Are free trade agreements good for ‘Factory Asia’? This column argues that rather than supporting ‘Factory Asia’, it is more likely that fragmentation trade has prospered despite the noodle bowl of overlapping FTAs in the region. Inter-regional FTAs, on the other hand, may have been able to indirectly support the growth of production networks among existing members, if they led to increased demand for the final goods that the networks produce.

What can we learn from China’s experience as a linchpin in the global value chain? This column presents new research showing that financial frictions influence the organisation of production across firm and country boundaries. If you’re credit-constrained, you might be stuck in the low value-added stage of the supply chain. Strengthening capital markets might thus be an important prerequisite for moving into higher value-added, more profitable activity. China’s experience tells us that liquidity-constrained manufacturers might therefore benefit more from import liberalisation and from the fragmentation of production across borders.

The revolution in manufacturing – increasingly known as ‘global value chains‘ – has changed the world of trade policy as much as it has changed the global industrial landscape. This column discusses new research suggesting that border management and transport and telecommunications infrastructure services matter far more than trade tariffs. Improving infrastructure and management would increase global GDP far more than the complete elimination of tariffs. However, it won’t be easy. Tackling supply chain barriers will require dynamic and responsive national and international trade policymaking procedures that are more in step with industrial practices.

Trade agreements have become ‘deeper’ over recent years, and there are initiatives in the pipeline to globalise deeper trade governance through mega-regional agreements (such as the Trans-Pacific Partnership). This column argues that trade agreements in general – and the WTO in particular – should focus on what they do best, reducing protectionist barriers. Broader issues such as intellectual property and regulatory expropriation should be left to governments to deal with on their own. Governments that handle these issues most effectively will be the winners in the new world of supply-chain trade.