Globalization has altered the competitive dynamics of nations, firms, and industries. This is most clearly seen in changing patterns of international trade, where the explosive growth of imports in developed countries indicates that the center of gravity for the production and export of many manufactures has moved to an ever expanding array of newly industrializing economies (NIEs) in the Third World. This shift is central to the ‘East Asian Miracle’, which refers to the handful of high-performing Asian economies that have attained lofty per capita growth rates, relatively low income inequality, high educational attainment, record levels of domestic saving and investment, and booming exports from the 1960s to the mid-1990s (World Bank, 1993). Regardless of whether the growth is due to productivity gains or to capital accumulation (Krugman, 1994; Young, 1994, 1995), their economic achievement is largely attributed to the adoption of export-oriented industrialization as the region's main development strategy.

This view of international trade as the fulcrum for sustained economic growth in East Asia, while unassailable in its macroeconomic basics, nonetheless leaves a number of critical questions unanswered in terms of the microinstitutional foundations supporting East Asian development. Why were Japan and the East Asian NIEs (South Korea, Taiwan, Hong Kong, and Singapore) so successful in exporting to distant Western markets, given the formidable spatial and cultural distances that had to be bridged? How were these East Asian nations able to sustain their high rates of export-oriented growth over three to four decades, in the face of a variety of adverse economic factors such as oil price hikes, rising wage rates, labor shortages, currency appreciations, a global recession, and spreading protectionism in their major export markets? Under what conditions can trade-based growth become a vehicle for genuine industrial upgrading, given the frequent criticisms made of low-wage, low-skill, assembly-oriented export activities? Do Asia's accomplishments in trade-led industrialization contain significant lessons for other regions of the world?

This chapter will address these questions using a global commodity chains framework. A commodity chain refers to the whole range of activities involved in the design, production, and marketing of a product. A critical distinction in this approach is between buyer-driven and producer-driven commodity chains.