1. One of the greatest effects of this new trend toward international production is that firms can utilize comparative advantages of different economies by locating different processes in different countries good example of this is the automobile industry. Automobiles have many thousands of parts. Some an highly sophisticated electronics or components that use specialized metal alloys. Some parts require amounts of capital, research, and skilled engineering inputs, while others are assembled or produced less skilled labor and little capital. Modern information and communications technologies, along with advances in transportation systems, enable the auto industry to manage the production of parts in m different places simultaneously. Engines may be made in Mexico, transmissions in Japan, electronics United States and Canada, brakes in Brazil, and additional parts from many other countries. Most automobiles today contain parts from many countries. Economists refer to this as a global value chai implies that each step in the production process can be identified and separated from other steps. Ea be located in a different country or region, but each adds value to the final product. How might globa chains cause the reported U.S. trade deficit with China to be larger than the actual trade deficit?
1. One of the greatest effects of this new trend toward international production is that firms can utilize comparative advantages of different economies by locating different processes in different countries good example of this is the automobile industry. Automobiles have many thousands of parts. Some an highly sophisticated electronics or components that use specialized metal alloys. Some parts require amounts of capital, research, and skilled engineering inputs, while others are assembled or produced less skilled labor and little capital. Modern information and communications technologies, along with advances in transportation systems, enable the auto industry to manage the production of parts in m different places simultaneously. Engines may be made in Mexico, transmissions in Japan, electronics United States and Canada, brakes in Brazil, and additional parts from many other countries. Most automobiles today contain parts from many countries. Economists refer to this as a global value chai implies that each step in the production process can be identified and separated from other steps. Ea be located in a different country or region, but each adds value to the final product. How might globa chains cause the reported U.S. trade deficit with China to be larger than the actual trade deficit?
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Transcribed Image Text:1. One of the greatest effects of this new trend toward international production is that firms can utilize the
comparative advantages of different economies by locating different processes in different countries. A
good example of this is the automobile industry. Automobiles have many thousands of parts. Some are
highly sophisticated electronics or components that use specialized metal alloys. Some parts require large
amounts of capital, research, and skilled engineering inputs, while others are assembled or produced with
less skilled labor and little capital. Modern information and communications technologies, along with
advances in transportation systems, enable the auto industry to manage the production of parts in many
different places simultaneously. Engines may be made in Mexico, transmissions in Japan, electronics in the
United States and Canada, brakes in Brazil, and additional parts from many other countries. Most
automobiles today contain parts from many countries. Economists refer to this as a global value chain. It
implies that each step in the production process can be identified and separated from other steps. Each can
be located in a different country or region, but each adds value to the final product. How might global value
chains cause the reported U.S. trade deficit with China to be larger than the actual trade deficit?
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