14 production involves moving production facilities to less developed countries with parts supplied from highly developed countries. In this sense, one may suspect the existence of a positive link between the level of development and trade surplus in parts.

Another reason exacerbating trade deficits in parts may be related to assembly operations that were established to jump high tariffs introduced specifically to lure foreign investors. Many CEEC have very low applied tariff rates on parts and high tariff rates as well as nontariff barriers on finished manufactures. The high levels of effective rates of protection often provide strong incentive to exporters to establish assembly operations. For instance, this consideration has been behind the proliferation of assembly operations of automobiles in Poland in the 1990s.

The possible distortionary impact of ill-designed policies notwithstanding the crux of the matter is that parts account for a growing share of manufactures in world trade. CEEC seem to have become part of this global trend, which indicates that they are not missing the boat of emerging global division of labor based on production fragmentation. The share of parts in their trade has been on the increase, although not in all major SITC double-digit groups. Furthermore, data for Malaysia, Mexico as well as for some CEEC suggest that at some point exports tend to grow faster than imports.

Table 5: Imports of parts and the share of imported parts in a product group, **1993, 1997** and **1998**

||**Value o**<br> <br>|**f Parts (m**<br>**US dollars**<br>|**illion of**<br>**)**<br>|**Share o**<br>**G**<br>|**f Parts**in <br>**roup (in**<br>|**a Product**<br>**%/6)**<br>|
|---|---|---|---|---|---|---|
|**Commodity Group SITC Rev. 2**|**1993**|**1997**|**1998**|**1993**|**1997**|**1998**|
|71 Power Generating Equipment|307|1,136|1,520|39.0|40.9|40.7|
|72 Machines for Special Industries|573|1,011|1,206|18.5|18.2|19.7|
|73 Metal Working Machinery|127|255|227|19.3|21.3|17.3|
|74 Machines for General Industries|562|1,083|1,303|16.1|16.2|15.7|
|75 Office Machines & Equipment|619|1,169|2,004|37.9|44.6|47.8|
|76 Telecommunication Equipment|1,256|3,569|4,077|78.6|84.6|83.9|
|77 Electrical Machinery|892|2,386|3,182|28.6|29.3|30.3|
|78 Road Vehicles|1,205|5,253|5,177|23.4|41.4|39.2|
|79 Other Transport Equipment|116|213|372|17.1|19.6|30.8|
|8 Other Manufacturing etc.|166|446|633|2.2|3.3|3.9|
|All Above Parts & Components|5,823|16,520|19,702|20.9|28.2|28.4|

**Source:** Computations based on CEEC data as provided to the UN COMTRADE database.

Another symptom of the likely involvement in a finer and deeper international division of labor is the increase of the share of parts in imports of a given product category. While one may not discount the possibility that some of these operations involve assembly due to high effective rates of protection of final products, high import content also indicates upgrading of final products. Three observations can be derived from Table 5, which provides information on the part content in imports in major two-digit SITC product groups. First and foremost, a very considerable overall increase in the share of parts in total imports of products (made of them) by