The Implications of Increasing Fragmentation and Globalization for the World Trade Organization

Abstract

In a series of papers over the last 10 years, Ronald Jones and Henryk Kierzkowski (1990, 2001a, 2001b, 1999) have significantly improved our understanding of the process by which the production of final consumption goods becomes divided into an increasing number of vertical production blocks connected by service links. The fragmentation of production at the international level has become especially noteworthy in recent years. As these authors point out, this process is driven both by the increasing returns stressed by Adam Smith that result from the increasing division of labor permitted by economic growth and from freer trade among countries and by technological progress in both production processes and the delivery of such services as transportation, communication, coordination, and accounting. In their paper in this volume Jones and Kierzkowski describe how reductions in the costs of services and advances in technology not only spread horizontally across sectors but often lead to interactions between technology and fragmentation whereby improvements in technology encourage both further fragmentation and additional fragmentation acts as an incentive for further technological progress.