TITLE:
Production Globalization or Localization?
AUTHORS:
Shun Xiao
KEYWORDS:
Processing Trade, Trade in Value Added Accounting System, Value Added to Export Ratio
JOURNAL NAME:
Modern Economy,
Vol.9 No.3,
March
28,
2018
ABSTRACT: As the global production expanding, vertical
specialization is thinner and thinner; most countries are just one “node” of
product value chain, and the trade of intermediate products is the goods transferring
from one node to another. We may wonder whether there is a law in the
connections between the “nodes”, whether the connections are subject to
political system, religious culture or geographic distance. This paper adopts a
new accounting system— value added accounting system—to
measure the trade flows between countries, and the ratio of value added export
(VAX ratio) is used to measure the degree of processing trade. Setting 60 major
economies trading with China as samples, it turns out that processing trade
tend to occur between countries closed or with regional trade agreements. With
time going, the influence of distance on processing trade is becoming more and
more significant, naming localization.