We investigate why the South is hardly involved in the global supply chain for the Boeing 787. We demonstrate that if the production process is supermodular, the South is excluded from global supply chains.

We highlight the fact that offshoring firms and local firms that do not offshore coexist in the North. Adopting the O‐ring production function approach to offshoring, we demonstrate that a fall in offshoring costs in any sector makes the South better off and that if offshoring costs in a high‐technology sector fall at a faster rate, the North is worse off, and vice versa.

I consider offshoring in the low-technology and high-technology sectors in a host country. I build a model in which the occurrence of offshoring is determined by both the skill level of unskilled workers and the level of 'offshoring facilitators'. Offshoring factilitators are factors or activities that promote offshoring in the high-technology sector, such as technological advancement, economic integration, services liberalization and harmonization of rules and regulations. If the level of offshoring facilitators is low, a rise in the skill level can attract offshoring to the low-technology sector but not to the high-technology sector. A rise in the level of offshoring facilitators can attract offshoring to the high-technology sector. Because offshoring in the high-technology sector provides jobs to skilled workers, it also improves the quality of labour markets. I discuss services liberalization in ASEAN and examine a case study of Thailand as the host country in the global economy.