ABSTRACT
Every country is concerned about its place in the international division of labor, regardless of its stage of development. States that are late on the development path seek to develop industries whose impact will be both broad and long term. They know inappropriate policies will exclude them from the dynamic sectors that power the global economy, and are concerned that domestic firms might be “cut out” of the global production network. States that developed early, on the other hand, are concerned that their leading sectors will not adjust rapidly enough to the changes in the world economy. They risk being “hollowed out” as leading firms move operations to countries where labor is less expensive and less regulated. Taiwan is unusual in that it confronts the challenges of both the developed and the developing world. Until quite recently it was a model of “late” development but now confronts the questions of adjustment that are so familiar to the advanced capitalist countries. It fears both being “cut out” and “hollowed out” simultaneously.
