Supply Chains and International Cooperation: Thinking Outside the Box

The value of world trade has increased 27-fold since 1950, three time more that the growth of global GDP. An increasing share of that trade involves international supply chains and the global fragmentation of production. But many countries do not participate intensively in this process. One reason is that variety of policies increase supply chain costs and inhibit firms from locating part of their supply chain to a country or region. This paper argues for a new approach by governments and the business community to identify and reduce supply chain barriers, including in the context of international trade agreements. Using trade agreements to lower trade costs that negatively affect the operation of supply networks would help increase their welfare impact and their relevance to business.