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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

Pacific Asian Countries in International Trade

Young Jo Lee

Graduate School of Pan-Pacific International Studies

May 13, 2004


  • 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

Feature 1 avid traders
Feature 1Avid Traders

Young Jo Lee

Eli trade
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

Feature 2 shift toward manufactured exports
Feature 2Shift toward Manufactured Exports

Young Jo Lee

Feature 3 open domestic markets
Feature 3Open Domestic Markets

Young Jo Lee

Eli no modern mercantilism
ELI, No Modern Mercantilism

  • Tariffs and NTBs shrinking rapidly

Young Jo Lee

Feature 4 upgrading of products
Feature 4Upgrading of Products

  • Moving into new growing markets

  • Shift toward more technology intensive industries

Young Jo Lee

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

Young Jo Lee

Gi for 1 st tier asian nics
GI for 1st Tier Asian NICs

Young Jo Lee

Gi for 2 nd tier asian nics
GI for 2nd Tier Asian NICs

Young Jo Lee

Demand growth knowledge intensity
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

Cases korea singapore
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

Feature 5 region wide sequential catch up
Feature 5Region-Wide Sequential Catch-up

Young Jo Lee

Source intra regional fdi
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

Private capital flows of gdp
Private Capital Flows (% of GDP)

Young Jo Lee

Feature 6 no regional pta
Feature 6No Regional PTA

Young Jo Lee

No region wide pta
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

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

Young Jo Lee

Feature 7 mushrooming bilateral ftas
Feature 7Mushrooming Bilateral FTAs

Young Jo Lee

Bilateral ftas in pacific asia
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

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 (Exception: USA-Singapore FTA)

    • Mostly between complimentary, not competing, economies

    • Sensitive industries are excluded

Young Jo Lee

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

Young Jo Lee