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Trade and production fragmentation : Central European economies in European Union networks of production and marketing

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  • Kaminski, Bartlomiej
  • Ng, Francis

Abstract

Developments driven by trade liberalization and tehcnological progress mean that old development strategies, based on state intervention and trade protection, no longer work. Global competition has brought a growing emphasis on product standards, rapid innovation, adaptability, and speedy response. Technology has made possible the fragmentation of production. Firms that become part of global production and distribution networks do not have to be foreign-owned, as many multinationals contract out the delivery of services and products. Foreign involvement facilitates the transfer of managerial and technological know-how, so firms benefit from becoming part of a network. Small producers, rather than servicing small local markets, can supply large firms abroad. Foreign participation--through outsourcing or direct investments--may offer direct access to a parent company's global networks. Becoming part of a multinational's production and distribution network is a cheap way to market products. But the unprecedented globalization of the production process has brought the integration of trade and the disintegration of production, with deep implications for the international division of labor. Have Central European economies been able to take advantage of the global fragmentation and disintegration of production and the division of labor? Ten countries--Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia--have made large strides toward readjusting their production structures to international markets, mainly in the European Union. And trade in industrial products has lost its pre-transition idiosyncratic character. All 10 economies apear to be on the same track as the European Union in changing patterns of trade with the networks the authors discuss. Progress is advanced in furniture (most of the 10 economies) and automobiles (the Czech Republic, Hungary, Poland, Slovakia, and Slovenia) and is gaining momentum in"information revolution"networks (Estonia and Hungary). Progress in industrial integration with the European Union has been uneven. The first-tier economies (the Czech Republic, Estonia, Hungary, Poland, Slovakia, and Slovenia) are much less so and, despite relatively low wages, have no comparative advantage in assembly in EU markets. Among first-tier economies, three stand out: Estonia and Hungary (in integration into"information revolution"markets) and Slovakia (in restructuring its automotive sector).

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2611.

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Date of creation: 30 Jun 2001
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Handle: RePEc:wbk:wbrwps:2611

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Keywords: Trade Policy; Environmental Economics&Policies; Economic Theory&Research; Transport and Trade Logistics; General Manufacturing; Environmental Economics&Policies; Economic Theory&Research; Trade Policy; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Consumption;

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References

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  1. Michael Borrus & John Zysman, 1997. "Globalization With Borders," Industry and Innovation, Taylor & Francis Journals, vol. 4(2), pages 141-166.
  2. John Zysman & Andrew Schwartz, 1998. "Reunifying Europe in an Emerging World Economy: Economic Heterogeneity, New Industrial Options, and Political Choices," Journal of Common Market Studies, Wiley Blackwell, vol. 36(3), pages 405-429, 09.
  3. Yeats, Alexander J., 1998. "Just how big is global production sharing?," Policy Research Working Paper Series 1871, The World Bank.
  4. Schwartz, Andrew & Zysman, John, 1998. "Reunifying Europe in an Emerging World Economy: Economic Heterogeneity, New Industrial Options, and Political Choices," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt60w702zc, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
  5. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  6. Klaus E Meyer, 2000. "International Production Networks and Enterprise Transformation in Central Europe," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 135-150, April.
  7. Ng, Francis & Yeats, Alexander, 1999. "Production sharing in East Asia : who does what for whom, and why?," Policy Research Working Paper Series 2197, The World Bank.
  8. Irwin, Douglas A, 1996. "The United States in a New Global Economy? A Century's Perspective," American Economic Review, American Economic Association, vol. 86(2), pages 41-46, May.
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Citations

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Cited by:
  1. Götz Zeddies, 2007. "Determinants of International Fragmentation of Production in the European Union," IWH Discussion Papers 15, Halle Institute for Economic Research.
  2. Kaminski, Bartlomiej & Ng, Francis, 2005. "Production disintegration and integration of Central Europe into global markets," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 377-390.
  3. Jože P. Damijan & Matija Rojec & Maja Ferjančič, 2011. "The Growing Export Performance of Transition Economies: EU Market Access versus Supply Capacity Factors," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(4), pages 489-509, December.
  4. World Bank, 2004. "Serbia and Montenegro : An Agenda for Economic Growth and Employment," World Bank Other Operational Studies 14487, The World Bank.
  5. João Amador & Sónia Cabral, 2008. "Vertical Specialization Across the World: A Relative Measure," Working Papers w200810, Banco de Portugal, Economics and Research Department.
  6. World Bank, 2002. "Lithuania - Country Economic Memorandum : Converging to Europe - Policies to Support Employment and Productivity Growth," World Bank Other Operational Studies 15334, The World Bank.
  7. Xu, Juanyi, 2011. "The optimal currency basket under vertical trade," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1323-1340.
  8. Ronald Jones; Henryk Kierzkowski; Chen Lurong, 2004. "What does the evidence tell us about fragmentation and outsourcing," IHEID Working Papers 09-2004, Economics Section, The Graduate Institute of International Studies.
  9. Giuseppe Tattara, 2008. "The Internationalisation of Production Activities of Italian Industrial Districts," Working Papers 2008_13, Department of Economics, University of Venice "Ca' Foscari".
  10. Lorentzen, Jochen & Møllgaard, Peter, 2000. "VERTICAL RESTRAINTS AND TECHNOLOGY TRANSFER: Inter-firm Agreements in Eastern Europe’s Car Component Industry," Working Papers 9-2000, Copenhagen Business School, Department of International Economics and Management.
  11. João Amador & Sónia Cabral, 2008. "International Fragmentation of Production in the Portuguese Economy: What do Different Measures Tell Us?," Working Papers w200811, Banco de Portugal, Economics and Research Department.
  12. Daniel Müller-Jentsch, 2005. "Deeper Integration and Trade in Services in the Euro-Mediterranean Region : Southern Dimensions of the European Neighborhood Policy," World Bank Publications, The World Bank, number 7335, October.
  13. Curran, Louise & Zignago, Soledad, 2012. "EU enlargement and the evolution of European production networks," Research in International Business and Finance, Elsevier, vol. 26(2), pages 240-257.
  14. Møllgaard, H. Peter & Lorentzen, Jochen, 2002. "EXCLUSIVE SAFEGUARDS AND TECHNOLOGY TRANSFER: Subcontracting Agreements in Eastern Europe’s Car Component Industry," Working Papers 10-2002, Copenhagen Business School, Department of Economics.
  15. Bartlomiej Kaminski & Beata Smarzynska, 2001. "Integration into Global Production and Distribution Networks through FDI: The Case of Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 13(3), pages 265-288.
  16. Kaminski, Bartlomiej & Ng, Francis, 2004. "Romania's integration into European markets : implications for sustainability of the current export boom," Policy Research Working Paper Series 3451, The World Bank.
  17. Kaminski, Bartlomiej & Smarzynska, Beata K., 2001. "Foreign direct investment and integration into global production and distribution networks : the case of Poland," Policy Research Working Paper Series 2646, The World Bank.
  18. Gianfranco De Simone, 2008. "Trade in Parts and Components and the Industrial Geography of Central and Eastern European Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(3), pages 428-457, October.
  19. Kaminski, Bartlomiej, 2001. "How accession to the European Union has affected external trade and foreign direct investment in Central European economies," Policy Research Working Paper Series 2578, The World Bank.

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