International Intra-Product Specialization And Trade

China's import and export data in the past three decades reveals that the commodity structure of Chinese import and export has been improved significantly,and the sophistication of China's export goods has a very high similarity to that of OECD countries.China's factor endowments and their changes,however,cannot account for this improvement and similarity convincingly.One important reason is that traditional statistics of import and export is based on an assumption that a product is made throughout the way in one country or region,and that factors of production cannot move across borders(the transnational movement of capital such as FDI is often viewed as a substitute of international trade).Similarly,new international trade theories based on monopolistic competition and economies of scale have failed to explain the new trade pattern between developed countries and developing ones,because the basic assumption of a preference for differentiated products or product varieties between nations with similar purchasing power cannot be held.A possible explanation to this new pattern of international specialization and trade,therefore,lies in the idea of international intra-product specialization and trade.Academic research on international intra-product specialization and trade by scholars at home and abroad has become popular since 1990's.To study this issue,they have employed or coined different concepts and have developed a variety of models,including general equilibrium model.Yet,there are a few loop holes in their study:firstly,they did not offer a framework to depict logically the trajectory of international division of labor from inter-industry to intra-product level,thus could not point out the direction of future evolution;secondly,they did not explain how international intra-product specialization is organized globally;and thirdly,their study was focused on developing theoretical models,analyzing global or regional specialization, or working on input-output forms.So far,no scholar has made research on China's involvement into international intra-product specialization and trade with regard to its import and export of parts and components.With an assumption that data for international specialization of trade in service is not available,data on parts and components can embody the most direct,most visual, and most reliable information on China's involvement into international intra-produet specialization and trade.Therefore,based on field investigation,questionnaire feedback by firms,processing trade data and data on trade in parts and components,we have developed a Factor Endowment Gap-Economies of Specialization-Transaction Efficiency(ESE) model to depict the evolution path of international specialization,and proposed a three-dimensional framework to develop three typical governance models of global production networks and international intra-product specialization.Besides,we have summarized the fundamental determinants of international intra-product specialization,and analyzed the status quo of China's involvement into international intra-product specialization and trade,the key determinants,and the value and benefits China has got.The basic conclusion we have got from our research is that China has been deeply involved into international intra-product specialization via import and export of parts and components,but the value and benefits China has got from trade in either final goods or parts and components are humble and marginal.So,we finally put forward some policy proposals on how to increase domestic value-added in China,how to enlarge the welfare share of Chinese people in international specialization,and how to maintain a sustainable development of China's foreign trade.