Pacific Asian Countries in International Trade

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Pacific Asian Countries in International Trade

• Young Jo Lee
• Graduate School of Pan-Pacific International
  Studies
• May 13, 2004

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Contents

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

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Feature 1Avid Traders
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Trade Ratios of Asian LA Countries
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ELI Trade

• ELI ? High trade dependence
• Not only exports but also imports
• Two Factors that favored ELI strategy
• Poor natural endowments
• Small domestic markets

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Feature 2Shift toward Manufactured Exports
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Manufactured Exports as of Total Exports
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RCA of Asian Countries, 1995
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Feature 3Open Domestic Markets
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ELI, No Modern Mercantilism

• Tariffs and NTBs shrinking rapidly

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Feature 4Upgrading of Products

• Moving into new growing markets
• Shift toward more technology intensive industries

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Growth Intensity Index (GI)

• Weighted average of a countrys export growth
  rates relative to world demands
  (exportsimportsmarkets) in different
  industries
• GI larger than 1 indicates a countys exports are
  concentrated in industries with a rapid growth in
  world demand

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GI for 1st Tier Asian NICs
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GI for 2nd Tier Asian NICs
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GI for Indonesia China
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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

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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)

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Feature 5Region-Wide Sequential Catch-up
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Flying Geese Pattern of Dev
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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

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Private Capital Flows ( of GDP)
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Feature 6No Regional PTA
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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

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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

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Feature 7Mushrooming Bilateral FTAs
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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

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Pacific Asian Countries in PTA
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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

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Share of FTA Partners in Countries Total Exports
(2000)
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Will the pattern continue?

• Challenges
• Technological catch-up in face of narrowing
  technological gap
• Chinas rise scattering geese
• Tasks
• Technological capabilities (skills, education,
  RD)
• Channels of technology transfer
• Incentive structures
• More authentic FTAs
• Greater insertion into utilization of WTO regime