Section I examines the implications of production sharing in the context of preferential trade liberalization. Of particular interest is the case in which a free trade area which is clearly trade-diverting under traditional circumstances, becomes trade-creating with joint production. Trade in...

This paper examines the repercussions of cross-border production sharing for the welfare effects of preferential trade liberalization. In a general-equilibrium context, a free trade agreement (FTA), which incorporates production sharing, raises the likelihood of welfare improvement. Thus, two...

This paper examines the implications of cross-border production fragmentation in the context of regional integration, using both general- and partial-equilibrium approaches. It shows the conditions under which fragmentation converts a trade-diverting FTA into a trade creating one. It assesses...

Preferential trade agreements between dissimilar economies are known to encourage inter-industry specialization, but when they take place between developed and developing countries, they also change the nature of intra-industry trade by facilitating cross-border production sharing. When such...

Creation of the North American Free Trade Area (NAFTA) has focused attention on trade in intermediate goods and on offshore sourcing in the context of preferential trade liberalization. Although intermediate goods trade as a general phenomenon has been thoroughly examined in the literature, its...