Products and components manufactured in international trade

Products and components manufactured in international trade

Products and components manufactured

  Manufactured products and components

This group of products makes up the largest share of world trade

in goods. The group is comprised of computers, televisions, videos,

automobiles, aircraft, machinery, chemicals, clothing, footwear

and just about everything else you can think of. A large part of this

trade is not in the final products you find on the shelves. In order

to make the product it will actually sell, a manufacturing firm

needs a number of components that might range from the highly

sophisticated, like computer chips, to mundane plastic casings.

There are two sources of demand, therefore, for manufactured

goods: demand for final goods by consumers and demand for

components of various kinds by firms. Some factories will only be

making the casings or the chips, and this makes the manufacturing

sector a large consumer of its own output.

The chain metaphor with backward and forward linkages from a

given firm is used to describe the trade in components. If we stay

with the example of plastic casings, a forward linkage consists

of the utilisation of the casing firm’s output as a component for

the televisions, computers or whatever the other firms make. A

backward linkage refers to firms providing components for the first

firm, for instance the powders used to make the plastic for the

casings or the dyes used to colour them.