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Geopolitics and Global Value Chains

The International Business Landscape: 2019 and Beyond

Alex Capri, NUS Business School

Copyright (c) Alex Capri
• US‐China Geopolitical Rivalry: Tariffs, NTBs, Export Controls, 
Sanctions, Protectionism, Nationalism Localization 

• The Evolving Trade landscape: 3 Scenarios
• Fair Trade Model
• China Inc. Model

KEY THEMES
• Nationalist Model

• Localization & Fragmentation: Technology and Digital Trade

• What’s Next for Global Value Chains?

Copyright (c) Alex Capri
Rise of 
Nationalism Increase of Data 
Localization 
Laws

Data Privacy 
Laws

Sanctions

Export  Increase in Non‐
Controls Tariff barriers US‐China 
“Trade War and 
Tech War”.
Licensing

Copyright (c) Alex Capri
NON‐TARIFF BARRIERS

• What Are They?  • Why do they Matter?

Copyright (c) Alex Capri
NON‐TARIFF BARRIERS
Standards  Finance 
Para‐Tariff 
Measures Measures
Measures
• Technical Products • Advance 
• Customs 
• Labeling. payments.
surcharges • Advance 
• Safety
• Internal taxes • Testing. deposits.
• Transactional  • Inspection • Cash margin 

fees. • Marking requirements.

“National  Price 
Security” Measures

• “Voluntary” 
• Sanctions. restraints.
• Export licensing. • Variable 
• Blocked Deals. charges.
• Price controls.

Copyright (c) Alex Capri
EXPORT CONTROLS, TECH TRANSFERS &   SANCTIONS

Copyright (c) Alex Capri
U.S. Lifts Ban on China's ZTE After $1.4 
Billion Penalty

Copyright (c) Alex Capri
US cuts of ZTE from American Tech Suppliers

Confidential and Proprietary. Copyright (c) by Alex Capri. All Rights Reserved.
Source: https://www.youtube.com/watch?v=yxFIrIYlGvs
Android Software

43m
Handsets shipped in
Cellphone RF
2017 (9th in global
Microchips chips
smartphone market)
~30% US’
components
Data movement
interconnects
Optical Components
(e.g. Glass)
%
The weight of U.S sales
of total overseas sales

~70% Rest of
11%
Market share in the US
the world (4th biggest player in the
market)

Source: https://www.reuters.com/article/us-usa-china-zte-components/u-s-suppliers-to-zte-may-find-more-demand-from-china-firms-rivals-idUSKBN1HP027,
Confidential and Proprietary. Copyright (c) by Alex Capri. All Rights Reserved.
End-to-End Traceability

Components Devices Devices & Services

Source: https://ctlsites.uga.edu/anth1102/smartphones-a9/

Pain Points

Confidential and Proprietary. Copyright (c) by Alex Capri. All Rights Reserved.
Are Chinese Tech Firms A Security Threat? 
What’s Next Re:  GVC Disruption?
Rare Earth Materials

Boeing Aircraft China Sales/Exports

University Research Funding & Overseas Students

Apples Market Share in China (30 % of global Revenue) 

Public Listing of Chinese Firms on the US Stock Markets

Copyright (c) Alex Capri
EMERGING GLOBAL TRADE MODELS

The “Fair Trade”   The Unilateral 
Multilateral Rules  “Nationalist 
Frameworks Model”  
The “China Inc.” 
Globalization 
Model 

Copyright (c) Alex Capri
“FAIR TRADE”
&
MULTILATERAL RULES‐BASED
FRAMEWORKS

Copyright (c) Alex Capri
“Fair Trade Model”
”FTA Gold Good For Small and
Standard” Medium Size (SMEs)
Promotes Transparency  Easier Rules of Origin
Environmental Standards  Self Certification
Labor Standards  Broader Protections on Intellectual
Intellectual Property Property
E-commerce rules
Digital trade
Data Privacy & Security
Regulates State Owned Enterprises (SOEs)
Must Operate Under Transparency Rules
Purchases and Sales based on commercial Realities and
Practices
Cannot Discriminate Against Enterprises, Goods or
Services
Cannot Benefit from State Subsidies or Assistance 16

Copyright (c) Alex Capri
Trade in the 21st
Century: Transparency

Technology as an 
Enabler

Rules 
Sustainability
Frameworks

Copyright (c) Alex Capri
The China Inc. Globalization Model

Copyright (c) Alex Capri
One‐Belt‐One‐Road

“CHINA INC.”

EXPANDING
GLOBALIZATIO
N FOOTPRINT Source: Xinhua

“Belt” =  Physical Road from China to Europe • 50 % of World GDP


• 65 Countries on 3 Continents
• 4.4 Billion People
“Road” = The Historic Maritime “Silk Road” • 60 % of the World’s Population

Copyright (c) Alex Capri
6 Economic Corridors Across Asia, Africa, Europe

“CHINA INC.”

EXPANDING
GLOBALIZATION
FOOTPRINT

Source: HKD Research
Regional Comprehensive Economic Partnership (RCEP)

• 16 Countries
• 45% of World’s Population.
• 28% of GDP.
• Will involve Massive Infrastructure.
• Lead by China.
• AIIB to play a major role.

Copyright (c) Alex Capri
The Nationalist Trade Model
THE NATIONALIST TRADE MODEL

Rejects Multilateral 
Inward looking and  Trade as a zero‐sum 
Trade Agreements, 
Self‐Serving. game. 
Frameworks.

Erodes the Post 
Mistrust and  WWII liberal trading 
Protectionist fragmentation in the  order dominated by 
international system. the US 

Copyright (c) Alex Capri
Cross Border Data Flows
Digital Trade in the 
21st Century:

• Cross‐border data 
flows are surging 
and connecting 
more countries.
Source: McKinsey
Data Localization Laws Are Surging
Data Privacy Regulations Around the World Will Increase
Digital Disruption & 
Trade in the 21st
Century:

• E‐commerce and the 
platform economy 

• More Cross border 
B2B, B2C, P2P

• Social Media

• Sharing Economy

Source: indiaretailing.com
Changing Production Technologies

• Automation: Scale Industries

• Additive Manufacturing (3D printing)

• Capital Substitution for Labour

• Transition: Asset Heavy to Asset Light Models

Copyright (c) Alex Capri
Copyright (c) BY Alex Capri. All rights Reserved.
Off-Shoring to Next Shoring
1980’s ‐ Present

“Off‐Shoring” “Near Shoring” “Next‐Shoring”


1980’s‐1990s 1990s‐ 2000s 2010‐Present

• Labor cost arbitrage • Proximity to demand
• Labor costs no longer 
• Extended supply  primary criteria • Proximity to 
chains innovation
• Shorter, multi‐faceted 
• Regulatory arbitrage        supply chains  • Virtual networks

• Farther from • Production closer to  • Talent Pools


demand  demand
• Short supply chains
• Economies‐of‐scale  • Multi‐faceted 
model (low variety) innovation and design  • Flexible production
footprints
• Far from R&D and  • Diverse, fragmented 
Innovation Centers • Robust global  markets, products
networks of suppliers
• Increased supply chain  • Agile, evolving 
risks • More production 
variety • Sustainable, socially 
• IP/Transfer of  accountable
technology risk • Lower supply chain 
risks

Copyright (c) Alex Capri
Copyright (c) BY Alex Capri. All Rights Reserved.
3D‐ Localization, Fragmentation

Copyright (c) Alex Capri
Copyright (c) BY Alex Capri. All Rights Reserved.
3D Disintermediation

Copyright (c) Alex Capri
.
Copyright (c) BY Alex Capri. All Rights Reserved
“Servicification” of GVCs
• Digital Platforms (Facilitation, management, maintenance, digital trade)

• Commoditization of data 

• IoT (infrastructure, connectivity ) 

• Sustainability and Ethics Service Providers (NGOs, niche players)

• AI & Knowledge Intensive Services 
(manufacturing of algorithms, cognitive data analysis)

• Trust and Security Services (privacy, security, truth)

• Regulatory Compliance (auditing, planning)

• Taxation (auditing, planning, optimization etc)

• Shared Economy (last‐mile delivery; capacity optimization etc)

Copyright (c) Alex Capri
Copyright (c) BY Alex Capri. All Rights Reserved.
Small and Medium Sized Businesses
Technology, Small Businesses and Trade

Copyright (c) BY Alex capri. All rights. reserved
Digital Disruption & 
Trade in the 21st
Century:

MSMEs

• ”Leveling UP”
• Leveraging Tech
What’s Next for Global Value 
Chains?
“Glocalization” Digital 
Economy
& Ecosystems

Localization of  Urbanization/
Localization
production clusters
•Regulations
and NTBS

Copyright (c) Alex Capri
Migration to 
production hubs 
within FTA areas.

Copyright (c) Alex Capri
Increased 
Trade amongst 
MSMEs
Increased Data 
Protectionsism

Copyright (c) Alex Capri
Thank You

Alex Capri, NUS Business School
acapri@nus.edu.sg

Copyright (c) Alex Capri