Periodic Reporting for period 1 - TWIN SEEDS (Towards a World Integrated and Socio-economically Balanced European Economic Development Scenario)
Reporting period: 2022-10-01 to 2023-12-31
The objective of the TWIN SEEDS project is to investigate changes in international trade and production patterns, specifically in global value chains (GVCs), both those of a longer-term nature (driven by the "twin seeds": technological developments and geo-political changes) and those that are taking place in the wake of the Covid-19 pandemic.
TWIN SEEDS has four main objectives:
Obj. 1. To explore the geographical reorganization of Global Value Chains (GVCs) under the transformative geopolitical, economic and technological conditions, paying particular attention to key players within GVCs, especially Multi-National Enterprises (MNEs) and their production networks.
Obj. 2. To highlight the effects of the challenges posed by the COVID-19 pandemic to trade relations and GVCs in general, and to international production in key strategic sectors such as health, in particular.
Obj. 3. To analyse how recent and emerging technological developments and GVCs restructuring are impacting on social inequalities, through changing international production structures and shifting work organisation, employment opportunities and job requirements.
Obj. 4. To construct optimal, multifaceted scenarios for a spectrum of interrelated policies in the key policy areas of trade and investment, competition and social policies. The scenarios will form the basis for suggested policy recommendations.
TWIN SEEDS has four main objectives:
Obj. 1. To explore the geographical reorganization of Global Value Chains (GVCs) under the transformative geopolitical, economic and technological conditions, paying particular attention to key players within GVCs, especially Multi-National Enterprises (MNEs) and their production networks.
Obj. 2. To highlight the effects of the challenges posed by the COVID-19 pandemic to trade relations and GVCs in general, and to international production in key strategic sectors such as health, in particular.
Obj. 3. To analyse how recent and emerging technological developments and GVCs restructuring are impacting on social inequalities, through changing international production structures and shifting work organisation, employment opportunities and job requirements.
Obj. 4. To construct optimal, multifaceted scenarios for a spectrum of interrelated policies in the key policy areas of trade and investment, competition and social policies. The scenarios will form the basis for suggested policy recommendations.
At present, TWIN SEEDS fully achieved the following objectives:
Obj. 1. The project provided a comprehensive exploration of the geographical reorganization of GVCs under the transformative geopolitical, economic and technological conditions. The research on this issue was conducted within WP1, whose research output was published in the form of a report (Deliverable D3, “Trends and drivers of GVCs and the role of MNEs in the recent wave of globalization”).
Obj. 2. The project studied the geographical reorganization of GVCs following the COVID-19 pandemic, when severe supply security issues emerged stemming from lock-downs, the shortage of supplies of intermediate and final products, which in turn only heightened the GVC vulnerabilities. The research on this issue was conducted within WP2, whose research output was published in the form of a report (Deliverable D5, “Emerging trends of GVCs and MNEs in the pandemic time”).
Obj. 3. the recent and emerging impacts of GVCs and MNEs on i) employment and inequality (WP3), ii) the environment (WP4), and iii) growth, productivity and competitiveness (WP5). TWIN SEEDS research on WP3, WP4 and WP5 already started, delivering preliminary results. These results, presented and discussed in three different Consortium meetings, require further analysis and research for their validation.
In the first reporting period, TWIN SEEDS did not start working on Obj. 4, which will be the focus of WP6 (see Table 1), planned to begin in Month 17.
Obj. 1. The project provided a comprehensive exploration of the geographical reorganization of GVCs under the transformative geopolitical, economic and technological conditions. The research on this issue was conducted within WP1, whose research output was published in the form of a report (Deliverable D3, “Trends and drivers of GVCs and the role of MNEs in the recent wave of globalization”).
Obj. 2. The project studied the geographical reorganization of GVCs following the COVID-19 pandemic, when severe supply security issues emerged stemming from lock-downs, the shortage of supplies of intermediate and final products, which in turn only heightened the GVC vulnerabilities. The research on this issue was conducted within WP2, whose research output was published in the form of a report (Deliverable D5, “Emerging trends of GVCs and MNEs in the pandemic time”).
Obj. 3. the recent and emerging impacts of GVCs and MNEs on i) employment and inequality (WP3), ii) the environment (WP4), and iii) growth, productivity and competitiveness (WP5). TWIN SEEDS research on WP3, WP4 and WP5 already started, delivering preliminary results. These results, presented and discussed in three different Consortium meetings, require further analysis and research for their validation.
In the first reporting period, TWIN SEEDS did not start working on Obj. 4, which will be the focus of WP6 (see Table 1), planned to begin in Month 17.
TWIN SEEDS delivered research findings going beyond the state of the art of the literature on GVCs.
WP1 focused on the impact on GVCs' reorganization of:
- RECENT POLICY SHIFTS, pointing to:
--- an expansion, in most countries of the EU over the period 2011-2018, of GVCs' engineering and support workers compared to production workers, implying a gradual specialisation pattern away from production and towards the upstream and downstream end of GVCs;
--- a positive role of ICT assets and business R&D expenditures in enhancing the abilities of countries to specialise in the most knowledge- and innovation-intensive activities of the value chain;
--- a shift of EU countries towards bilateral and unilateral agreements, although not all agreements had the same impact on trade;
--- the challenge posed by non-tariff measures (NTMs) for MNEs’ subsidiaries’ activity and performance than tariffs. High-tech manufacturing subsidiaries are particularly vulnerable to these NTMs, as they suffer higher regulatory losses;
--- the importance of an improved foreign investment environment together with a credible commitment to a high level of investor protection for stimulating the formation and consolidation of International Production Networks (IPNs) driven by EU multinational companies.
- TECHNOLOGICAL CHANGE, pointing to:
--- a faster increase of imported (relative to domestic)) R&D between 2010 and 2019 in all advanced economies, including the EU27 (and in contrast to China);
--- the importance of the governance structure as a mediating element of the relationship between GVC embeddedness and innovation performance, with internalization of production and development being the only governance mode contributing positively to new innovations;
WP2 focused on an issue, the effect of the COVID-19 pandemic on the reorganization of GVCs, still poorly studied in the literature.
TWIN SEEDS research revealed:
--- the occurrence of a direct effect of the COVID-19 pandemic on the reorganization of global production;
--- a heterogeneity in the reorganization strategies, since some companies used reshoring, nearshoring and friend-shoring strategies. However, not all decisions related to these practices were directly caused by the COVID-19 pandemic, but also by digitalization and external factors, including
geopolitical tensions;
--- a significant effect of the level of digitalisation on the export performance of different industries during the pandemic. Industries with more computing equipment had higher actual exports than expected. This effect was caused mainly by manufacturing and not service-trade;
--- a time-persisting role of trade policy interventions in the face of COVID. Detailed analysis of EU trade in PPE and their inputs indicate that the GVC is still strongly regionally oriented;
--- a risk for the future resilience of the vaccine value chain, related to the complexity in the supply of such products.
WP1 focused on the impact on GVCs' reorganization of:
- RECENT POLICY SHIFTS, pointing to:
--- an expansion, in most countries of the EU over the period 2011-2018, of GVCs' engineering and support workers compared to production workers, implying a gradual specialisation pattern away from production and towards the upstream and downstream end of GVCs;
--- a positive role of ICT assets and business R&D expenditures in enhancing the abilities of countries to specialise in the most knowledge- and innovation-intensive activities of the value chain;
--- a shift of EU countries towards bilateral and unilateral agreements, although not all agreements had the same impact on trade;
--- the challenge posed by non-tariff measures (NTMs) for MNEs’ subsidiaries’ activity and performance than tariffs. High-tech manufacturing subsidiaries are particularly vulnerable to these NTMs, as they suffer higher regulatory losses;
--- the importance of an improved foreign investment environment together with a credible commitment to a high level of investor protection for stimulating the formation and consolidation of International Production Networks (IPNs) driven by EU multinational companies.
- TECHNOLOGICAL CHANGE, pointing to:
--- a faster increase of imported (relative to domestic)) R&D between 2010 and 2019 in all advanced economies, including the EU27 (and in contrast to China);
--- the importance of the governance structure as a mediating element of the relationship between GVC embeddedness and innovation performance, with internalization of production and development being the only governance mode contributing positively to new innovations;
WP2 focused on an issue, the effect of the COVID-19 pandemic on the reorganization of GVCs, still poorly studied in the literature.
TWIN SEEDS research revealed:
--- the occurrence of a direct effect of the COVID-19 pandemic on the reorganization of global production;
--- a heterogeneity in the reorganization strategies, since some companies used reshoring, nearshoring and friend-shoring strategies. However, not all decisions related to these practices were directly caused by the COVID-19 pandemic, but also by digitalization and external factors, including
geopolitical tensions;
--- a significant effect of the level of digitalisation on the export performance of different industries during the pandemic. Industries with more computing equipment had higher actual exports than expected. This effect was caused mainly by manufacturing and not service-trade;
--- a time-persisting role of trade policy interventions in the face of COVID. Detailed analysis of EU trade in PPE and their inputs indicate that the GVC is still strongly regionally oriented;
--- a risk for the future resilience of the vaccine value chain, related to the complexity in the supply of such products.