Global value chains can benefit economy

The Spanish economy can take advantage of the ongoing restructuring of global value chains, according to the latest technical report from the Committee for Reflection on Internationalization of The Spanish Exporters and Investors Club, a body of experts from the academic and business worlds and former senior government officials.  

According to the report, Spain has a "favourable competitive position in terms of costs with respect to central European countries", to which other strengths must be added, such as its infrastructure and an acceptable level of qualification. "The reconfiguration of global value chains can be an opportunity to attract investment and strengthen Spain's position in European value chains," say the authors of the technical note, Rosario Gandoy and Carmen Díaz-Mora, professors at the University of Castilla-La Mancha.  

According to Gandoy and Díaz-Mora, recent changes in the global economic environment, such as the advance of protectionism and the recent COVID-19 crisis, "have undermined some of the pillars that supported the expansion of global value chains, forcing to rethink the convenience or not of this form of internationalization of production, which implies a high level of external dependence". 

From his point of view, which is also supported by academic studies, the above-mentioned changes will not put an end to this form of organization of production processes, which has proved to be a suitable model for reducing costs, improving production efficiency and the competitiveness of economies. "The most likely thing, they say, is that companies will reconfigure their global value chains depending on the characteristics of the activity, the markets for their products and existing comparative advantages".

For the authors, the new configuration of the value chains will be determined by the search for a balance between abandoning the most cost-effective locations and the risks involved in external dependence, particularly on China. "Security concerns will most likely lead to greater diversification of supplies, so as to reduce the incidence of potential non-compliance by a particular supplier, and to a widening of the inventory margin, an aspect we have seen has accentuated the impact of COVID-19," they explain.  

They also believe that after the pandemic it is very possible that companies will opt for a shortening of the production chains, so that the manufacturing process is carried out "within a smaller geographical area and closer to the market".  

In order for the Spanish economy to take advantage of the opportunities of this ongoing reconfiguration of global value chains, in the technical note approved by the the Committee for Reflection on Internationalization of The Spanish Exporters and Investors Club, the authors recommend the implementation of several specific industrial policy actions, which should be aimed at improving business competitiveness. In particular, they refer to the need to implement measures to boost the technological capacity of enterprises and the assimilation and dissemination of new technologies in manufacturing.  

Another set of measures should, in their view, be aimed at increasing financial support for exports and promoting the upgrading of management capital and the training of professionals with expertise in international operations. 

They also recommend facilitating the growth of the business dimension, for example by removing regulatory restrictions on the growth of SMEs.  

All this should be complemented with support actions for companies to improve their knowledge of foreign markets and to contact and make themselves known among the companies that lead global sectorial value chains, with specific programmes by Embassies, Consulates and Commercial Offices. 

Finally, they point out the need to improve the business framework in which the companies that are inserted in the global value chains operate. Among them, they stress the importance of reviewing the regulatory environment, tax policy, the functioning of the labour market and the efficiency of the goods and services market.