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
May 13, 2004
Young Jo Lee

3. Feature 1 Avid Traders
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Young Jo Lee

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

6. Feature 2 Shift toward Manufactured Exports
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Young Jo Lee

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

8. RCA of Asian Countries, 1995 Country Manufactured Primary Korea 1.2
0.5
Taiwan
0.4
Hong Kong
1.1
0.6
Singapore
0.7
Malaysia
1.0
Thailand
Indonesia
2.3
China
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Young Jo Lee

9. Feature 3 Open Domestic Markets
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10. ELI, No Modern Mercantilism
Tariffs and NTBs shrinking rapidly
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Young Jo Lee

11. Feature 4 Upgrading of Products
Moving into new growing markets
Shift toward more technology intensive industries
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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
May 13, 2004
Young Jo Lee

13. GI for 1st Tier Asian NICs
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14. GI for 2nd Tier Asian NICs
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15. GI for Indonesia & China
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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
May 13, 2004
Young Jo Lee

17. Cases: Korea & Singapore
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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Young Jo Lee

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

19. Flying Geese Pattern of Dev
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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
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Young Jo Lee

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

22. Feature 6 No Regional PTA
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Young Jo Lee

23. No Region-Wide PTA Dense invisible linkages But no regional PTA
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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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
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Young Jo Lee

25. Feature 7 Mushrooming Bilateral FTAs
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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
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Young Jo Lee

27. Pacific Asian Countries in PTA
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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
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Young Jo Lee

29. Share of FTA Partners in Countries’ Total Exports (2000)
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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
May 13, 2004
Young Jo Lee