Economic integration agreements and the location of vertical FDI
Juan Blyde, Alejandro Graziano, Christian Volpe Martincus 13 May 2014
Joining international production networks has been the successful path to industrialisation taken by some Asian and eastern European countries in the last decades. This column argues economic integration agreements are a major force behind the formation of these international linkages. Using a global dataset of establishments to measure global value chains, it shows that countries with integration agreements have 8% more linked subsidiaries.
Production processes are becoming increasingly fragmented. Many goods that were manufactured in single countries are now sliced in different bundles assigned to plants around the globe, giving rise to what is commonly known as global value chains (GVCs). The emergence of GVCs is allowing nations to industrialise much more rapidly by joining international production networks rather than by building entire supply chains at home. This has been the path to industrialisation taken by some Asian countries and, more recently, by some eastern European countries as well (Baldwin 2012).
trade agreements, vertical FDI, global value chains
Trade collapse and vertical foreign direct investment
Kiyoyasu Tanaka 07 May 2009
Global trade is collapsing at an unprecedented rate, but not evenly across the globe. This column argues that ‘vertical specialisation’ – the internationalisation of manufacturing supply chains – accounts for the amplification of Japan’s drop in trade. The good news is that once OECD countries start to recover, the amplification should work in reverse, boosting Japanese exports and imports at an accelerating rate.
The US subprime mortgage crisis inflicted high capital losses for domestic and foreign financial firms that had invested in securities backed with US real estate loans. This triggered a severe credit crunch in the US, which grew into a full-blown financial crisis of global proportions and later ended up affecting the entire global economy. The prime characteristics of the current global economic crisis have so far been plummeting stock and equity prices, skyrocketing bank failures, and a sudden collapse in international trade.
Japan, vertical FDI, trade collapse