Implications for Trade, Incomes and Economic Vulnerability
Edited by Benno Ferrarini and David Hummels
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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