Global Production

174 Pages·2016·3.38 MB·English

Global Production: Firms, Contracts, and Trade
Structure
Pol Antr(cid:224)s
Harvard University
June, 2015
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 1/174
Road Map
Broad Introduction
Contracts and International Trade
Introduction
Preliminary Evidence
A Model of Exporting
A Model of Global Sourcing
Empirical Tests
Multinational Firm Boundaries
Transaction-Cost Theory
Property-Rights Theory
Empirical Tests
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 2/174
BROAD INTRODUCTION
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 3/174
Introduction ThreeMajorDevelopments
Three Major Developments
Three major developments in the world economy in the last 25 years:
1 Information and communication technology (ICT) revolution
2 Deepening of trade liberalization and continuing transportation cost
reduction
3 Political developments expanding the reach of globalization
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 4/174
Introduction ThreeMajorDevelopments
ICT Revolution
1. Information and communication technology (ICT) revolution
Processing power and memory capacity of computers
Cost of transmitting information over an optical network
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 5/174
the light coloured bars in Figure 11) seemed to come out of the blue; taking the development
as exogenous followed naturally.
There are two major problems with the second pillar when it comes to 21st century
regionalism. The most obvious is the prevalence of unilateralism (demonstrated in Section
3.4). To put it differently, if the observed regionalism since 1994 had not been accompanied
by massive unilateral tariff cutting – i.e. the dark line in Figure 11 had been flat in the new
century instead of falling – the old approach might have been useful. No MTN occurred
while RTAs boomed so the old approach would have asserted that the RTAs were stumbling
blocks. But the world tariff average did fall in the new century, due mostly to unilateralism.22
The second pillar could be restored if folding unilateralism into multilateralism was an
option. But this too falls down on the facts. What the world has seen is an explosion of
unilateral and regionalism, not unilateralism versus regionalism. Section 3 argued that
regionalism and unilateralism seemed to be jointly endogenous reactions to a common third
cause (the ICT triggered 2nd unbundling). The old framing of the question misdirects attention
by highlighting a trade off that the world never faced.
The second major problem for the second pillar is posed by a different set of facts – the
historical parallelism of regionalism and multilateralism. For example, the US and Canadian
stances on starting FTA negotiatioInntrso dwucetrioen shaTpherdee pMriamjorarDielyve lbopym tehntes outcome of a political
economy conflict inside each nation between national exporters (who would benefit) and
FallinnatigonaTl irmapodrte coCmpoetsittorss (who would lose). Their stance on an MTN was shaped by the
same factors and actors. Given this, it is easy to understand the synchronicity of tariff-cutting
decisions. US and Canadian exporters were in the ascendency in 1986 and they got their
2.gDoveerenpmeenntisn tgo temrabdraecel itbraedrea lliibzearatliisoantioan nredgifoanalllilny gantdr manulstiplaoterrtaalltyi o–n thce oCsatnsada-US
FTA talks and the Uruguay Round were both started in 1986.
EU, NAFTA, Mercosur, ASEAN FTA, China(cid:146)s WTO accession, etc.
Figure 11: Tariff liberalisation since 1947: RTAs, MTNs and unilateralism.
GATT Kennedy Tokyo Uruguay Doha
signed Round Round Round ends Round
50 16%
ends ends WTO born begins
45
14%
40 13% New RTAs (number of
12% 12% agreements)
35
10% New WTO members
30 (number of nations)
10%
25 9% 8%
GATT/WTO Round in
progress
20 6%
6%
15 Wscaolrel)d average tariff (right
4%
10
2%
5
0 0%
749194911591359155917591959116913691Sour5691ces: R7691TAs: 9691WTO1791 onlin3791e data5791bases7791 & H9791ufbau1891er-Sc3891hott R5891TA da7891tabas9891e; tar1991iffs: C3991lems5991on an7991d Will9991iamso1002n (20300204) u5002p to 17002988, then World DataBank (weighted tariffs all products)

PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 6/174

22 About half of world trade is now covered by an RTA of some form, but the NAFTA was the last big one; after
that, the RTA trade share was about 45% so the hundreds of RTAs expanded coverage by only 5% and many of
these excluded most high-tariff items.
- 22 -
Introduction ThreeMajorDevelopments
Political Developments
Introducci(cid:243) TresFen(cid:242)mensImportants
Transicions Pol(cid:237)tiques
3. Political developments expanding the reach of globalization
3. Esdevenimentspol(cid:237)ticsquehanampliatl(cid:146)abastdelaglobalitzaci(cid:243)
Fall of communism, worldwide ideological shift to the right in large
Caigudadelcomunisme;girideol(cid:242)gicengranpartsdelm(cid:243)ncapa
parts of the globe
pol(cid:237)tiquesmØsliberals
PolAntr(cid:224)s (HarvardUniversity) Laglobalitzaci(cid:243)delprocØsproductiu Juliol2014 5/32
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 7/174
Introduction MadeintheWorld
An Implication: Rise of Global Value Chains
Gradual disintegration of production processes across borders
(cid:147)Made in(cid:148)labels in manufactured goods have become archaic
symbols of an old era
Every author has his/her pet word to describe this phenomenon:
(cid:147)slicing of the value chain(cid:148)
(cid:147)fragmentation of the production process(cid:148)
(cid:147)disintegration of production(cid:148)
(cid:147)delocalization(cid:148)
(cid:147)vertical specialization(cid:148)
(cid:147)global production sharing(cid:148)
(cid:147)unbundling(cid:148)
(cid:147)o⁄shoring(cid:148)
(cid:147)(cid:135)attening of the world(cid:148)
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 8/174
Introduction MadeintheWorld
An Example: Everybody(cid:146)s Favorite Toy
Designed by Apple in California, Assembled in China
AssembledinChina(andnowalsoinBrazil)byFoxconnandPegatron
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 9/174
Introduction MadeintheWorld
Tearing Down an iPad 3
PolAntr(cid:224)s (HarvardUniversity) GlobalProduction June,2015 10/174