Asia and Global Production Networks

Asia and Global Production Networks

Implications for Trade, Incomes and Economic Vulnerability

Edited by Benno Ferrarini and David Hummels

This timely book deploys new tools and measures to understand how global production networks change the nature of global economic interdependence, and how that in turn changes our understanding of which policies are appropriate in this new environment. Bringing to bear an array of the latest methods and data to study global value chains, this unique book assesses the evolution of global value chains at the firm level, and how this affects competitiveness in Asia.

Chapter 10: The development and future of Factory Asia

Richard Baldwin and Rikard Forslid

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, international economics

Extract

Like a gigantic, impossibly complex but wonderfully efficient factory, East Asia churns out a vast array of manufactured goods with world-beating price-quality ratios. But this is not a series of national efforts. Manufacturing processes that used to be performed in single factories (mostly in Japan and Republic of Korea) have been fractionalized and dispersed across the region – creating what Baldwin (2006) called ‘Factory Asia’. This chapter looks at the underlying interconnected processes that have led to the development of Factory Asia – namely the fractionalization of the manufacturing process into stages and the dispersion of these stages around Asia. It does so by developing the TOSP (tasks, occupations, stages, products) framework that was informally introduced in Baldwin (2012). The TOSP framework views the production of goods as the performance of a range of tasks that are organized into occupations (collection of tasks) and stages (collections of occupations). Typically offshoring occurs at the level of stages rather than tasks or occupation. This framework is then used to examine the likely effects of improving information and communication technology (ICT) on the future of Factory Asia. Two dimensions are distinguished: fractionalization of the production process (slicing up the value chain), and their spatial dispersion (offshoring stages). A key premise of this chapter is that it is a trap to think of Factory Asia from the perspective of traditional trade theory.

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