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would surely have reminded us, China is not a dimensionless point in space, it is a
collection of locations—and Chinese export industries, like U.S. industries a
century ago, are famously clustered, with one town dominating world production
of buttons, another world production of cigarette lighters, yet another accounting
for a large share of underwear production, and so on. I've argued (Krugman
2009
)
that the advantages of such clustering play an important role in generating overall
gains from trade, even though the international pattern of trade is determined by
old-fashioned comparative advantage.
So location isn't irrelevant, even to comparative-advantage trade. Yet the key
point is that the forces driving trade between America and China are different from
the forces driving trade between Atlanta and Chicago. And this difference may, in
turn, explain the very divergent recent trends in interregional and international
trade.
3.3
Soaring Globe, Stagnating Regions
I have already made use of Subramanian and Kessler's term “hyperglobalization,”
which mainly refers to the dramatic growth in international trade since about 1990.
Figure
3.1
gives you an idea of what we're talking about here. The figure shows
the ratio of an index of world manufactures trade to world manufacturing produc-
tion, with 1950
1 (data from United Nations 1962 and World Trade Organization
2013). If you look at the data up through around 1990, you see a point many
international economists, myself included, used to make frequently—that much of
the growth in trade since World War II, impressive as it was, only represented a
return to pre-World War I levels. Actually, I used to say that the crucial
technologies underlying globalization were the steamship, the railroad, and the
telegraph—everything since had been a minor improvement.
But since 1990 trade has risen far beyond anything seen in the past. As I have
already stressed, much of this trade growth involved exports from developing
nations. Much of it also involved vertical specialization, with different pieces of a
given final good produced in different countries.
What drove this new era of globalization? Despite containerization, it's surpris-
ingly hard to find a clear downward trend in the costs of ocean transportation
(Hummels
2007
). Containerization may, however, have reduced effective shipping
times by making it much easier to get goods onto and off liners. Meanwhile, air
transportation became much cheaper. At the same time, there were dramatic policy
changes—not in advanced countries, which did the great bulk of their liberalization
before 1980, but in developing countries, which in the late 1980s and early 1990s
shifted from inward-looking,
¼
import-substituting industrialization strategies to
outward-looking policies.
The result of these forces was a broad relocation of international production,
with labor-intensive activities—including the labor-intensive aspects of vertically
disintegrated production, even for skill- or capital-intensive goods—moving to
emerging nations, and hence a dramatic rise in overall trade.
