1. New East Asian Alliances
February 22, 2012
2012 CommonWealth Economic Forum
Asia’s Transformation and Growth in a New Era of Risk
New East Asian Alliances
Oh-Seok Hyun

2. Contents 1. Integrating East Asia 2. Convergence in East Asia
In this chapter, we review the statistics of intra-regional and extra-regional exports, which recorded around 10% annual growth in 2000s.
2. Convergence in East Asia
- In this part, we look into economic and social circumstances to review conditions of East Asia’s integration with coefficient variation(CV) index of KCJ(Korea-China-Japan), ASEAN, EU5 countries.
CV is calculated by standard deviation of economic, social, and political variables, such as GDP per capita, trade volume, R&D expenditure, and unemployment rate.
3. Summary
- With this part, we summarize the above export statistics and index data, and suggest some challenges that East Asia countries face.
4. Policy Recommendation
- Finally, I will suggest a policy recommendation related with Korea-China-Japan’s FTA in the last part.

3. 1. Integrating East Asia
Intraregional exports of manufactured goods in East Asia increased remarkably.
Since 2000, East Asian countries have begun to increase intraregional exports from 5,678 to 11,305 million US$ in all manufactured goods, which indicates the 10% of annual average growth.
It is contrasted to America’s growth rate of same item, which shown 2% in the table below.
This is clear evidence of the development of international production network within East Asia.
Intraregional exports
Extra-regional exports
Intra-regional share in export to world
Value (million US$)
Annual average growth rate
Product
composition
Annual average
growth rate
2000
2007
00-07
East Asia(ASEAN+6)
All manufactured goods
5,678
11,035
10%
78%
8,141
14,897 9%
87%
43%
Machinery
3,513
6,607
47%
5,494
9,266 8%
54%
42%
Parts and components
2,301
4,292
30%
2,307
3,314 5%
19%
56%
(ICT-related goods)
1,585
2,433 6%
17%
1,308
1,310 0%
65%
Finished products
1,212
2,315
16%
3,187
5,951
35%
28%
530
1,035 7%
1,316
2,456
14%
Other manufactured goods
2,165
4,428
11%
31%
2,646
5,631
33%
44%
Merchandise trade, total
7,099
14,106
100%
9,227
17,166
45%
America (NAFTA & UNASUR)
7,122
8,033 2%
69%
4,715
6,727
71%
4,637
4,883 1%
3,095
3,765 3%
40%
2,271
2,130
-1%
18%
1,717
1,817
636
319
-9%
836
556
-6%
36%
2,366
2,752
24%
1,379
1,948
21%
59%
720
733
499
325
2,485
3,150
27%
1,619
2,962
52%
9,237
11,584
6,120
9,439
55%
Europe (EU27)
14,213
25,837
79%
6,979
12,953
85%
67%
7,770
13,074
4,072
7,423
49%
64%
3,204
5,554
1,806
3,179
867
771
-2%
521
501
61%
4,566
7,520
23%
2,266
4,244
1,378
1,636
525
583 4%
74%
6,444
12,763
39%
2,908
5,530
70%
17,692
32,748
8,271
15,272
68%
Source: ADBI (2011)

4. CV(Coefficient of Variation) of GDP per capita
2. Convergence: Economic Circumstances
Income Level
Korea, China, and Japan have great convergence in GDP per capita.
CV of GDP per capita in KCJ countries decreased remarkably in 1990s, while EU5 nation’s income gap has been slowly increased.
CV(Coefficient of Variation) of GDP per capita
Source: Chun & Park (2010), KDI

5. CV(Coefficient of Variation) of Labor Productivity
2. Convergence: Economic Circumstances
Labor Productivity
Korea, China, and Japan have great convergence in labor productivity.
As well as income level, labor productivity gap between Korea, China, and Japan has been narrowed in 1990s.
On the contrary, EU5 nation’s CV data has shown little variation.
CV(Coefficient of Variation) of Labor Productivity
Source: Chun & Park (2010), KDI

6. CV of central government debt
2. Convergence: Economic Circumstances
Macroeconomic Stability
But inflation of Korea, China, and Japan has been fluctuated widely in 1990s
Especially KCJ’s fluctuations in price were sharp, which are wider than those of EU5 nation’s .
Gap of central government debt in KCJ has been slowly expanded after 2000s,
while EU5’s gap has been narrowed.
CV of Inflation
CV of central government debt
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

7. 2. Convergence: Economic Circumstances
Economic Openness
Economic openness is measured by trade and foreign direct investment.
Both Trade volumes of KCJ and EU5 have converged, but EU5’s CV was more stable.
On the contrary, both gap of FDI in KCJ and EU5 have sharp fluctuation after 1990s, which means FDIs move sensitively than trade.
CV of trade volume
CV of FDI
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

8. 2. Convergence: Economic Circumstances
Level of Informatization
Level of informatization was estimated by number of Internet users and
mobile phone subscription.
In Korea, China, and Japan, level of informatization has remarkable convergence. It indicates that information gap has been reduced in Asian countries.
CV of Internet user’s number
CV of mobile phone subscription’s number
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

9. 2. Convergence: Economic Circumstances
Technology Innovation
Technology innovation was measured by percentage of R&D expenditure and
number of patents granted.
Since 2000s, KCJ’s R&D rate gap and patent number has been constantly narrowed,
as opposed to EU5.
CV of R&D rate
CV of Patent Number
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

10. 2. Convergence: Economic Circumstances
Education
For higher education, both EU5 and KCJ continued to convergence, the other hand,
ASEAN countries’ educational gap has been expanded until mid 2000s.
But the gap of public spending on education in KCJ continually expending.
CV of Graduates of higher education
CV of Public Spending on Education
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

11. 2. Convergence: Social Circumstances
Safety
Since the mid1990s, the unemployment rate gap in KCJ has been converged,
but that in ASEAN is expanding constantly.
With regard to Health expenditure, both EU and KCJ continued to show convergence
since 1990.
CV of Unemployment rate
CV of Health expenditure
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

12. 2. Convergence: Social Circumstances
Safety(con’d)
Suicide rate gap in EU5 nations is expending constantly, on the contrary,
KCJ’s have a tendency to be narrowed recently.
Both crime rate gap of KCJ and ASEAN has narrowed generally.
CV of Suicide Rate
CV of Crime Rate
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

13. CV(Coefficient of Variation) of Gini Index
2. Convergence: Social Circumstances
Distribution
The gap between KCJ three nation’s Gini Index has been widely expended in 2000s,
while ASEAN’s gap has narrowed.
CV(Coefficient of Variation) of Gini Index
Source: Chun & Park (2010), KDI

14. CV(Coefficient of Variation) of Fertility Rate
2. Convergence: Social Circumstances
Low Fertility
The gap in fertility rate among Korea, China, and Japan’s was expended until mid 2000s, however, the gap has been narrowed recently.
ASEAN nation’s fertility gap seemingly has converged.
CV(Coefficient of Variation) of Fertility Rate
Source: Chun & Park (2010), KDI

15. CV of Institution Trust
2. Convergence: Social Circumstances
Trust
We can not find the distinct characteristics about general trust.
With regard to institution trust, gap in KCJ countries was fluctuated, while that in EU has been constantly narrowed.
* CV of Trust was calculated based on World Valued Survey
CV of General Trust
CV of Institution Trust
Source: Chun & Park (2010), KDI
Source: Chun & Park (2010), KDI

16. CV(Coefficient of Variation) of Foreign Population
2. Convergence: Social Circumstances
International Cooperation
Foreign population gap in KCJ has a tendency to be converged, while ASEAN’s gap has been expended.
CV(Coefficient of Variation) of Foreign Population
Source: Chun & Park (2010), KDI

17. 3. Summary
So far, we have seen economic and social indexes that reflect the status of convergence in Korea, China, and Japan.
Korea, China, and Japan seemingly have great differences on the surface, but the comparison with other regions and the time-series data show that prerequisite conditions for economic integration are not unfavorable.
It should be noted, however, that unlike the convergence in economic areas, social differences between countries have not been narrowed, which means that a keen attention would be needed to stimulate convergence in this area.

18. 4. Policy Recommendation
Korea – China – Japan FTA ?
Currently under consideration
- In the process of Asian integration, Korea-China-Japan’s leading role between advanced economies and developing countries is necessary. Therefore, it is very timely for Korea-China-Japan to take joint conference to discuss Free Trade Agreement to encourage integration of East Asia.
Trade could bring win-win situation.
- Trade among Korea-China-Japan would strengthen competitiveness in the global market and result in Win-Win situation.
More economic integration could bring political stability.
- As shown in the European Union(EU), economic integration evidently has a significant role in maintenance of peace and political stability after World War Ⅱ. More economic integration in Asia also could bring political stability.
Partners for a New World Order.
East Asia integration would be more effectively set up when Korea, China, and Japan expand their cooperation in various global issues.
The active role of Taiwan is needed to bring stability of a New World Order.

19. Thank you