Mitigating Digital Trade Barriers: Strategies for Enhancing National Value Chains Performance

This paper examines the impact of barriers to trade in digital services on the quality of national value chains (NVCs) and and explores production specialization as a mitigation strategy. Utilizing an integrated production and trade model, we measure the quality of NVCs using multidimensional indicators. The study analyzes data from 47 economies across 35 sectors over a period from 2014 to 2020, highlighting significant adverse effects of digital trade barriers, especially in economies that are high-income, highly open to trade, and extensively informatized. In contrast, our analysis suggests that bolstering production specialization within these value chains can effectively mitigate such detrimental effects.The research underscores the critical need for a strategic and responsive policy framework that encourages the diversification and enhancement of production capabilities.