Global value chains strengthen the economic linkages between countries. The COVID-19 crisis has also illustrated that while they can mitigate economic shocks and support a country’s ability to recover, they can transmit disruptions between countries at the same time. The economic slump was not necessarily deeper in countries that were more strongly integrated into the international division of labour. Still, businesses are well advised to incorporate adverse economic developments in foreign markets in their cost considerations. Given the growing geostrategic tensions since the outbreak of the war in Ukraine, they could also be encouraged to realign their international production networks in order to reduce dependencies and risks that are regarded as being too high from a societal perspective. A general retreat from the international division of labour, however, is not a sensible approach as it would cause considerable losses in prosperity.

Shocks, dependencies and trends – considerations on international production networks(PDF, 675 KB, accessible)