ABSTRACT
Economic production has gone global during the last 20 years. Not so long ago, world trade involved almost exclusively the exchange of fin-ished goods. Toyota, for instance, produced cars in its Japanese factories and exported these vehicles to, say, the United States. Today, intermediate goods-goods that are assembled together into finished goods-make up a growing proportion of trade. Toyota now sources the components for its autos from producers throughout the world and these components are shipped to factories in the United States (and 15 other countries) where workers assemble them into cars and trucks sold to American consumers as well as exported to more than 20 countries around the world. Global production networks such as these (often called “global value chains”) are increasingly common in today’s global economy. Consider Nutella, a cocoa-hazelnut spread produced by the Italian Ferrero Group. Ferrero sources the cocoa they use for Nutella in Nigeria and it draws its hazelnuts from Turkey. It sources its sugar from Brazil, while the Vanillin comes from China and the Palm Oil comes from Malaysia. Ferrero transforms these various ingredients into its tasty spread in nine factories located throughout North and South America, Europe, and Australia. The entire production network is managed from corporate headquarters in Alba, Italy.
