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The changing structure of international trade linked to global production systems : what are the policy implications?

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  • Milberg, William
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    Abstract

    The author argues in this paper that the quantitative rise in world trade openness since 1980 may be less significant than the qualitative change in the structure of world trade, specifically the rise in intermediate goods trade resulting form the breaking up of the production process into different parts and locating these parts in different countries. His paper examines the extent of that structural change, its causes, and its implications for theory and policy. The increasing importance of trade in intermediate goods requires a new emphasis in the theories of international trade and investment toward a theory of the competitive struggle of absolute advantage and externalization. The challenge of industrial upgrading in global production systems will require industrial, competititon and labour market policies at the national level aimed at generating the profit and wage growth needed to build skills, knowledge-based assets, infraestructure and demand that in turn gird long-term economic growth. In particular, a delicate balance must be struck between market power for firms needing profits to innovate, and competitive pressure that encourages knowledge- asset creation. He concludes that in past successful cases of industrial upgrading, inward foreign direct investment has not played a leading role and should not be relied on in this sense even with the provision of special incentives.

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    File URL: http://www.ilo.org/public/libdoc/ilo/2004/104B09_240_engl.pdf
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    Bibliographic Info

    Paper provided by International Labour Organization in its series ILO Working Papers with number 370120.

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    Length: 27 pages
    Date of creation: 2004
    Date of revision:
    Publication status: Published in Working paper :
    Handle: RePEc:ilo:ilowps:370120

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    Keywords: trade structure; international relocation of industry; trend; developed countries; developing countries; globalization; structure du commerce international; délocalisation industrielle; tendance; pays développés; pays en développement; mondialisation; estructura comercial; reubicación internacional de industrias; tendencia; países desarrollados; países en desarrollo; globalización;

    References

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    1. Gerald Epstein & Elissa Braunstein, 2002. "Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?," Working Papers wp45, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. Chaudhuri, T. Datta & Adhikari, Smita, 1993. "Free trade zones with Harris-Todaro unemployment A note on Young-Miyagiwa," Journal of Development Economics, Elsevier, vol. 41(1), pages 157-162, June.
    3. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
    4. Jack Glen & Kevin Lee & Ajit Singh, 2003. "Corporate profitability and the dynamics of competition in emerging markets: a time series analysis," Economic Journal, Royal Economic Society, vol. 113(491), pages F465-F484, November.
    5. Manuel R. AGOSIN & Ricardo MAYER, 2000. "Foreign Investment In Developing Countries, Does It Crowd In Domestic Investment?," UNCTAD Discussion Papers 146, United Nations Conference on Trade and Development.
    6. Peter Nolan & Dylan Sutherland & Jin Zhang, 2002. "The Challenge of the Global Business Revolution," Contributions to Political Economy, Oxford University Press, vol. 21(1), pages 91-110, December.
    7. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    8. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
    9. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
    10. Jan Fagerberg & Jarle Hildrum, 2002. "Do global production networks and digital information systems make Knowledge spatially fluid?," Working Papers 13, Centre for Technology, Innovation and Culture, University of Oslo.
    11. Jörg Mayer & Arunas Butkevicius & Ali Kadri & Juan Pizarro, 2003. "Dynamic products in world exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(4), pages 762-795, December.
    12. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    13. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
    14. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
    15. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    16. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
    17. Bacha, Edmar L., 1978. "An interpretation of unequal exchange from Prebisch-Singer to Emmanuel," Journal of Development Economics, Elsevier, vol. 5(4), pages 319-330, December.
    18. Bernard Hoekman & Peter Holmes, 1999. "Competition Policy, Developing Countries and the WTO," The World Economy, Wiley Blackwell, vol. 22(6), pages 875-893, 08.
    19. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    20. Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
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    Cited by:
    1. Silva, Ester G. & Teixeira, Aurora A.C., 2008. "Surveying structural change: Seminal contributions and a bibliometric account," Structural Change and Economic Dynamics, Elsevier, vol. 19(4), pages 273-300, December.

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