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Global production sharing and South-South trade

Author

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  • Prema-chandra Athukorala
  • Shahbaz Nasir

Abstract

Purpose - The purpose of this paper is to examine patterns and determinants of trade among developing countries (South-South trade), with emphasis on the role of production sharing in global economic integration of the Southern economies. Design/methodology/approach - The paper begins with an analytical narrative of the emerging trends and patterns of South-South trade using a classification system that helps delineating trade based on global production sharing (network trade) from total recorded trade. Then it undertakes a comparative econometric analysis of the determinants of South-South and South-North trade using the standard gravity model. Findings - The share of South-South trade in world trade has shown a significant increase over the past two decades. This increase has predominantly come from the dynamic East Asian countries, reflecting their growing engagement in global production sharing. The growth dynamism of East-Asia centered production networks depends heavily on demand for final (assembled) goods in the Northern markets; South-South trade is largely complementary to, rather than competing with, South-North trade. While regional trading agreements (RTAs) could play a role at the margin, natural economic forces associated with growth and structural change in the economy and the overall macroeconomic climate as reflected in the real exchange rate, and the quality of trade related logistics are far more important in the expansion of South-South network trade. Originality/value - This is the first study to examine patterns and determinants of South-South trade paying attention to the role of global production sharing. The findings are valuable for informing the contemporary policy debate on promoting South-South trade. The trade data classification system developed here is expected to help further research on this subject.

Suggested Citation

  • Prema-chandra Athukorala & Shahbaz Nasir, 2012. "Global production sharing and South-South trade," Indian Growth and Development Review, Emerald Group Publishing, vol. 5(2), pages 173-202, September.
  • Handle: RePEc:eme:igdrpp:v:5:y:2012:i:2:p:173-202
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    References listed on IDEAS

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    1. Judith M. Dean & K. C. Fung & Zhi Wang, 2011. "Measuring Vertical Specialization: The Case of China," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 609-625, September.
    2. Jean-François Brun & Céline Carrère & Patrick Guillaumont & Jaime de Melo, 2015. "Has Distance Died? Evidence from a Panel Gravity Model," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 13, pages 299-320 World Scientific Publishing Co. Pte. Ltd..
    3. Prema-chandra Athukorala, 2009. "Production Networks and Trade Patterns:East Asia in a Global Context," Departmental Working Papers 2009-15, The Australian National University, Arndt-Corden Department of Economics.
    4. Helpman, Elhanan, 2011. "Understanding Global Trade," Economics Books, Harvard University Press, number 9780674060784, December.
    5. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
    6. Peter Egger, 2005. "Alternative Techniques for Estimation of Cross-Section Gravity Models," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 881-891, November.
    7. Przemyslaw Kowalski & Ben Shepherd, 2006. "South-South Trade In Goods," OECD Trade Policy Papers 40, OECD Publishing.
    8. Prema-chandra Athukorala, 2011. "Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?," Asian Economic Papers, MIT Press, vol. 10(1), pages 65-95, Winter/Sp.
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    Cited by:

    1. Bernhardt, Thomas, 2014. "How promising is South-South trade as a contributor to economic development in Asia and South America? Insights from estimating income elasticities of import demand," MPRA Paper 56413, University Library of Munich, Germany.
    2. Daniel Poon, 2014. "China’s Development Trajectory: A Strategic Opening for Industrial Policy in the South," UNCTAD Discussion Papers 218, United Nations Conference on Trade and Development.
    3. Millanida Hilman, Rafiazka & Widodo, Tri, 2015. "Global Production Sharing in Machinery and Transport Equipment Industry in the ASEAN4," MPRA Paper 79663, University Library of Munich, Germany.

    More about this item

    Keywords

    India; China; Global production sharing; Production fragmentation; South-South trade; Gravity model; Regional trade agreements; Production processes; Production planning; Globalization;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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