Southeast Asian Countries in Global Production Networks

Cross-border dispersion of different stages/slices of the production processes within vertically integrated global industries, which we label global production sharing1 in this chapter, has been a key structural change in the global economy in recent decades (Jones and Kierzkowski, 2001; Helpman, 2011). This process of international division of labor opens up opportunities for countries to specialize in different slices (tasks) of the production process in line with their relative cost advantages. Trade based on global production sharing, that is, trade in parts and components, and final assembly traded within global production networks, has been the prime mover of the dramatic shift in manufacturing exports from developed to developing countries (Krugman, 2008). Given this structural shift in trade patterns, the conventional approach to analyzing export performance, which treats international trade as an exchange of good produced from beginning to end in a given trading partner, is rapidly losing its relevance