In a globalized world, where production processes are often geographically fragmented, the competitiveness of a country’s exports depends increasingly on inputs imported from other countries, since that facilitates the division of labour between lower-wage and higher-wage workers. Clearly, this fragmentation boosts international trade for a given level of GDP.
In effect, we trade parts, and then we trade the final products, which  2  implicitly means trading the parts again (Hummels, Ishi and Kei-Mu 2001; Yi 2003; Chen, Kondratowicz and Kei-Mu 2005). Chart 1 offers some data on trade penetration of goods for the world and for the three NAFTA economies.