Agglomeration versus Fragmentation:A Comparison of East Asia and Europe

Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.

Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia

In this paper we statistically test the validity of the mechanics of complex VFDI in Japanese machinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From the theoretical point of view, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries which have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in the MNEs with higher productivity. These results have an important implication for the policies of developing countries in attracting FDI.

Interindustrial Structure in the Asia-Pacific Region: Growth and Integration, by Using 2000 AIO Table

Over the past 20 years Asian countries have achieved a certain degree of economic growth and at the same time deepened spatial interdependence. In January 2006, IDE completed the 2000 Asian International Input-Output Table, which covers eight major East Asian countries/regions as well as Japan and the United States. Given the dynamic changes in the economies of East Asia, this paper attempts to summarize the characteristics and their patterns of change in industrial structures and trade structures of the countries/regions in the Asia-Pacific region from the three viewpoints of time, space, and industry, by using the AIO table for 1985, 1990, 1995, and 2000.

Production Networks and Spatial Economic Interdependence: An International Input-Output Analysis of the Asia-Pacific Region

The Asia-Pacific Region has enjoyed remarkable economic growth in the last three decades. This rapid economic growth can be partially attributed to the global spread of production networks, which has brought about major changes in spatial interdependence among economies within the region. By applying an Input-Output based spatial decomposition technique to the Asian International Input-Output Tables for 1985 and 2000, this paper not only analyzes the intrinsic mechanism of spatial economic interdependence, but also shows how value added, employment and CO2 emissions induced are distributed within the international production networks.

Industrial Networks between China and the Countries of the Asia-Pacific Region

This paper investigates the changes in the structures of industrial networks that have occurred in the Asia-Pacific region in line with the rapid growth of the Chinese economy. Analyses using international input-output tables revealed that during the 1990s, there was a significant increase in the dependence of Asian countries’ manufacturing industries, such as textiles and electronics, on China’s industries, though industries in Japan and the United States remain important as the main suppliers of industries in Asian countries.

Production networks in the Asia-Pacific region : facts and policy implications

Production networks have been extensively developed in the Asia-Pacific region. This paper employs two micro-level approaches, case studies and econometric analysis, using JETRO's firm surveys which investigate Japanese affiliates operating in Southeast Asia. These two approaches found that production networks have extended, involving suppliers, across various nations in the Asia-Pacific region, and that production bases in host and home countries have different roles. A home country serves as a headquarters with services such as R&D, international marketing, and financing. A high tariff policy in a host country may foster domestic industries through the expansion of procurement from domestic suppliers, either indigenous or foreign, but it may discourage a country from becoming an export platform.

Promoting institutional connectivity in the Asia Pacific region : a study of supply chain and trade in services

This paper analyzes "institutional connectivity", or the degree of seamless trade in services centering on the distribution sector. Foreign equity participation in mode 3 (commercial presence) of trade in services and business firms’ investment performance has been studied closely. Net economic benefits of transparent institutional connectivity in the wholesale sector have also been revealed statistically in the case of Japan’s bilateral FTAs with other APEC members. Given these results, APEC could work on establishing its own harmonized "service trade commitment table" with only the foreign capital participation as its simple policy restriction. This would surely enhance an APEC-wide, institutional supply chain connectivity.

Winner-Take-All Contention of Innovation under Globalization: A Simulation Analysis and East Asia's Empirics

This paper sets out to examine how innovation enhances export competitiveness: The proposition that export volume becomes enhanced as more productivity-enhancing innovation is captured by the exporting economy is the focus of this study. From a Schumpeterian perspective, innovation can be characterized by continuous creation and subsequent diffusion of newer technologies on the basis of the exporters' existing capital stock. Then we highlight the theoretical possibility that concentration of innovative activities in a small group of "winner" economies would lead to larger shares of "winner" economies' exports of innovation-active commodities than those commodities for which technology involved is already mature. The world's export data corroborates this theoretical prediction overall, and a focus upon East Asia has revealed the region's increasing resort to technology-intensive commodity sectors, which has presumably been enabled through attracting technology-bearing inward foreign direct investment. Considering the overall gains from innovation, acceleration of full "cycle" of innovation and imitation might be a desirable option.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Financial Cooperation in East Asia

This paper addresses the rationale for financial cooperation in East Asia. It begins by giving a brief review of developments after the Asian currency crisis, and argues that enhancing regional financial cooperation both quantitatively and qualitatively will require: (1) upgrading surveillance capabilities in the region, and (2) creating a clear division of labor between regional institutions and the IMF. It also mentions the issue of membership and the background forces that have led to the duplication of similar forums in East Asia. Although the concern over crisis management is the central issue in East Asian financial cooperation, other issues such as exchange rate policy coordination and fostering regional capital markets are discussed as well.

Rules of Origin and Local Content in East Asia

Rules of Origin (RoO) are an integral part of all trade rules. In order to be eligible for Common Effective Preferential Tariffs (CEPT) under AFTA and similar arrangements under the ASEAN-China FTA, a product must satisfy the conditions relative to local content. The paper tries to calculate local content as well as cumulative local content in East Asian economies, with use of the Asian International Input-Output Tables; it also investigates factors of change in local content by applying decomposition analysis. The paper finds that the cumulation rule increased local content of the electronics industry more significantly than local content of the automotive industry, and the contribution of the cumulation rule increased in the period 1990-2000, due to rising dependency on neighboring ASEAN countries and China.

Border Barriers in Agricultural Trade and the Impact of their Elimination: Evidence from East Asia

Abstract: By means of a GTAP based-CGE model, we investigate the impact of the elimination of import tariffs and non-tariff policy barriers (NTPBs) on agricultural trade towards East Asian FTAs. To do that, we first measure the NTPBs by employing a widely-used method derived from the literature on border effects. Next, by adding into the GTAP database our estimates on the NTPBs, which the original GTAP database by its nature does not succeed in incorporating, we compute the impact of the entire elimination of policy barriers (the complete reduction of import tariffs and of NTPBs) on GDP.

Chapter 4 The Challenges in Developing Realistic NEG Simulation Models for East Asia

This chapter attempts to identify some important issues in developing realistic simulation models based on new economic geography, and it suggests a direction for solving the difficulties. Specifically, adopting the IDE Geographical Simulation Model (IDE-GSM) as an example, we discuss some problems in developing a realistic simulation model for East Asia. The first and largest problem in this region is the lack of reliable economic datasets at the sub-national level, and this issue needs to be resolved in the long term. However, to deal with the existing situation in the short term, we utilize some techniques to produce more realistic and reliable simulation models. One key compromise is to use a 'topology' representation of geography, rather than a 'mesh' or 'grid' representation or simple 'straight lines' connecting each city which are used in many other models. In addition to this, a modal choice model that takes into consideration both money and time costs seems to work well.