This article first introduces the concept, the rationale, the causes and the genesis of global value chains from a worldwide perspective in the form of a brief overview. In the second empirical section, a closer look is taken at the intermediate trade integration in the EU. In particular, the employment effects of the intermediate trade connections for each EU member state and for selected sectors are highlighted. In the concluding section, it is explained why global value chains are particularly susceptible to rising protectionism. Moreover, tentative implications of the current coronavirus pandemic are pointed out.

The EU´s falling share in global manufacturing has fuelled concerns about an overall loss of EU competitiveness, in particular vis-à-vis China. We analyse the empirical evidence underlying these concerns by applying a newly developed decomposition technique to global input-output data spanning the years 2000 to 2014. Our results confirm the diminishing role of the EU in manufacturing value chains, but also show that this is mostly, by nearly 75 per cent, a consequence of the geographical and sectoral reallocation of global demand, reflecting the lower economic growth in the EU relative to the rest of the world. Still, the other almost 25 per cent of the EU’s loss of global share is explained by its lower participation in manufacturing value chains, which confirms a downturn in EU competitiveness. By extending the analysis to individual manufacturing activities we show that this general trend is more pronounced for low-tech (e.g. textiles) than high-tech sectors, with pharmaceuticals emerging as the most resilient EU industry. Policy concerns appear to be most warranted for electronics, a key sector for which the EU´s global share fell even more than for overall manufacturing, without evidence that EU value added from upstream service inputs could significantly mitigate this trend.

We analyse the trade routes between the UK and EU countries. Our results show that the relative importance of the UK as a trading partner in the EU has slightly decreased. We further decompose the total value added into components that quantify the value added that is generated through direct trade with the UK and the indirect trade that is channelled through third countries. Close to one third of the total value added is generated through indirect trade and two thirds through direct trade. Furthermore, 18 per cent of EU countries’ value-added trade to the UK passes through the UK onto other countries.

With international trade increasingly undertaken within vertically fragmented supply chains, this paper considers the impact of changes in trade costs on domestic output. In the context of the UK’s exit from the EU we show that the negative impact on UK output will depend on changes in both domestic and export competitiveness. Since for many firms the majority of their sales are to the domestic market, the domestic competitiveness impact may be quantitatively more important. The impact on output will be more significant the greater the integration of firms in international supply chains, and the greater the asymmetric impact of leaving the EU on UK firms relative to EU firms.

We examine labour market performance in the US and the UK prior to the onset of the Covid-19 crash. We then track the changes that have occurred in the months and days from the beginning of March 2020 using what we call the Economics of Walking About (EWA) that shows a collapse twenty times faster and much deeper than the Great Recession. We examine unemployment insurance claims by state by day in the US as well as weekly national data. We track the distributional impact of the shock and show that already it is hitting the most vulnerable groups who are least able to work from home the hardest – the young, the least educated and minorities. We have no official labour market data for the UK past January but see evidence that job placements have fallen sharply. We report findings from an online poll fielded from 11–16 April 2020 showing that a third of workers in Canada and the US report that they have lost at least half of their income due to the Covid-19 crisis, compared with a quarter in the UK and 45 per cent in China. We estimate that the unemployment rate in the US is around 20 per cent in April. It is hard to know what it is in the UK given the paucity of data, but it has gone up a lot.