (2011, 2019): talks about two types of unbundling which can explain
the rise of global value chains:
(1) unbundling of transportation in a world free of global value chains
- before industrial revolution – even though international trade existed (spice trade, silk
road, slave trade) the location of bulk of production and that of consumption were closely
related, each village or city was producing for itself so that the consumption was very
close t the place
- after industrial revolution – good produced in great numbers and transported across great
distances bc of (1) development of railways, steamships – dramatic drop in the cost of
transportation that made it possible and profitable -> production local – global
distribution -> the South became market for the North, no need to innovate and develop,
but caused difference in income and economic wealth in the N and S
(2) transmission
- production was unbundled from a single location, could take place at different locations
across the world and different stages of the production could be allocated to diff factories
of the world -> to ensure the production of a good quality product
- behind it: ICT Revolution (internet and communications technology) that was necessary
to create GVCs -> has enabled the coordination of complex means and stages of
production at a distance instructions
- vast wage diff between the global north and the global south that made this economically
profitable for firms based in N -> cut up their production chain and allocate diff stages of
production to diff factories across the world – process called vertical integration
3
, specification & coordination: production is carved up in diff stages and no longer is
overseen by one single company; each firm in the chain is allocated a specific task of
production (World War II)
➔ This specification reduces costs and advances innovation
➔ Drives global offshoring (the outsourcing of production and labor of other countries)
- The geographical scope developed: until 1970 international trade between Europe, US
and Canada
- After 1970: rise of Asia, particularly China as a site of manufacture (phenomenon
explained by the Baldwin’s second unbundling – ICT revolution and transmission)
- Asia surpassed the global north in terms of production capacity -> industrialization of
global south and de-industrialization of the global north -> smaller gap of wealth between
N and S -> due to global value chains that enable countries in S to access global markets
as start to develop more on both economic and social levels
Why do GVCs matter?
- '[GVCs] revolutionized development options facing poor nations; now they can join
supply chains rather than having to invest decades in building their own. The offshoring
of labour-intensive manufacturing stages and the attendant international mobility of
technology launched era-defining growth in emerging markets (...) This reversal of
fortunes constitutes perhaps the most momentous global economic change in the last 100
years.’ – Deborah K. Elms and Patrick Low ; WTO
- 'Although 'everyone can benefit from global value chains... we will all benefit more if
governments take steps to enhance the new business environment.. Encouraging the
development and participation in global value chains is the road to more jobs and
sustainable growth for our economies.' – World Investment report 2013 of the UN
Committee for Trade and Development
➔ Although participation in GVCs are a way to build one’s economy level, wealth is not
equally distributed across nations in terms of their economic abilities and clout;
manufacturing, which creates the least relative value, is still predominantly allocated and
offshored to countries. Law enables this by awarding absolute property rights, in
4
