International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications*

Abstract

International production/distribution networks in East Asia developed in the 1990s and after have distinctive features in their significance, extensiveness, and sophistication. This paper first lists “18 facts” on production/distribution networks in East Asia that have been identified by a number of studies using international trade data, microdata of Japanese multinational enterprises, and casual observations. It then presents a concept of two‐dimensional fragmentation as a starting point of theoretically formalizing the phenomena of fragmentation and agglomeration. It finally discusses the policy environment in which the formation of production/distribution networks has been accelerated and policy implications of the existence of such networks for economic integration in East Asia.