Trade Integration and Production Networks in Asia: The Role of China
AbstractThis paper examines the implications of cross-border component sourcing and production networks for trade competitiveness and welfare. Offshore sourcing of components in which it has comparative disadvantage, enables a country to enhance its comparative advantage in the final product. This option provides emerging countries with an important alternative to capital accumulation and technical change as paths to economic development. In addition, production sharing changes the nature of trade-balance accounting and tends to reduce the sensitivity of trade flows to movements in exchange rates. This has important implications for trade policy and for the choice of exchange-rate regime. In the context of regional trade areas, for example, deeper integration allowing for production sharing has welfare effects superior to those of standard preferential trade liberalization.
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Bibliographic InfoPaper provided by Lowe Institute of Political Economy in its series Working Papers with number 0403.
Length: 14 pages
Date of creation: 2004
Date of revision:
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cross-border sourcing; trade integration; production sharing; exchange rate elasticities;
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-20 (All new papers)
- NEP-CNA-2005-12-20 (China)
- NEP-NET-2005-12-20 (Network Economics)
- NEP-SEA-2005-12-20 (South East Asia)
- NEP-TRA-2005-12-20 (Transition Economics)
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