pacific asian countries in international trade

Pacific Asian Countries in Pacific Asian Countries in International TradeInternational Trade

Young Jo LeeGraduate School of Pan-Pacific

International StudiesMay 13, 2004

May 13, 2004 Young Jo Lee 2

ContentsContents Avid traders Shift toward manufactured exports Open domestic markets Upgrading of products Region-wide sequential catch-up No regional PTA Mushrooming bilateral FTAs


Feature 1Feature 1Avid TradersAvid Traders


Trade Ratios of Asian & LA CountriesTrade Ratios of Asian & LA Countries

050

100150200250300350

1988 1998

ChinaIndonesiaJapanKoreaMalaysiaPhilippinesThailandArgentinaBrazilChileMexicoPeruUruguayVenezuela


ELI & TradeELI & Trade

ELI High trade dependence Not only exports but also imports

Two Factors that favored ELI strategy Poor natural endowments Small domestic markets


Feature 2Feature 2Shift toward Manufactured Shift toward Manufactured

ExportsExports


Manufactured Exports as % of Total Manufactured Exports as % of Total ExportsExports

0102030405060708090

100

1980 1985 1990 1995

KoreaTaiwanHong KongSingaporeMalaysiaThailandIndonesiaChinaWorld


RCA of Asian Countries, 1995RCA of Asian Countries, 1995Country Manufactured Primary

Korea 1.2 0.5Taiwan 1.2 0.4

Hong Kong 1.1 0.6Singapore 1.1 0.7Malaysia 1.0 1.1Thailand 1.0 1.2Indonesia 0.7 2.3China 1.2 0.5


Feature 3Feature 3Open Domestic MarketsOpen Domestic Markets


ELI, No Modern MercantilismELI, No Modern Mercantilism

Tariffs and NTBs shrinking rapidly


Feature 4Feature 4Upgrading of ProductsUpgrading of Products

Moving into new growing markets Shift toward more technology intensive

industries


Growth Intensity Index (GI)Growth Intensity Index (GI)

Weighted average of a country’s export growth rates relative to world demands (=exports=imports=markets) in different industries

GI larger than 1 indicates a county’s exports are concentrated in industries with a rapid growth in world demand


GI for 1GI for 1stst Tier Asian NICs Tier Asian NICs


GI for 2GI for 2ndnd Tier Asian NICs Tier Asian NICs


GI for Indonesia & ChinaGI for Indonesia & China


Demand Growth & Knowledge Demand Growth & Knowledge IntensityIntensity

Growth in world import demand correlates strongly with product innovation and knowledge intensity

The more knowledge intensive an industry is, the more rapidly it grows (Exception: aerospace industry)

Asian countries’ penetration into rapidly growing market means that they succeeded in industrial upgrading


Cases: Korea & SingaporeCases: Korea & Singapore Korea

ELI chosen around 1963 after a decade of ISI Heavy-chemical industrialization in the 70s Electronics in the 1980s

Singapore Gave up ISI for ELI when unification w Malaysia

failed “2nd Industrial Revolution” (1979) in favor of capital-

intensive industries New Economic Policy (1986), Strategic Economic

Plan (1991), and Singapore 2000 (1996)


Feature 5Feature 5Region-Wide Sequential Catch-Region-Wide Sequential Catch-

upup


Flying Geese Pattern of DevFlying Geese Pattern of Dev


Source: Intra-Regional FDISource: Intra-Regional FDI

Intra-regional FDI regional production networks

Japan as a model & source of capital & technology for 1st tier NICs

Japan & 1st tier NICs as models & sources of capital & technology for 2nd tier NICs

Plaza Accord of 1985


Private Capital Flows Private Capital Flows (% of GDP)(% of GDP)


Feature 6Feature 6No Regional PTANo Regional PTA


No Region-Wide PTANo Region-Wide PTA

Dense invisible linkages Regional production networks Ethnic Chinese networks Subregional economic zones

But no regional PTA Even bilateral PTA is rare in the region

At end of 2001, China, Hong Kong, Japan, Korea, Taiwan & Mongolia were the only countries that were not parties to any PTA


Why No Region-Wide PTA?Why No Region-Wide PTA?

Wide divergence among Asian economies Lack of leadership

Japan: burden of history China: Not ready yet, Japan wary

External opposition USA against any PTA that includes Japan but

excludes USA APEC in place of EAEC


Feature 7Feature 7Mushrooming Bilateral FTAsMushrooming Bilateral FTAs


Bilateral FTAs in Pacific AsiaBilateral FTAs in Pacific Asia 30+ bilateral FTAs in the last 4 years Why?

Increasing awareness of weakness of existing arrangements (APEC, ASEAN, ASEM), esp. after Asian crisis

Demonstration effects from regional blocs elsewhere Changing configuration of domestic eco interests

Uneven distribution Led by more developed countries More inter-regional than intra-regional


Pacific Asian Countries in PTAPacific Asian Countries in PTA


Economic Effects?Economic Effects?

Most are politically safe FTAs That is why partners outside the region are preferred

Economic effects will not be large FTAs with relatively insignificant partners (Exceptio

n: USA-Singapore FTA) Mostly between complimentary, not competing, econ

omies Sensitive industries are excluded


Share of FTA Partners in Countries’ Total Share of FTA Partners in Countries’ Total Exports (2000)Exports (2000)


Will the pattern continue?Will the pattern continue? Challenges

Technological catch-up in face of narrowing technological gap

China’s rise & scattering geese Tasks

Technological capabilities (skills, education, R&D) Channels of technology transfer Incentive structures More authentic FTAs Greater insertion into & utilization of WTO regime

pacific asian countries in international trade

Documents