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International affairs

Competing from Australia Paper 1: Global Chains

Australia is at risk of being left out of the new wave of globalisation - the rise of the global production and supply chains.

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Report summary

World economic production has undergone substantial restructuring as a new wave of globalisation has emerged in the post-"dot com" era. A number of developing economies have risen in prominence both as both producers and as markets. Many businesses and services have rapidly become more globalised.

In both manufacturing and services, the focus of international investment has shifted towards "efficiency seeking". This shift is being driven by competition and the global rationalisation of production. As a result, the production of both goods and services is becoming increasingly fragmented and geographically dispersed. At the same time, an increasing role is played by companies and alliances, large and small, that operate across borders.

As this process continues, the world economy increasingly resembles a series of chains for the production and supply of goods and services - the "global chains" of the report's title.

Perhaps the best-known example of this process is Dell, the computer firm which sells its PCs direct to customers via the Web and the telephone, sourcing parts mainly from Taiwan and China and assembling them in factories spread worldwide from Ireland to Malaysia. But other industries connected into global supply chains range from cars to software to education services such as universities.

The rise of "global chains" raises a very real challenges for Australia. There is a risk that Australia will find it increasingly difficult to link into these global systems - that we will be left out of these global chains.

About the report

The Global Chains report has been written for CEDA by Professor John Houghton of Victoria University's Centre for Strategic Economic Studies.

Professor Houghton is an acknowledged international expert on the influence of information technology on production systems, and consults frequently for the OECD.