Sunday, July 15, 2012

Peter Draper — The shifting geography of global value chains: Implications for developing countries and trade policy

Fundamental changes to global value chains are afoot. This column argues that over the next decade the underlying cost structures driving their location could change dramatically. It presents a recent report on the political economy of value chains and the implications for developing countries and trade policy.
Read it at VOX
The shifting geography of global value chains: Implications for developing countries and trade policy
by Peter Draper | Chair of the Global Agenda Council on Trade

6 comments:

Carlos said...

I spent 10 years pulling production lines out of Europe and the USA and setting them up in Asia.

Some of the highly automated products were retailing for $50 but only cost $4 to make in Asia and ship to the USA. This was compared to a cost of about $4.20 if made in USA. Why would they would bother to ship the lines and lose all those jobs to increase a products net profit by 0.4% you ask?

Well the more compelling reason was to avoid tax. They would sell the ($4 cost) product internally from the Asia entity to the US entity for $35 and attract significantly lower corporation taxes. The (local tax free) profits from the Asia entity were remitted to Deleware HQ after being washed through a complex series of Asian/ Caribbean tax havens and diluted through low profit European entities.

We could stop a lot of the marginal outsourcing through changes and enforcement of the tax code without touching a single trade agreement.....It's all in the transfer pricing folks!

Unforgiven said...

What do you think of Warren's idea of not taxing biz at all?

Tom Hickey said...

"What do you think of Warren's idea of not taxing biz at all?"

This is essentially correct. However, I would separate revenue from productive contribution from economic rent (land rent, monopoly rent and financial rent) and tax economic rent only, leaving all gains from productive contribution untaxed.

Unforgiven said...

I wonder how Warren's idea of having just a property tax would affect the "economic rent" biz. I would imagine that we would be so busy finding jobs for "tax professionals" that it would take a while for that one to settle out.

Arrgh! All that output, currently WASTED on a lot of thrashing about.

Unforgiven said...

Should have said "all that effort", as there wouldn't seem to be much in the way of useful output.

Just eliminating the amount of physical and mental illness created by our current tax system would transform the country.

AndyCFC said...

Its correct things are changing but not obvious, we have been setting up supply chains from North Africa, we can truck over in a matter of a few days from Morrocco and a much cheaper price than bringing in from the far east already most of the clothing we bring in is from Turkey & North Africa.. less so from the far east now... China needs to change its model quickly.