Vertical Specialization and the Changing Nature of World Trade

[...]In this article, we shed light on the globalizationof international production and trade by demonstratingthe increasingly important role vertical specializationplays in international trade. We use case studies andinput-output tables to calculate the level and growth ofvertical-specialization-based trade, which we define as theamount of imported inputs embodied in goods that areexported. The case studies—the United States–CanadaAuto Agreement of 1965, Mexico’s maquiladora trade withthe United States, electronics trade between Japan andAsia, and trade involving Opel’s subsidiary in Spain—allow us to quantify the amount of vertical-specializationbasedtrade.3 In all of the case studies, our findings indicatethat vertical specialization has increased sharply in recentyears: in the Japan-Asia electronics trade, for example, itincreased 900 percent between 1986 and 1995.[...]