Trade and Production Fragmentation : Central European Economies in European Union Networks of Production and Marketing
Developments driven by trade liberalization and tehcnological progress mean that old development strategies, based on state intervention and trade protection, no longer work. Global competition has brought a growing emphasis on product standards, r...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/06/1346345/trade-production-fragmentation-central-european-economies-european-union-networks-production-marketing http://hdl.handle.net/10986/19601 |
| Summary: | Developments driven by trade
liberalization and tehcnological progress mean that old
development strategies, based on state intervention and
trade protection, no longer work. Global competition has
brought a growing emphasis on product standards, rapid
innovation, adaptability, and speedy response. Technology
has made possible the fragmentation of production. Firms
that become part of global production and distribution
networks do not have to be foreign-owned, as many
multinationals contract out the delivery of services and
products. Foreign involvement facilitates the transfer of
managerial and technological know-how, so firms benefit from
becoming part of a network. Small producers, rather than
servicing small local markets, can supply large firms
abroad. Foreign participation--through outsourcing or direct
investments--may offer direct access to a parent
company's global networks. Becoming part of a
multinational's production and distribution network is
a cheap way to market products. But the unprecedented
globalization of the production process has brought the
integration of trade and the disintegration of production,
with deep implications for the international division of
labor. Have Central European economies been able to take
advantage of the global fragmentation and disintegration of
production and the division of labor? Ten
countries--Bulgaria, the Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Poland, Romania, Slovakia, and
Slovenia--have made large strides toward readjusting their
production structures to international markets, mainly in
the European Union. And trade in industrial products has
lost its pre-transition idiosyncratic character. All 10
economies apear to be on the same track as the European
Union in changing patterns of trade with the networks the
authors discuss. Progress is advanced in furniture (most of
the 10 economies) and automobiles (the Czech Republic,
Hungary, Poland, Slovakia, and Slovenia) and is gaining
momentum in "information revolution" networks
(Estonia and Hungary). Progress in industrial integration
with the European Union has been uneven. The first-tier
economies (the Czech Republic, Estonia, Hungary, Poland,
Slovakia, and Slovenia) are much less so and, despite
relatively low wages, have no comparative advantage in
assembly in EU markets. Among first-tier economies, three
stand out: Estonia and Hungary (in integration into
"information revolution" markets) and Slovakia (in
restructuring its automotive sector). |
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