International Product Trade Model, Effects And Policy Research

International intra-product division is a kind of complicated international producing network distributed in different places in which the job is divided according to the production process. It allows trade partners from industry and product level deepen into the process level. The production process of specific products is divided into different production value chain and arranged to countries and regions with different factors and resources. Therefore, important changes have taken place in the nature, scale, and benefits distribution of international trade, as well as in the development mode of competition between countries.As the prime promoters of the international production networks and intra-product division under the background of economic globalization, the overseas expansion of the multi-national corporations from the developed countries make the intra-product mainly in two forms:internal-oriented FDI and outsourcing. The core substance of internalization and outsourcing relies upon the course that different production processes or sections were artificially divided in geographic space and extended to different countries, and the essence is the international zone choice of production layout. Therefore, they both belong to the theory of intra-product trade. These two forms have relationships as well as differences either in the motivation or the economic effects.However, the final choice of the intra-product trade pattern is the result of the combined effects from varieties of supply and demand factors, and the significance of which is decided by the state of equalization between the general purposes and the sub-goals of strategic development made by multi-national corporations. First of all, the corollary of vertical FDI by multi-national corporations is the internalization of production and the trade internalization followed. On the one hand, the internalization of production means to build the international division of labour based on the vertical integration; on the other hand, the different objects of intra-product specialization correspond with internalized profits and costs in different nature and degree. Making intra-markets overseas to develop intra-corporate trade, enterprises can protect their monopoly advantage while coordinate their configuration resources using the administrative authority, in order to avoid adverse impact.on operation efficiency and economic benefits caused by incomplete foreign markets. Second, the revival of the international trade between developed and developing countries is closely related to the boom of international outsourcing in a large degree. The content of outsourcing has transferred and upgraded from production to service, which not only deepen the degree of integration of many developing countries into international intra-product division, but also benefit their rise on production value chain, so that they can march on the road of sustainable development of economic growth.According to the division of vertical specialized organizing mode, the study of the economic effect of intra-product trade can be explained by vertical integration and vertical disintegration effects, i.e. FDI effect and outsourcing effect. FDI studies mainly on the effect of economic rise, the total volume of trade, income and employment, as well as technology spillover; while international outsourcing effect can be divided into producing products outsourcing and service outsourcing, which refers to producing efficiency effect and income distribution effect, and so on. The specific study methods include theory qualitative analysis and demonstration quantitative analysis. Particularly, the traditional trade theory indicate that the international service outsourcing can generally increase the profits of both sides in trade, but developed countries still question seriously the reliability of service outsourcing on the factors of living standard, domestic employment, job replacement, income distribution and homeland security as well as the privacy of customers.We can not explain the increasing income disparity between the rural and urban areas only considering the policy factors, such as raising the government purchase price of grain, reducing agriculture taxation and producing costs, as well as deepen the household registry reform.In the empirical study of the relationship between the international intra-product trade and the income disparity between the rural and urban areas, the economic effect of international outsourcing can be divided into output effects and cost effects. The income disparity has a long-term stable equilibrium relationship with the processing trade, but the export and import of the processing trade's influence on the urban-rural income ratio is in the opposite direction:the processing trade exports have a positive impact on narrowing the income disparity, not so noticeable, though; while, with the rate of processing trade imports increase by 10% for each urban-rural income gap will widen about 0.7%. This fully proves that the status of comparative advantage in China is in conflict with the industry and trade structure upgrade. Under the current urban-rural human capital structure, the upgrade of the industry and trade structure must lead to the widen of the urban-rural gap. Therefore, narrowing the differences of urban-rural human capital level should be the long-term focus of the resolution to the income disparity between the urban and rural areas.The development of service outsourcing, especially the initiative service outsourcing, could be the effective strategy for the developing countries to participate in international service outsourcing competition and improve the status of intra-product division. Service outsourcing on the one hand can improve the overall economic welfare, on the other hand it can ease the situation of relative decline of the labor income on the condition of manufacturing outsourcing to narrow the income disparity. Besides, the fixed costs on maintenance and updating of communications technology and transportation networks,etc., will have an impact on the income level of different domestic production factors in the developing countries and the nation's overall well-being.At last, both theories and facts have indubitably proved that the general decrease of the trade barrier in the world wide is the basic premise of intra-product division trade, and that free trade is the only way leading every country into globalized production according to their comparative advantage respectively, which is the inevitable trend of trade policy under the circumstance of globalization. With the marked characteristic of cooperation between governments and enterprises, strategic trade policy has three disadvantages which are Uncertainty, Non-cooperative Game and Matthew Effect, so that developing countries should remain objective and prudent when they are formulating policies. In the development strategy selection of intra-product division, developing countries should persist in the basic policy of free trade, the competitive principle of comparative advantage, the practicable methods of increasing domestic rate of adoption, the core act of raising the quality of human resources, and the development aim of building high technology service industry.