Long-Term Trends in International Production

Abstract

The paper examines long-term trends in international production, i.e. the production of goods and services under the governance of transnational corporations (TNCs) ― either through foreign direct investment (FDI) or non-equity arrangements. Since the mid-1980s, international production has grown very rapidly, faster than world’s production and trade, playing a larger role in the world economy and changing the ways in which economic integration takes place among countries. It has become a key driving force of globalization. The nature of international production has also changed, responding to rapid technological change, intensified competition and economic liberalization. The paper recounts the increasing importance of non-equity forms in TNCs’ strategies and the shift of FDI towards services. It examines the changing geography of FDI, emphasizing that EU countries have emerged as a major source and destination of FDI ― in a process shaped considerably by EU integration. New EU members from Central and Eastern Europe received substantial FDI inflows in the transition towards market economy. One of the greatest challenges of globalization, and its unfulfilled promise, is a more equitable distribution of benefits from international production, especially in favour of the poorer developing countries.