Globalisation and Supply Chain

Globalisation and Supply Chain Networks: the Auto Industry in Brazil and India

John Humphrey, Institute of Development Studies at the University of Sussex. *

To be published in G. Gereffi, F. Palpacuer and A. Parisotto (eds), Global Production and Local Jobs , Geneva, International Institute for Labour Studies, 1999.

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Introduction

In the past decade, the auto industries of developing countries have been transformed by trade and investment liberalisation policies and the global expansion of the auto industry. The protective instruments (tariffs, quantitative restrictions, investment controls, etc.) that once shielded most developing countries auto industries from international competition have been partially dismantled. However, governments have remained active promoters of the auto industry through investment incentives, local content regulations and tariffs. Government promotion of the auto industry has interacted with the globalisation strategies of the major auto assemblers. These firms have looked to the larger emerging markets (ASEAN China, Eastern Europe, India, Mercosur and Mexico) for both low-cost production sites (particularly for low-end cars) and for growing markets to offset stagnation in the industrially advanced countries.1 In the past decade, these regions have attracted considerable foreign direct investment (FDI) and the prospects for the auto industry have been transformed. The emerging markets can be classified into two groups. The first group consists of those countries on the periphery of the industrially advanced countries that are being incorporated into their productive structures. This is clearly the case for Mexico, which is being increasingly integrated into the North American auto production system, and also for Eastern Europe in relation to Western Europe. A similar process may be accelerated in the ASEAN region following the collapse of domestic demand in 1997-98. Some division of labour between ASEAN countries and...