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Abstract
The birth of international trade policy has brought about with it manifold ramifications.
The nuances of international trade are based on the economic policy of Adam Smith’s
comparative advantage, modified several times by Ricardo, Heckscher and Ohlin and
Krugman to better suit the needs of the times. Nations almost always prefer to
manufacture what they excel at producing and import what may be produced at
cheaper rates in other nations. However, this uncomplicated concept of comparative
advantage does not seem to be so uncomplicated anymore! Manufacture of a certain
product no longer involves merely one importing and one exporting nation. Various
nations add value to trade by providing intermediate processes, services or inputs
requisite for the final product; value chains spread across the globe. These inputs may
be used directly in the manufacture of goods, or may on the other hand need to be
processed before they may be used. At the same time, inputs used in the manufacturing
of goods are not limited to goods but also extend to services that are provided in
manufacturing the final product, for instance, warehousing, housekeeping, transport,
etc. Nations have therefore come to be so interdependent that the mercantilist view of
beggar-thy-neighbour has been considered to be completely redundant, especially
when a nation’s imports include value added from within its own nation. Moreover,
nations have even begun to question the effectiveness of antidumping duties, since the same would be imposed on imports which the importing nation has itself added value
to. Thus, albeit that value chains build upon the simple concept of comparative
advantage, they have in turn compelled certain pressing questions to do with the
manner in which trade policy is regulated, bringing about some imperative structural
changes. When goods are manufactured with the aid of inputs provided by several
nations, it no longer remains fair that the last country where the good has been
assembled is considered the country of origin. Against this backdrop, in 2011 the then
Director-General of the WTO Pascal Lamy mooted the concept that goods are now
“made in the world”. This article delves to gain a deeper insight into the concept of
“made in the world” and how the working of global value chains has permitted nations
across the globe to add value to trade and may in turn pose some significant
implications for international trade policy. For most, it would require bringing into line
various policies to arrive at a congruent approach to trade in value-added goods.
International trade regulation must provide a sound response to the dynamics of the
concept of “made in the world”, inter alia through more thorough regulation and
liberalization of the services, investment, customs and competition sectors, to name a
few.