RESEARCH AND ANALYSIS: WORKING PAPERS

What Global Fragmentation Means for the WTO

The rapid rise in global fragmentation — foreign investment, global supply chains, and ‘production sharing’ — is fundamentally reshaping the multilateral trading system.

This paper uses a simple economic modeling framework to understand how the global fragmentation phenomenon may reshape the WTO, and particularly its developing country members that are most affected by the rise in global production sharing and foreign direct investment. The paper argues that the surge in global production sharing, supply chain agreements, and investment has not only recast the role of existing GATT/WTO rules, but that these same forces also create a strong rationale for new multilateral disciplines pertaining to investment incentives and other ‘behind-the-border’ policies.

 

No: ERSD-2014-03

Author: Emily J. Blanchard

Manuscript date: February 2014

Key Words:

GATT WTO, International Investment, Global Supply Chains, Production Fragmentation, Multilateral Investment Agreements

JEL classification numbers:

F13, F15, F21, F23

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Disclaimer 

This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title.

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