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production networks are considered one of the most important phenomenon in
economic globalization. Due to the progress of global liberalization and the
subsequent reduction in tariff restrictions, non-tariff, the advanced
information technology, communication technology, the development in
transportation systems, the deregulation in trade and investment policies, and
the numerous progress in the production of industrial products Technology, the
possibility of breaking up production processes into different stages in
different countries depends on the specialization and techniques of production
of the industry. So that, each country takes part in the production of a
commodity, but at different stages of the value-added chain based on their
compatative advantage. The segmentation of production takes place in industries
in which production processes can be broken down into technologically separate
and independent operation provides intermediate inputs to be assembled in the
final product.


This phenomenon has
produced many structural changes, especially in the pattern of trade side by
changing the comparative advantage of the countries who involved in the
production networks. From one side its lead to widen the range of
specialization and division of labor, where the country produce a part of the
product, not all the product, according to their comparative advantage, which
means many countries can contribute according to their comparative advantage of
producing a part of the product weren’t exist before in the absence of
fragmentation of the entire production of this product in one location. From
the other side, when every country produces a part of the product, an
increasing in the trade growth in parts and components between the countries
participating in the production of this product, which means, changing in the
pattern and direction of international trade. So, the formation of production
networks has dramatically transformed the spatial patterns of international
trade with a notable magnification effect on record trade flows operating
through multiple border-crossing of parts and components.

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