JEL code: F1 _____________________________________________________________________________ Abstract: Dramatic changes are occurring in the nature of international trade. Production processes increasingly involve a sequential, vertical trading chain stretching across many countries, with each country specializing in particular stages of a good's production sequence. We document a key aspect of these vertical linkages -the use of imported inputs in producing goods that are exported -which we call vertical specialization. Using input-output tables from the OECD and emerging market countries we estimate that vertical specialization accounts for up to 30% of world exports, and has grown as much as 40% in the last twenty-five years. The key insight about why vertical specialization has grown so much lies with the fact that trade barriers (tariffs and transportation costs) are incurred repeatedly as goods-in-process cross multiple borders. Hence, even small reductions in tariffs and transport costs can lead to extensive vertical specialization, large trade growth, and large gains from trade. We formally illustrate these points by developing an extension of the Dornbusch-Fischer-Samuelson Ricardian trade model. ______________________________________________________________________________ This paper is a revision and extension of "The Growth of World Trade" by Ishii and Yi (1997). Since then, the authors have benefited from comments by 4 Tariffs on manufactured goods have fallen by about 15 percentage points, and according to Hummels (1998aHummels ( , 1998b, transportation costs have fallen little over the last thirty-five years. 5 That is, the production possibilities frontier must be relatively flat for a small trade barrier reduction to induce a large trade volume change. A simple back-of-the-envelope calculation shows why. Tariffs and transportation costs have fallen by less than ½ of 1 percentage point per year. On the other hand trade/GDP has grown by over 2.5% per year. This suggests elasticities of substitution of 5 and higher are needed to rationalize trade barrier reduction with trade growth. See Baier and Bergstrand (1997) for more careful elasticity estimates, and Yi (1999) for a calibration of trade growth with and without vertical specialization. 6 We do not count border-crossings that are merely in transit shipments, e.g., Chinese goods going through Hong Kong's ports on their way to the U.S. 10 Development economists have used (3), which they also call the import content of exports. See for example, Chenery, Syrquin, and Robinson (1987). However, their interest was traditionally with balance of payment issues, not the extent of vertical specialization, or its implications for trade growth and gains from trade.

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BackgroundThe development of novel yeast strains with increased tolerance toward inhibitors in lignocellulosic hydrolysates is highly desirable for the production of bio-ethanol. Weak organic acids such as acetic and formic acids are necessarily released during the pretreatment (i.e. solubilization and hydrolysis) of lignocelluloses, which negatively affect microbial growth and ethanol production. However, since the mode of toxicity is complicated, genetic engineering strategies addressing yeast tolerance to weak organic acids have been rare. Thus, enhanced basic research is expected to identify target genes for improved weak acid tolerance.ResultsIn this study, the effect of acetic acid on xylose fermentation was analyzed by examining metabolite profiles in a recombinant xylose-fermenting strain of Saccharomyces cerevisiae. Metabolome analysis revealed that metabolites involved in the non-oxidative pentose phosphate pathway (PPP) [e.g. sedoheptulose-7-phosphate, ribulose-5-phosphate, ribose-5-phosphate and erythrose-4-phosphate] were significantly accumulated by the addition of acetate, indicating the possibility that acetic acid slows down the flux of the pathway. Accordingly, a gene encoding a PPP-related enzyme, transaldolase or transketolase, was overexpressed in the xylose-fermenting yeast, which successfully conferred increased ethanol productivity in the presence of acetic and formic acid.ConclusionsOur metabolomic approach revealed one of the molecular events underlying the response to acetic acid and focuses attention on the non-oxidative PPP as a target for metabolic engineering. An important challenge for metabolic engineering is identification of gene targets that have material importance. This study has demonstrated that metabolomics is a powerful tool to develop rational strategies to confer tolerance to stress through genetic engineering.

BackgroundIsobutanol is an important target for biorefinery research as a next-generation biofuel and a building block for commodity chemical production. Metabolically engineered microbial strains to produce isobutanol have been successfully developed by introducing the Ehrlich pathway into bacterial hosts. Isobutanol-producing baker’s yeast (Saccharomyces cerevisiae) strains have been developed following the strategy with respect to its advantageous characteristics for cost-effective isobutanol production. However, the isobutanol yields and titers attained by the developed strains need to be further improved through engineering of S. cerevisiae metabolism.ResultsTwo strategies including eliminating competing pathways and resolving the cofactor imbalance were applied to improve isobutanol production in S. cerevisiae. Isobutanol production levels were increased in strains lacking genes encoding members of the pyruvate dehydrogenase complex such as LPD1, indicating that the pyruvate supply for isobutanol biosynthesis is competing with acetyl-CoA biosynthesis in mitochondria. Isobutanol production was increased by overexpression of enzymes responsible for transhydrogenase-like shunts such as pyruvate carboxylase, malate dehydrogenase, and malic enzyme. The integration of a single gene deletion lpd1Δ and the activation of the transhydrogenase-like shunt further increased isobutanol levels. In a batch fermentation test at the 50-mL scale from 100 g/L glucose using the two integrated strains, the isobutanol titer reached 1.62 ± 0.11 g/L and 1.61 ± 0.03 g/L at 24 h after the start of fermentation, which corresponds to the yield at 0.016 ± 0.001 g/g glucose consumed and 0.016 ± 0.0003 g/g glucose consumed, respectively.ConclusionsThese results demonstrate that downregulation of competing pathways and metabolic functions for resolving the cofactor imbalance are promising strategies to construct S. cerevisiae strains that effectively produce isobutanol.

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