Factor Endowment, International Fragmentation And Upgrading Of Trade Structure

In the past20years, foreign trade has been playing more important role in China’s national economy and the structure of foreign trade has been upgraded in an open and stable market environment and under dualistic pattern of international trade. But when it comes to the situation of trade protectionism on the rise and low added value in product specialization, there’re still questions about whether the upgrading of trade structure can last for long. This study reviews the classical trade structure theory and establishes a theory model on evolution and upgrading of foreign trade structure from traditional specialization to intra梡roduct specialization, which takes factor endowments and international fragmentation as main research perspectives. Then it takes an empirical test of determining factors of China’s foreign trade structure evolution based on China’s economic and trade data from1992to2010, further testing key factors of the trade structure continual upgrading.Under certain given conditions, this study puts forward three propositions hypothesis:(1) the differences between factor endowments decide the patterns of product specialization and international trade; countries mainly export factor intensive products and import factor scarce products;(2) product differentiation leads to the generation of intra-industry trade; the share of infra-ndustry trade is related with differences of factor endowments between countries and the economic development level of countries with abundant labor;(3) infra-roduct specialization leads to the generation of processing trade and intra-ndustry trade of intermediate products; the higher the degree of vertical specialization is, the bigger the share of processing trade and infra-industry trade will be and the more developed the factor intensity of products will be.Structure of foreign trade includes three aspects, which are commodity composition of foreign trade, mode structure of foreign trade and model structure of foreign trade. Besides, processing trade value promotion and proportion improvement of high tech product and infra-industry trade are the optimal path of our country’s trade structure. The results show that the comparative advantage in labor force and vertical specialization both have obvious explanation for evolution of China’s trade structure, and the deepening of vertical specialization has contributed to endogenous changes of capital accumulation and technological progress, which upgrade trade structure together with vertical specialization. Furthermore, there’s long-run equilibrium relationship between vertical specialization and trade structure; the deepening of vertical specialization Granger-causes the upgrading of trade structure. As a result, international fragmentation can be an effective way to continuingly promote the improvement of trade structure and improve the trade competitiveness.The innovation of this study is that, the theoretical analysis bases on actual development process of the foreign trade of developing countries and comprehensively contains varieties of factors; the empirical study analyses trade structure on multiple levels and uses new indexes of international fragmentation and a variety of measurement methods. But there’re still some shortcomings to be further improved. For example, the theoretical model is not fit for developed countries, and time span of empirical data is limited, and there’s no space for analysis on representative industry.