Name: Bruno Macaes, Former Portuguese Secretary of State for European Affairs

Title: Global Value Chains, Policy Coordination and the Belt and Road Initiative

Abstract:

The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia, and Europe. The Maritime Silk Road is designed to go from China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast through the South China Sea to the South Pacific in the other. At sea, the initiative will focus on jointly building smooth, secure, and efficient transport routes connecting major sea ports. The initiative is designed to take advantage of global value chains, integrating different economies more closely and attempting to make economic policies in different countries fit better together. But the challenges are enormous, as the task of developing global value chains in an efficient manner is a very complex one and policy coordination usually raises problems of misaligned interests. One of the challenges is to create mechanisms that allow information to be communicated between different countries and used efficiently.

A priority identified in Vision and Action is to improve the “division of labor and distribution of industrial chains”. When it comes to the division of labor along the value chains of industrial production, positions and preferences reflecting national interests of countries in the regions may differ or even contradict each other. In this case, who decides?

This is particularly the case in the age of global value chains. Today, very few products are manufactured in a single country. Your manufacturing imports are actually more likely to be in intermediate goods, that is, commodities, parts and components, or semi-finished products that you use to make your own products. These could be final products or could themselves be new cogs in a global network of producers and suppliers.

Once they are produced in the world, the combined result of an intricate division of labor within each value chain might occur, then things get rather tricky. What you want is to pick and choose the best segments within each value chain. Thus, if China wants to focus on certain segments of a given value chain, it needs high levels of complementarity in other countries and this will only develop if right transport and communications infrastructures have been created and if right economic policy decisions have been adopted and pursued by those countries. Given services are important for the integrity of global value chains, increasing services export will also be a strategic goal for the Belt and Road.

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