Chapter 19: Global production sharing, trade patterns and determinants of trade flows: the role of East Asia
Global production sharing – the break-up of a production process into vertically separated stages carried out in two or more countries – has become one of the defining characteristics of world trade over the past few decades. It began in electronics and garments in the late 1960s but has spread to many other industries. As the scale of activities in a vertically integrated production process expands, so do the opportunities for reducing costs by locating parts of the production process in different countries. This has resulted in a steady rise in the trade in parts and components across national borders. And it has grown into a global phenomenon involving countries at varying stages of development. However, there is evidence that it is far more significant in East Asia and has played a critical role in the region’s economic growth and structural transformation. There are many theoretical studies examining the causes and modalities of global production sharing, and implications of the growing dichotomy between parts and components and final products for trade flow analysis and trade policy (Jones, 2000; Jones and Kierzkowski, 2001; Helpman, 2006; Feenstra, 2008). A number of recent studies also document the increasing importance of global production sharing and the prominent role played by China and other East Asian economies in promoting this type of exchange (Athukorala, 2005 and 2009; Arndt, 2008; Ng and Yeats, 2001).
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