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Competition Policy and Global Value Chains

Richard Bolwijn

UNCTAD

Division on Investment and Enterprise

Geneva, 7 July 2014

UNCTAD Ad Hoc Expert Meeting: the role of competition law and policy in fostering sustainable development and trade

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD

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Trade is increasingly driven by global value chains (GVCs),

leading to a significant amount of double counting

Global gross exports “Double counting”

(foreign value added in

exports)

Value added in trade

~19 ~5

~14

28%

ESTIMATES

Value added in global trade, 2010 (Trillions of dollars)

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The importance of GVCs in domestic economies is significant Domestic value added in trade as a share of GDP, by region, 2010 (Per cent)

30%

14%

27%

22%

16%

37%

18%

24%

25%

30%

28%

13%

12%

26%

18%

22%

Least Developed Countries

Memorandum item:

Transition Economies

South America

Caribbean

Central America

Latin America and Caribbean

West Asia

South Asia

East and South - East Asia

Asia

Africa

Developing Economies

Japan

United States

EU

Developed Economies

Global

Developing country average

26%

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GVCs are typically coordinated by TNCs

Global trade in goods and

services

Non-TNC

trade

All TNC-related

trade

Intra-firm trade TNC arm's length

trade

TNC-related trade:

~80%

ESTIMATES

NEM-generated

trade, selected

industries

Global gross trade (export of goods and services), by type of TNC involvement, 2010 (Trillions of dollars)

~ 19 ~ 4

~ 15 ~ 6.3

~ 2.4

~ 6.3

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The presence of TNCs drives GVC participation Correlation between inward FDI stock and GVC participation, 187 countries, 1990 – 2010

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FDI shapes patterns of value added in trade Key value added trade indicators (median values), by quartile of FDI stock

relative to GDP, 2010

1st quartile

(Countries with high FDI stock

relative to GDP)

2nd quartile

3rd quartile

4th quartile

(Countries with low FDI stock

relative to GDP)

Foreign value added in export

18%

17%

24%

34%

Value added contribution of trade

to GDP

21%

24%

30%

37%

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Value capture in GVCs depends on several factors Value capture in GVCs: value added trade shares by component, developing country

average

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The potential for business linkages can be high both in

manufacturing and in services

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Longer term, the ideal development path involves not just

participation but also domestic value added creation GDP per capita growth rates for countries with high/low growth in GVC

participation, and high/low growth in domestic value added share, 1990-2010

GVC participation

growth rate

Growth of the domestic value added

component of exports

Low

Low

High

High

+ 2.2% + 3.4%

+ 0.7% + 1.2%

+ n.n% median GDP per capita

growth rates =

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For most developing countries an increase in participation in

GVCs implied a reduction in domestic value added share GVC Development Paths: country examples

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The links between competition policy and GVCs

Enabling

Upgrading

Enabling Value

Capture

Enabling Participation

1

2

3

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How anti-competitive practices can affect developing

country participation in GVCs

Anti-competitive

practices

Relevance in

GVCs*

Main impact

Participation Value capture Upgrading

Description

C

C Anti-competitive

mergers

Abuse of

dominant

position

• Imposing unfair trading terms (e.g.

exclusivity)

• Excessive, predatory or

discriminatory pricing

• Refusal to supply or provide access

to essential facilities

• Combining firms to create a

monopoly or dominant position

C

Anti-competitive

vertical market

restraints

• Contractual or similar arrangements

between firms at different levels of

production chains that limit

competition or entry by new suppliers

C Collusive practices/

Cartels

• Price-fixing or market allocation

arrangements between competing

suppliers

• Limiting the supply or production of

goods and services

Note: Based on increased incentives for firms to engage in abusive practices, increased opportunities to abuse and potential damage from abuse.

ILLUSTRATIVE FRAMEWORK

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Visit UNCTAD websites:

www.unctad.org/diae

and

www.unctad.org/wir

www.unctad.org/fdistatistics

Thank You!

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