Regional Dynamics in Global Production Sharing: Evidence from “Factory South America”

Abstract

The global value chain (GVC) literature has recognized the regional linkages of global production sharing while overlooking some regions across the globe. This gap may leave unanswered the question of how South American countries’ regional trade linkages have changed amid the acceleration of globalization. This study, thus, investigates the regional linkages of global production sharing of South America by relying on value-added trade measures. Additionally, we develop a pioneering value-added hubness measure to illustrate the degree of relative market dependence between countries. The findings suggest that intra-regional forward linkages in South America have increased over time, but there are signs of a re-orientation towards Asia. China’s influence extended beyond Asia, and together with the United States, China became an important hub-nation for South America. Brazil appears as a potential regional hub, mainly through its domestic market and not domestic production. Therefore, the study adds to GVC literature with insights about a missing region, reveals signs of changes in the interconnections between regional blocs, and enriches the research on the hub-and-spoke trade systems.