Global production sharing: exploring Australia's competitive edge

Abstract

Global production sharing 'cross-border dispersion of production processes within vertically integrated global industries 'has been an increasingly important structural feature of economic globalization in the recent decades. This paper examines patterns and determinants of global production sharing with an emphasis on how Australian manufacturing fits into global production networks (GPNs). Though Australia is a minor player in GPNs, there is evidence that Australian manufacturing has a distinct competitive edge in specialized, skillintensive tasks in several industries such as aircrafts, medical devices, machine tools, measuring and scientific equipment, and photographic equipment. Specialization in highvalue-to-weight components and final goods within GPNs, which are suitable for air transport, helps Australian manufacturing to overcome the 'tyranny of distance' in world trade. Being predominantly 'relationship-specific', Australian GPN exports are not significantly susceptible to real exchange rate appreciation.