The global economy is characterized by international production networks, where firms operate through trade, foreign direct investment (FDI) and strategic partnerships. While international agreements have been effective in bringing down tariffs and improving market access for FDI, non-tariff measures and domestic regulation can create transaction costs that add up along the value chain. Costs can arise due to the restrictiveness of the regulation itself or due to differences between regulations in different markets. This paper focuses on the latter. It examines why these costs matter and the approaches that exist for addressing them.
This paper is part of the Global Value Chain Policy Series.