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Claremont Colleges Working Papers in Economics, Department of Economics, Claremont McKenna College >
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http://hdl.handle.net/10419/23388
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| Title: | | Trade Diversion and Production Sharing  |
| Authors: | | Arndt, Sven W. |
| Issue Date: | | 2004 |
| Series/Report no.: | | Working paper series / Claremont McKenna College 04,01 |
| Abstract: | | 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 members of a free trade area, who each have comparative disadvantage in the production of a final product relative to a nonmember, may nevertheless enjoy net trade creation if they jointly possess comparative advantage in key components of that product. At a minimum, cross-border production sharing reduces the trade-diverting elements of an FTA. It follows, that rules of origin, viewed as constraints on cross-border fragmentation, augment the negative, tradediverting elements of free trade areas. |
| Subjects: | | Trade Diversion Free Trade Areas Fragmentation Production Networks |
| JEL: | | F15 F13 F11 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Claremont Colleges Working Papers in Economics, Department of Economics, Claremont McKenna College
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| 2004-01.pdf | | 151.29 kB | Adobe PDF |
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