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Trade integration in East Asia : the Role of China and production networks

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  • Haddad, Mona
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    Abstract

    Production networks have been at the heart of the recent growth in trade among East Asian countries. Fragmentation trade, reflected mainly in the trade in parts and components, is expanding more rapidly than the conventional trade in final goods. This is mainly due to the relatively more favorable policy setting for international production, agglomeration benefits arising from the early entry into this new form of specialization, considerable intercountry wage differentialsin the region, lower trade and transport costs, and specialization in products exhibiting increasing returns to scale. The economic integration of China has deepened production fragmentation in East Asia, countering fears of crowding out other countries for international specialization. International production fragmentation in East Asia has intensified intraregional trade but has depended heavily on extraregional trade in final goods. While production networks centered on China have contributed significantly to growth in East Asia, they also breed vulnerabilities. They have not automatically led to technology spillovers and have led to an extreme interdependence across East Asian countries.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4160.

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    Date of creation: 01 Mar 2007
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    Handle: RePEc:wbk:wbrwps:4160

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    Keywords: Economic Theory&Research; Free Trade; Trade Policy; Trade Law; Technology Industry;

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    Cited by:
    1. Prema-chandra Athukorala & Nobuaki Yamashita, 2005. "Production Fragmentation and Trade Integration: East Asia in a Global Context," Departmental Working Papers 2005-07, The Australian National University, Arndt-Corden Department of Economics.
    2. Miria Pigato, 2009. "Strengthening China's and India's Trade and Investment Ties to the Middle East and North Africa," World Bank Publications, The World Bank, number 2626, January.
    3. Allegret, Jean-Pierre & Essaadi, Essahbi, 2011. "Business cycles synchronization in East Asian economy: Evidences from time-varying coherence study," Economic Modelling, Elsevier, vol. 28(1-2), pages 351-365, January.
    4. Dinda, Soumyananda, 2011. "China’s Trade in Asia and the World: Long run Relation with Short run Dynamics," MPRA Paper 30664, University Library of Munich, Germany, revised 04 May 2011.
    5. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, vol. 20(3), pages 255-268, May.
    6. World Bank, . "Middle East and North Africa Economic Developments and Prospects, 2008 : Regional Integration for Global Competitiveness," World Bank Other Operational Studies 12949, The World Bank.
    7. Wong, Chin-Yoong & Eng, Yoke-Kee, 2010. "Vertically globalized production structure in New Keynesian Phillips curve," The North American Journal of Economics and Finance, Elsevier, vol. 21(2), pages 198-216, August.
    8. Walkenhorst, Peter, 2008. "Policies to strengthen trade competitiveness in Tunisia," MPRA Paper 24130, University Library of Munich, Germany.
    9. Xing, Yuqing, 2008. "China?s Exports in ICT and its Impact on Asian Countries," Working Paper Series RP2008/39, World Institute for Development Economic Research (UNU-WIDER).

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