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Pacific Asian Countries in International Trade

Pacific Asian Countries in International Trade. Young Jo Lee Graduate School of Pan-Pacific International Studies May 13, 2004. Contents. Avid traders Shift toward manufactured exports Open domestic markets Upgrading of products Region-wide sequential catch-up No regional PTA

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Pacific Asian Countries in International Trade

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  1. Pacific Asian Countries in International Trade Young Jo Lee Graduate School of Pan-Pacific International Studies May 13, 2004

  2. Contents • Avid traders • Shift toward manufactured exports • Open domestic markets • Upgrading of products • Region-wide sequential catch-up • No regional PTA • Mushrooming bilateral FTAs Young Jo Lee

  3. Feature 1Avid Traders Young Jo Lee

  4. Trade Ratios of Asian & LA Countries Young Jo Lee

  5. ELI & Trade • ELI  High trade dependence • Not only exports but also imports • Two Factors that favored ELI strategy • Poor natural endowments • Small domestic markets Young Jo Lee

  6. Feature 2Shift toward Manufactured Exports Young Jo Lee

  7. Manufactured Exports as % of Total Exports Young Jo Lee

  8. RCA of Asian Countries, 1995 Young Jo Lee

  9. Feature 3Open Domestic Markets Young Jo Lee

  10. ELI, No Modern Mercantilism • Tariffs and NTBs shrinking rapidly Young Jo Lee

  11. Feature 4Upgrading of Products • Moving into new growing markets • Shift toward more technology intensive industries Young Jo Lee

  12. 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 Young Jo Lee

  13. GI for 1st Tier Asian NICs Young Jo Lee

  14. GI for 2nd Tier Asian NICs Young Jo Lee

  15. GI for Indonesia & China Young Jo Lee

  16. Demand Growth & Knowledge Intensity • 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 Young Jo Lee

  17. Cases: 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) Young Jo Lee

  18. Feature 5Region-Wide Sequential Catch-up Young Jo Lee

  19. Flying Geese Pattern of Dev Young Jo Lee

  20. Source: 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 Young Jo Lee

  21. Private Capital Flows (% of GDP) Young Jo Lee

  22. Feature 6No Regional PTA Young Jo Lee

  23. No 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 Young Jo Lee

  24. 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 Young Jo Lee

  25. Feature 7Mushrooming Bilateral FTAs Young Jo Lee

  26. Bilateral 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 Young Jo Lee

  27. Pacific Asian Countries in PTA Young Jo Lee

  28. 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 (Exception: USA-Singapore FTA) • Mostly between complimentary, not competing, economies • Sensitive industries are excluded Young Jo Lee

  29. Share of FTA Partners in Countries’ Total Exports (2000) Young Jo Lee

  30. 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 Young Jo Lee

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