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Abstract In the aftermath of the COVID-19 pandemic, supply chains have become important policy tools to ensure the security and resilience of regional trading blocs of major economies. The US government's focus on supply chains for selected strategic industries and the EU Commission's renewed efforts to strengthen its supply chains using 'sustainability standards' coincides with the global trend in the shift towards digital and low-carbon economies. Furthermore, the rising tensions between the US and China, with no signs of reconciliation over key issues of contention, have emphasized the need for more credibility and trust in global supply chains. However, such policies also have the potential to serve as new barriers to participation in supply chains by less-developed economies which are not yet prepared to meet the high-level sustainability criteria which aim for higher protection of the environment and labor rights. There also seems to be an apparent shift in paradigm supporting the interventionist role of government that emphasize the need for more discretion for policy objectives that pursue societal and democratic values, not to mention national security interests. The current rules of international trade, however, do not sufficiently address these new issues and need to be realigned in order to meet the new demands. The current 'rules of the game' need to be reinforced in order to accommodate the rising need of countries for increased consideration of issues of sustainability and competitiveness.
Keywords Supply chain, Environment, Labor, Sustainability, Industrial policy
1. Introduction
The consistent growth and expansion of global supply chains that has led global trade growth during the past 30 years has been weakening since the global financial crisis in 2008-09 (WTO 2019a). More recently, structural changes in global supply chains have become more prominent due to the shifting role of China in global value chains (GVC) and the increasing trends of re-shoring or near-shoring of production sites to different strategic locations along the global supply chain. China has enjoyed its position as a production hub in Asian regional supply chains since the 2010s, leading to significant growth in trade and economic development which has enabled the country to climb up the supply chain ladder to engage in higher value-added activities by its domestic industries. As China's industrial structure became more sophisticated, the...