1. ETSG2006 (Wien, Sep7-9) Outsourcing of Intermediate Manufacturing Products in Asian Economies Yushi Yoshida Faculty of Economics Kyushu Sangyo University

2. ETSG2006 (Wien, Sep7-9) Objectives of the paper Investigate (1)intra-regional “intermediate manufacturing products” trade among the Asian economies & (2)the effect of FDI on these trades.  Has the role of each Asian economy changed? Ranks in quality ladder  General picture  China effect? Rapid economic growth and inward FDI  Bilateral trade with Japan? Fragmentation /outsourcing

3. ETSG2006 (Wien, Sep7-9) Background increase in intra-regional trades among the Asian economies (Table 1) well-documented intra-industry trade  fragmentation / outsourcing Jones(2000) and Arndt and Keirzkowski (2001)  export-platform FDI Motta and Norman (1996) and Yeaple (2003)

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5. Globalization in Automobile industry Two forces  World automobile conglomerates GM, Ford, Toyota, Daimler Crysler, Volkswagen, Renault, PSA, Hyundai  World prodction networks

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9. Data for Automobile components products Trade data (30 products)  HS 6-digit classification (COMTRADE, UN) Appendix 1 and Appendix 2  HS 9-digit classification (Japan, MOF) FDI data (OJCD)  automobile makers  components suppliers

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12. Changing roles for intermediate production in the Asia (1) Bilateral trade with Japan (the number of product variety)  Korea and Taiwan have exported most of the sample products  the number of product variety increased for the rest of the Asia

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14. Changing roles for intermediate production in the Asia (2) Quality ladder  unit price proxy products might be different in size, but unit price approximates value-added over one unit of material used.  ex) bumper and its components  ranking measure shows convergence

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17. Empirics Estimation Model Panel estimation  Annual bilateral export data (1993 - 2003)  Exporting countries: Japan, China, Korea, Hong Kong,Malaysia, Thailand, Philippines, Indonesia, India  Importing countries: 9 + US

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19. Expected signs PROD + FDI : (M or P) FDI (X or M)  MakerFDIX - if local procurement increases  MakerFDIM + increase in demand for components  PartsFDIX+ increase in supply capacity (export-platform FDI)  PartsFDIM+ if complements / - if substitute

20. ETSG2006 (Wien, Sep7-9) (-) (+) (?)

21. ETSG2006 (Wien, Sep7-9) Empirical results (1) General results  FDI effects are different for makers’ investments and suppliers’ investments  Makers’ FDI in importing countries promotes components trade  Suppliers’ FDI in exporting countries also promotes components trade  Suppliers’ FDI in importing countries has complementary effect for components trade

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23. Empirical results (2) China effect  Makers’ investments in China decreases component trade between other countries in the Asia.Shift to China  Suppliers’ investments in China promotes component trade between other countries. Complementarity among intermediate products

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25. Empirical results (3) Bilateral trade with Japan  Japanese exports No effect of FDI for importing countries  Japanese imports Positive effect for suppliers’ FDI No effect for makers’ FDI

26. ETSG2006 (Wien, Sep7-9) Conclusions (1) Convergence in product variety and quality for automobile components trade among the Asian economies (2) Distinct effects of FDI by makers and suppliers on component trade (3) Large inflow of FDI in China affects components trade among other countries in the Asia. (4) Some evidence of vertical-FDI in bilateral trade with Japan.