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Global Production Sharing and South-South Trade

Author

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  • Prema-chandra Athukorala
  • Shahbaz Nasir

Abstract

This paper examines 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. It 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. There is evidence that the share of South-South trade in world trade has increased significantly over the past two decades. However, 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.

Suggested Citation

  • Prema-chandra Athukorala & Shahbaz Nasir, 2012. "Global Production Sharing and South-South Trade," Departmental Working Papers 2012-12, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2012-12
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    References listed on IDEAS

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    Cited by:

    1. Ragoobur, Verena Tandrayen & Tengur, Neha Devi & Seewooruttun, Bhooteshta, 2021. "South-South Trade: The Potential for Mauritius," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(3), pages 45-65, September.
    2. 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.
    3. 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.
    4. 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.

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    More about this item

    Keywords

    global production sharing; production fragmentation; South-South trade; gravity model; regional trade agreements; RTA;
    All these keywords.

    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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