Are Production Networks Passé in East Asia? Not Yet

Many people have a vague notion that the room for expanding international production networks is almost exhausted and that this is why international trade has slowed down since the recovery from the great trade collapse. This paper presents evidence against such belief in the East Asian context by classifying finely disaggregated international trade data into five categories based on the stages of the production process. Our thorough data examinations show that the slowdown in world trade and East Asian trade was attributed mainly to sluggish growth in trade of primary goods and processed raw materials. In contrast, East Asian trade in manufactured parts and components and the assembled end products within international production networks mostly seen in machinery industries, continued to expand steadily, underpinned by the intensive margin growth. We argue that East Asian production networks did not slow down and the potentiality of the production networks has not been exhausted yet.

ERIA-DP-2018-03