《Integration of Trade and Disintegration of Production》.pdf

Integration of Trade and Disintegration of Production in the Global Economy Robert C. Feenstra Revised, April 1998 Forthcoming, Journal of Economic Perspectives. Robert C. Feenstra is Professor of Economics, University of California, Davis, California; Visiting Professor of Economics, Haas School of Business, University of California, Berkeley, California; and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts. Abstract The last few decades have seen a spectacular integration of the global economy through trade. The rising integration of world markets has brought with it a disintegration of the production process, however, as manufacturing or services activities done abroad are combined with those performed at home. I compare several different measures of foreign outsourcing, and argue that they have all increased since the 1970s. I also consider the implications of globalization for employment and wages of low-skilled workers, and for trade and regulatory policy, such as labor standards. The last few decades have seen a spectacular integration of the global economy through trade. The share of imports (or exports) in GDP for the United States has approximately doubled in the last two decades, and if intra-OECD trade is omitted, the same is true for the OECD countries generally. Trade does remain a seemingly small fraction of U.S. GDP. This is not surprising in view of the fact that large economies trade less with others, and more internally. But the modest share of trade in total national income hides the fact that merchandise trade as a share of merchandise value-added is quite high for the U.S. and the OECD, and has been growing dramatically. In fact, if one focuses on merchandise trade relative to va