Production Fragmentation and Trade Integration: East Asia in a Global Context

This paper examines the implications of international production fragmentation for analysing global and regional trade patterns, with special emphasis on countries in East Asia. It is found that, while 'fragmentation trade' has generally grown faster than total world manufacturing trade, the degree of dependence of East Asia on this new form of international specialisation is proportionately larger compared to North America and Europe. International production fragmentation has certainly played a pivotal role in continuing dynamism of the East Asian economies and increasing intra-regional economic interdependence. There is, however, no evidence to suggest that this new form of international exchange has contributed to lessoning the regions dependence on the global economy. On the contrary, growth dynamism based on vertical specialisation depends inexorably on extra-regional trade in final good, and this dependence has in fact increased over the years.