Impacts of Reverse Global Value Chain (GVC) Factors on Global Trade and Energy Market

Byeongho Lim, Jeongho Yoo, Kyoungseo Hong and Inkyo Cheong
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Byeongho Lim: Korea Maritime Institute, Pusan 4911, Korea
Jeongho Yoo: Division of International Commerce, Pukyong National University, Pusan 48434, Korea
Kyoungseo Hong: Program in International Relations, New York University, New York, NY 10012, USA
Inkyo Cheong: Department of International Trade, Inha University, Incheon 22212, Korea

Energies, 2021, vol. 14, issue 12, 1-17

Abstract: Since the outbreak of COVID-19 and the American decoupling policy, the global value chains (GVCs) have been switched to regional GVCs, and, in the worst case, are subject to a potential alteration of reversing the GVCs, ultimately entailing a severe impact on international trade and the global energy market. This paper applies a quantitative approach using a computational general equilibrium (CGE) model to estimate the effects of the reverse GVC factors on the global economy, trade, and energy market. These reverse GVC factors will decrease the global GDP, and such effect will bring a greater influence on both China as well as the United States, which is pursuing decoupling. The increased trade costs due to these factors will reduce the GVC indices, mostly in ASEAN by 0.2~1.15%, followed by Korea, Japan and China. Surprisingly, the GVC index in the United States is expected to be strengthened due to the enhanced GVC with its allies such as Canada and Mexico. In China, the use of oil, gas and petroleum is expected to decrease by around 10%, and similar effects are expected in Korea and the EU. Among the world’s major energy producers, it is estimated that the US will reduce energy exports by 16–62% depending on the energy source, and the Middle East and Russia will significantly reduce their gas exports. The global energy market is shrinking, but in particular, the international gas market is expected to decrease by 27.3~38.6%.

Keywords: global value chain (GVC); reverse GVC factors; decoupling; COVID-19; global energy market (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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