Research On The Interactive Relationship Between Producer Service Trade And Intermediate Production Trade:Based On International Vertical Specialization

With the further development of economic globalization and product segmentation technology, the entire production process of a certain product is divided into different parts, fostering international vertical specialization based on the objects of production blocks, working procedures and links. This leads to a significant increase in intermediate production trade. Producer service is not only the essential intermediate input of intermediate production trade, it is also the bond for connecting the dispersed production layout. In the context of international vertical specialization, it is of great necessity to explore the question of what is the relationship between producer service trade and intermediate production trade, and whether there is a positive interaction between the two. The answer of these two questions is not only closely related to China's improvement of status in international division, it is also beneficial to a sustainable development of China's foreign trade.This paper, based on theoretical analysis, conducts a model and mechanism analysis on the interaction between producer service trade and intermediate production trade. Three hypotheses are proposed in this paper:(1) The import and export trade of intermediate products plays a positive role in producer service import and export trade. (2) The degree of import dependence of producer service trade plays a negative role in the export of intermediate products. (3) The enhancement of international competitiveness of producer service trade plays a positive role in intermediate production export. Based on these hypotheses and drawing on previous research, this paper chooses processing trade as the proxy variable for intermediate production trade, constructs vector error correction models and conducts an empirical analysis based on time series data from 1997 to 2013. Furthermore, the paper draws on Granger Causality Test and Impulse Response Function in order to explore dynamic relationship between the variables in short-term.The result of the research demonstrates:(1)There is a positive long-term equilibrium relationship between processing trade and producer service trade, and when the natural logarithm of processing trade rises by 1%, the natural logarithm of producer service trade increases by 0.9242%. Processing trade is the Granger reason of producer service trade while the latter is not the Granger reason of the former. The first phase response value of processing trade to producer service trade is 0, but peaks at 0.5 at the tenth phase. On the other hand, the first phase response value of producer service trade to processing trade is 0.6 and peaks at 0.9 at the fifth phase. (2)There is a positive long-term equilibrium relationship between processing export trade and the degree of import dependence of producer service trade, and when the natural logarithm of the degree of import dependence of producer service trade grows by 1%, the natural logarithm of processing trade export decreases by 0.9707%. The degree of import dependence of producer service trade is the Granger reason of processing export trade whereas the latter is not the Granger reason of the former. The first phase response value of processing export trade to the degree of import dependence of producer service trade is 0, and then stays stable at approximately-0.2. However, the first phase response value of the degree of import dependence of producer service trade to processing trade export stands at around 1.2 and reaches the highest point at around 1.4 at the second phase. (3) There is a positive long-term equilibrium relationship between processing trade export and international competitiveness of producer service trade, and when the natural logarithm of international competitiveness of producer service trade rises by 1%, the natural logarithm of processing trade export increases by 0.0531%. Moreover, there is a two-way Granger Causality relation between the two variables. The response value of processing trade export to international competitiveness of producer service trade peaks at 1.0 at the fifth phase and this is then followed by a continuous decline. The response value of international competitiveness of producer service trade to processing trade export peaks at 0.5 at the third phase and then shows a negative response. Finally, the paper concludes with policy suggestions which includes the promotion of the interaction between producer service industry and manufacturing industry, the undertaking of international service outsourcing, the liberalization of investment and trade and establishment of relative mechanisms in terms of promoting the interactive development between producer service trade and intermediate production trade.