Trade sanctions and Global Value Chains: A China–South Africa perspective

China has been an important trade partner for many African countries, and in particular for\r\nSouth Africa, whose trade volume with China has increased significantly over the past decades.\r\nChanges of global trade and Global Value Chains (GVCs) dynamics as response of increasing\r\ntrade sanctions bring substantial economic challenges for both countries directly involved and\r\ncountries not directly involved by sanctions. On the one hand, trade sanctions have direct\r\neffects on sanctioned countries. On the other, sanctions can have significant indirect effects on\r\ncountries not involved, as a consequence of trade diversion, changes in comparative advantages,\r\nand geopolitical realignment. The paper provides an empirical assessment of Global Value\r\nChains’ re-organization by China and African countries in the age of trade sanctions. It explores\r\nand quantifies the intertwined relationship between trade sanctions, GVCs participation, and\r\nRevealed Comparative Advantage (RCA), with a focus on the dyad China–South Africa in a\r\ncomparative perspective vis-á-vis other Chinese trade partners. The analysis is based on a\r\npurpose-built dataset covering GVCs participation indexes on 66 origin and destination countries\r\nfor 68 industries (ISIC Rev.4) over the period 2005–2018. A simplified evolutionary model\r\nshows how the indirect effect of sanctions on forward GVCs could be positive and sizable, the\r\nmechanism being the displacement of (heterogeneous) inefficient firms with (heterogeneous)\r\nmore efficient ones; while the indirect effect of sanctions on backward GVCs is indeterminate. By\r\nzooming onto the China–South Africa relations, the paper sheds new light on the consequences\r\nof sanctions, as perceived from both buyer’s (backward) and seller’s (forward) perspective, in\r\na so-called South–South trade partnership.