International Division of Labour and the New International Division of Labour

The original concept of international division of labour actually emerges of the economics of international trade. The idea is the different nations have comparative advantage in the production of certain goods or services base on Ricardo’s Theory of Comparative advantage. Thus Malaysia may specialize in the production of rubber tires because it has the raw materials. Japan may specialize in the production of cars because it has the technology. Thus USA will import tires from Malaysia and assembly the cars in USA. This is the classical approach to the international division of labour.

The New International Division of Labour only emerge with the internationalization of production. As MNCs set up branch plants in ELDCs, manufacturing activities like car assembly, hi-tech goods etc which used to be only located in EMDCs also moved to ELDCs. As such Malaysia and Japan both produce cars. In NIDL, higher order activities like research and development continues to remain in the core (EMDCs) while lower end mass production is done in the periphery (ELDCs) As such while Malaysia produces their own cars, design and research is still done in Japan. These information is either given or sold to Malaysia car producers.