APEC in the 21st Century 9789812305022

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APEC!

21st Cenblrv

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The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publications, an established academic press, has issued more than 1,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publications works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world.

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Edited by Riyana Miranti and Denis Hew

INSmUTE OF SOUTHEAST ASIAN STUDIES I5EII!i Singapore

iv First published in Singapore in 2004 by ISEAS Publications Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2004 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data APEC in the 21st century / edited by Riyana Miranti and Denis Hew. 1. Asia Pacific Economic Cooperation (Organization). 2. Asian cooperation. 3. Pacific Area cooperation. 4. Free trade—Asia. 5. Free trade—Pacific Area. 6. World Trade Organization—China. 7. Finance—East Asia. 8. East Asia—Commerce. 9. Investments, Foreign—East Asia. I. Miranti, Riyana, 1974II. Hew, Denis. HF1583 A85 2004 ISBN 981-230-212-3 (soft cover) Typeset by International Typesetters Pte Ltd, Singapore Printed in Singapore by Seng Lee Press Pte Ltd

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Contents Acknowledgements

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Abbreviations

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1

APEC’s Achievements and Tasks

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Ippei Yamazawa 2

APEC’s TILF Agenda: Progress and Future Directions

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Chen-Sheng Ho 3

Economic and Technical Cooperation in APEC: New Beginning or Revised Agenda?

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Medhi Krongkaew 4

Trading with Favourites: Free Trade Agreements in the Asia-Pacific

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Christopher Findlay, Mohd Haflah Piei and Mari Pangestu 5

Preferential Trading Agreements in the Western Hemisphere

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Fernando Gonzalez-Vigil 6

The Implications of China’s Accession to the WTO Deepak Bhattasali and Masahiro Kawai

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Contents

International Financial Flows and Regional Financial Safeguards in East Asia

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Ramkishen S. Rajan 8

Trade and Foreign Direct Investment in East Asia

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Masahiro Kawai and Shujiro Urata About the Contributors

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Acknowledgements The editors would like to thank all the chapter contributors for their support in generating this volume. Initial versions of the chapters were first presented as papers at the APEC Roundtable on 8–9 June 2001 at the Institute of Southeast Asian Studies (ISEAS) Singapore. The Roundtable was coordinated by Professor Chia Siow Yue, who was Director of ISEAS from 1996 to 2002. The editors would also like to express their sincere appreciation to the staff of ISEAS for organizing the Roundtable and preparing this volume for publication. This publication benefited from the financial support of the Rockefeller Brothers Fund.

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Abbreviations ABAC AELM AFTA AGGI AIA AMM APEC APIAN APII ARF ASCM ATCWG ATL ATPA BMC BMN CACM CAP CARICOM CBEREA CBI CBMs CBTPA CER CGE CGP COW

APEC Business Advisory Council APEC Economic Leaders' Meeting ASEAN Free Trade Area Advisory Group on Gender Integration ASEAN Investment Area APEC Ministers' Meetings Asia Pacific Economic Cooperation APEC International Assessment Network Asia Pacific Information Infrastructure ASEAN Regional Forum Agreement on Subsidies and Countervailing Measures Agricultural Technology Cooperation Working Group Accelerated Tariff Liberalization Andean Trade Preference Act Budget and Management Committee Business Management Network Central American Common Market Collective Action Plan Caribbean Community and Common Market Caribbean Basin Economic Recovery and Expansion Act Caribbean Basin Initiative confidence-building measures Caribbean Basin Trade Partnership Act Closer Economic Relations computable general equilibrium Centre for Global Partnership Committee of the Whole

Abbreviations

CSCAP CTI EAI EALAF EAP ECLAC ECOTECH EDFOR EDNET EDRC EPG ESC EVSL EWG FDC FDI FWG GATS GATT GEI GPEG GSP HCB HCBCG HLM HRD HRDWG IADB IAP IEG IEGBM IPEG ISTWG ITA LAFTA LAIA

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Council for Security Cooperation in the Asia-Pacific Committee for Trade and Investment Enterprise for the Americas East Asia and Latin America Forum ECOTECH Action Plan United Nations Economic Commission for Latin America and the Caribbean economic and technical cooperation Education Forum Education Network Economic and Development Review Committee Eminent Persons Group Subcommittee for Economic and Technical Cooperation Early Voluntary Sectoral Liberalization Energy Working Group Foundation for Development Cooperation foreign direct investment Fisheries Working Group General Agreement on Trade in Services General Agreement on Tariffs and Trade Group on Economic Infrastructure Government Procurement Experts Group Generalized System of Preferences human capacity building Human Capacity Building Coordination Group High Level Meeting human resource development Human Resource Development Working Group Inter-American Development Bank Individual Action Plan Investment Experts Group Informal Experts Group on the Mobility of Business People Intellectual Property Rights Expert Group Industrial Science and Technology Working Group Information Technology Agreement Latin American Free Trade Association Latin American Integration Association

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LCD LMI LSPN MAFF MAPA MERCOSUR MFN NAFTA NATO NBIP NIEs NPT NTMs OAA OAS OECD PAFTAD PBEC PECC PSM PTAs RTA SCCP SCSC SEC SME SMEWG SOE SOM SRTA TAC TBN TELWG TFP TILF TNC TOR

Glossary

least common denominator Labour Market Information Network Labour and Social Protection Network Multilateral Agreement on Investment Manila Action Plan for APEC Common Market of the South most-favoured-nation North American Free Trade Organization North Atlantic Treaty Organization non-binding investment principles newly industrializing economies Nuclear Non-Proliferation Treaty non-tariff measures Osaka Action Agenda Organization of American States Organization for Economic Cooperation and Development Pacific Trade and Development Conference Pacific Basin Economic Council Pacific Economic Cooperation Council professional staff member preferential trade agreements regional trade agreements Sub-committee on Customs Procedures Sub-committee on Standards and Conformance ECOTECH Subcommittee small and medium enterprise Small and Medium Enterprise Working Group state-owned enterprise Senior Officials' Meeting subregional trade agreement Treaty of Amity and Cooperation Trans-Pacific Business Association Telecommunications Equipment Working Group total factor productivity trade and investment liberalization and facilitation Trade Negotiations Committee terms of reference

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Glossary

TRIMs TRQ TRIPs WHFTA WTO

Trade-Related Investment Measures tariff-rate quotas Trade-Related Aspects of Intellectual Property Rights Western Hemisphere Free Trade Area, later, FTAA World Trade Organization

APEC’s Achievements and Tasks

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1 APEC’s Achievements and Tasks Ippei Yamazawa

APEC’S Achievements: An Overview China hosted the Ninth Leaders’ Meeting and the Thirteenth Ministerial Meeting of APEC in Shanghai in October 2001. China joined APEC together with Hong Kong and Chinese Taipei in 1992. Together with its accession to the World Trade Organization (WTO), this provided a superb opportunity for China to take the initiative in international cooperation. APEC is a unique organization for regional economic cooperation; twenty-one economies participate in it around the Pacific Ocean. It still remains an informal institution with annual meetings of leaders and ministers as its core and cannot be compared with a structured, formal and integrated body like the European Union. Nonetheless, with major economies such as the United States, Japan and China among its members, APEC plays, together with the EU, a major role in the world economy. APEC started as a ministerial meeting in Canberra in 1989 with twelve members. Each year, a different member-state has taken turns to host APEC meetings in its major city. The host member chairs

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Leaders’ and Ministerial meetings and initiates preparations throughout the year. However, it is often said that APEC’s momentum has slowed recently. APEC has not made much progress in liberalizing trade and investment and the organization could not prevent the Asian crisis which hit East Asian developing economies in 1997 and 1998. APEC could not help WTO in launching its millennium round of negotiations in Seattle in 1999. All these disappointments have tended to discourage interest in APEC. Can APEC achieve anything? This chapter attempts to answer this important question. APEC has two tracks of actions: trade and investment liberalization and economic and technical cooperation (ECOTECH). ECOTECH was on the agenda from the outset but criticized for not having achieved much. Meanwhile, trade and investment liberalization began in 1993. This was stated explicitly in the Leaders’ declaration for the first time at the Seattle APEC meeting in 1993. Apparently this was due to the Eminent Persons Group (EPG) Report I submitted to APEC in August 1993, which elaborated the trade and investment liberalization agenda in its vision of APEC’s tasks (APEC/EPG 1993). Then in 1994 the Bogor Declaration stated a commitment to “achieving free and open trade in the region by 2010/2020”. Later, the Osaka Action Agenda (1995) provided the guideline for implementing the trade and investment liberalization programmes and all member economies submitted their Individual Action Plans (IAPs) for liberalization by November 1996 (Manila Action Plans for APEC, MAPA), which were implemented on 1 January 1997. Expectations for APEC heightened between 1993 to 1996 because of this prompt implementation of the trade and investment liberalization programme. When the EPG’s second report was presented to President Soeharto in 1994 with its explicit recommendation for implementing APEC’s programme of liberalization by 2000, some of its members wondered whether it would be too hasty to begin as the liberalization programme under the Uruguay Round agreement had not yet been completed (APEC/EPG 1994). Contrary to expectations, the Pacific Business Forum (PBF) — EPG’s counterpart for the business community) — recommended that APEC should start its programme immediately and a few members of the Leaders meeting endorsed this. Indonesia’s then President Soeharto accepted the latter ’s recommendation and announced the ambitious Bogor Declaration.

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However, Individual Action Plans (IAPs) have not gone far beyond the Uruguay Round commitments and another liberalization programme to supplement them, i.e. the Early Voluntary Sectoral Liberalization (EVSL), actually failed to take off because of conflict between the major participants in 1998. Together with the East Asian crisis which hit Southeast Asian economies (a leading group of economies with high growth potential in APEC), the liberalization momentum has since slowed down, and has certainly dampened expectations for APEC. However, pessimism about APEC is overly influenced by vacillating expectations about the organization, ignoring its actual capability. APEC’s recent experiences in liberalization have certainly revealed that APEC is not a negotiating body and cannot do much alone in the trade and investment liberalization area. However, APEC can still contribute to liberalization under WTO by acting as a catalyst. APEC could potentially assist its East Asian members in economic restructuring and return them to a high growth path, thus reviving the leading role of APEC in the 21st century. In this chapter, APEC’s liberalization programmes are first examined including its unique IAP approach and its modest achievements in section 2. Then APEC’s failure in EVSL and a practical role as a catalyst for the WTO are discussed in section 3. Lastly, ECOTECH activities are reviewed in section 4. ECOTECH was boosted by the APEC Summit in Brunei in 2001 and was a major area of focus in the APEC Summit in Shanghai in October 2001.

Individual Action Plans (IAPs) for Trade and Investment Liberalization and Facilitation (TILF) The Osaka Action Agenda for liberalization and facilitation started with eight general principles: comprehensiveness, WTO-consistency, comparability, non-discrimination, transparency, standstill, simultaneous start/continuous process/differentiated timetables, flexibility, and cooperation. It has an extensive coverage of 15 areas: tariffs, non-tariff measures, services, investment, standards and conformance, customs procedures, intellectual property rights, competition policy, government procurement, deregulation, rules of origin, dispute mediation, mobility of business people, implementation of the Uruguay Round outcomes,

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information gathering and analysis. The Action Agenda suggests a menu of actions by individual member governments and concerted actions by all members in individual areas. Unique modality of concerted unilateral liberalization The Concerted Unilateral Liberalization (CUL) is a new modality to implement TILF programmes. Individual member governments unilaterally announce their own liberalization and facilitation programmes and implement them in accordance with their domestic rules. Individual APEC members will closely watch each other’s liberalization programmes and their implementation. They may feel obliged to submit a liberalization programme which is as comprehensive as their neighbour’s. They may be encouraged to implement the programmes as they have made a committment. In other words, “peer pressure” is relied upon among APEC members to urge all members to join the liberalization process — this is the essence of the CUL. The Osaka Action Agenda was a guideline for individual members to draft IAPs: all member governments submitted their plans by September 1996 and the Philippines, which hosted APEC that year, packaged them together to adopt as MAPAs in November. All members started to implement their IAPs on 1 January 1997. This modality is however criticized as being unassertive in comparison with the western approach of negotiating a trade and investment liberalization agreement. For example, agreements under GATT and WTO are legally binding so that the signatories will be punished and sanctioned if they fail to implement their commitments. Initially, Asian members found this legalistic approach unacceptable. However, this should not be misunderstood as Asian members’ hesitation about committing to trade and investment liberalization. So far, Asian members have implemented trade and investment liberalization on a unilateral basis. Furthermore, these countries realize that their preceding high economic growth has been based on their open economic policies, and that continued efforts to liberalize trade and investment are indispensable for further growth. This was clearly reflected in Asian leaders’ commitment to the Bogor Declaration. This modality was based on past experience and called for unilateral liberalization in a concerted manner within the Osaka Action Agenda.

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This was a practical way of promoting liberalization without losing the momentum of the Bogor Declaration. It will take another decade or two if there are efforts to change APEC into a negotiating body like GATT and WTO. The CUL modality has both good and bad points. On the one hand, it provided a flexible framework for liberalizing within a short time frame. On the other hand, the results were difficult to measure and the IAPs differed considerably. Also, the IAPs were structured so as to list accomplishments while omitting significant obstacles that remained.1 The author organized a study team in the Pacific Economic Cooperation Council (PECC) Japan Committee and made quantitative assessments of individual members’ action plans for 1996–98 as a way of objectively measuring progress toward APEC’s free trade targets, i.e. 2010 for developed members and 2020 for the rest of members (Yamazawa & Urata 1999). Although handicapped by gaps in available information, this chapter provides a fair and objective assessment of the IAPs.2 Quantitative assessment of IAPs The quantitative assessment of IAPs showed varying results. Many economies were generally committed to liberalization only for a short period and their commitment was characterized as Uruguay Round (UR) plus a small a. However, prospects in the area of facilitation were brighter, especially with respect to the collective action plans (CAPs), which detail joint actions. These CAPs have been strengthened, thereby supporting the concerted implementation of members’ IAPs. Progress in advancing collective action has depended to a large extent on the degree of initiative exercised by convenors in charge of various APEC subcommittees and expert groups. How are the collective plans related to individual ones? APEC members participate in the CAP voluntarily and report on their involvement via their individual plans. Participation in collective plans is an important means by which members can move towards APEC’s goals, especially in TILF and ECOTECH. The encouragement offered by collective action plans is likely to mean that APEC’s objectives will be achieved earlier than the 2010/2020 deadlines by both industrialized and developing economies.

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Strengthening the IAP process APEC member governments have continued to submit revised versions of their IAPs annually. The CTI (Committee for Trade and Investment) project team prepared a Style Guide for presentation of IAP templates which encouraged all IAPs to follow the same broad tabular format.3 This includes: • A brief overview of the economy’s vision/policy approach to the area. • A table that outlines improvements implemented over the preceding year, the current situation, and planned further improvements, against specified reporting criteria. • A table which provide base-year information for that area of the economy and cumulative improvements made towards Bogor goals against specified reporting criteria. A quick review of the 2000 IAPs suggests that it will take more time for all APEC member governments to follow this format thoroughly. But if the IAPs are improved along these lines, they will provide both policymakers and business people with useful information about the trade and investment environment of individual APEC economies and give a clear indication of the progress toward Bogor goals. The 2000 joint ministerial statement commended the e-IAP initiative (IAPs in the prototype format on the APEC website) as an effective means to make IAPs more transparent, specific and comprehensive.4 Ministers agreed for all members to use the new e-IAP system for their 2001 IAP submission. A peer review process began in 1999 in which individual member governments submit their IAPs for peer reviews at CTI meetings. Almost two-thirds of the APEC members had completed their submissions by 2000. Ministers endorsed a set of recommendations to improve the rigour and profile of the peer review process. This would mean regular, focused and managerial peer reviews without compromising their voluntary nature. Business people may be invited to this peer review process in the near future. While APEC’s trade and investment liberalization agenda has achieved some of its goals in some areas, it has proved unable to tackle certain difficult sectors. These should be left to negotiation under the WTO.

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A Catalyst for WTO Liberalization Early Voluntary Sectoral Liberalisation (EVSL) was introduced as a breakthrough to the slow liberalization via the IAPs. EVSL is also a part of CAPs and jointly implemented by individual governments. It was preceded by the success of the Information Technology Agreement (ITA). At the Subic meeting in 1996, President Clinton proposed an ITA in which all tariffs and NTMs on semi-conductors and other parts and materials for information technology equipment are reduced or eliminated by the year 2000. The ITA was adopted at the APEC Leaders’ Meeting and then forwarded to the WTO Ministerial Meeting in Singapore just two weeks later and was adopted as a WTO agreement. Fifteen APEC economies signed the agreement and it was implemented since April 1997. The ITA is not a form of voluntary liberalization but it has become a legally binding treaty. EVSL as an alternative approach to APEC Liberalization Encouraged by the success of the ITA, the Canadian chair proposed to accelerate the implementation of EVSL by two years from 2000. 61 sectors were suggested as candidates for EVSL in 1997 and the Vancouver APEC finally designated 15 sectors (9 sectors had higher priority, see Table 1) and agreed to work out their implementation within 1998. Each had its nominating economies and supporting economies. It was suggested that the liberalization of the remaining sectors would be brought to the WTO negotiations after critical majority support is secured. Facilitation measures such as Standards and Conformance and Customs Procedures are also mentioned in the EVSL proposal of several sectors and they are the main objectives in Telecommunications and Automotive Products. ECOTECH is mentioned in eight sectors, in which EVSL aims to promote development and training of human resources necessary to implement facilitation measures as well as liberalization. What characterizes the EVSL approach is that, by incorporating both TILF and ECOTECH measures, it can mitigate adjustment costs and even enhance the impact of liberalization. This is a clear advantage that APEC has over GATT/ WTO in promoting liberalization and will constitute a major value added feature of APEC to the WTO.

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Ippei Yamazawa TABLE 1 List of Designated Sectors for Early Voluntary Liberalization Objectives

Sectors

Nominating Economies

Environmental goods and services*

Tariffs, NTMs, Services, ECOTECH

Canada, Japan, C Taipei, US

Chemicals*

Tariffs, NTMs, S&C, Customs, Investment

Australia, HKC, Singapore, US

Medical equipment*

Tariffs, NTMs, ECOTECH

Singapore, US

Energy equipment and services*

Tariffs, NTMs, Services

Australia, Thailand, US

Telecommunications*

S&C

US

Toys*

Tariffs, NTMs,

China, HKC, Singapore, US

Automotive products

S&C, Customs, ECOTECH

US

Food

Tariffs, NTMs, S&C, ECOTECH

Australia, Canada, NZ, Thailand

Fisheries*

Tariffs, NTMs, Subsidy, S&C, ECOTECH

Brunei, Canada, Indonesia, NZ, Thailand

Oilseeds and oilseed products

Tariffs, NTMs, ECOTECH

Canada, Malaysia, US

Fertilizer

Tariffs, S&C, ECOTECH

Canada, Japan

Gems and jewelry*

Tariffs, NTMs,

Thailand, C Taipei

Civil craft

Tariffs,

Canada

Forest products*

Tariffs, S&C

Canada, Indonesia, NZ, US

Natural and synthetic rubber

Tariffs, NTMs, ECOTECH

Japan, Thailand

Notes: S&C = Standards and Conformance, Customs = Customs Procedures ECOTECH = Economic and technical cooperation, NTM = Non-Tariff Measures HKC = Hong Kong China, C Taipei = Chinese Taipei, NZ = New Zealand * = nine priority sectors Source: Yamazawa and Urata (1999)

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At the Vancouver APEC, leaders endorsed their ministers’ agreement on EVSL and urged its early implementation and it was scheduled so that the concrete plan for implementing EVSL would be agreed upon at the trade ministers’ meeting in June 1998. However, the trade ministers failed to agree over the mode of liberalization, a package deal of “all nine sectors times three measures (trade liberalization, facilitation and ECOTECH)” with less flexibility. EVSL was originally conceived to identify a few sectors to be agreed upon more easily and implemented earlier in addition to the IAP, thereby maintaining the momentum of liberalization within APEC. However, EVSL changed from the voluntary IAP to the ITA-type negotiation, albeit under the same title of “early voluntary sectoral liberalization”. The element of voluntarism has weakened so that each economy must either say “yes” or “no” to this package proposal. The package deal of “mutually beneficial” and “balance of interest” is a typical formula of the GATT negotiations and has departed far from the IAPs’ voluntary basis. Did the nine sectors really reflect balanced interests? The nine sectors were adopted mainly on the basis of export interests and they were balanced in the sense that they represented the interests of all APEC economies. Alternatively, the initial package could be selected based on importers’ interest, which is consistent with the teaching of “gains from trade”. However, there will always be resistance by domestic producers competing with imports and there will always be political economy problems around persuading domestic interest groups to support trade and investment liberalization. Sectors of likely least resistance at home, which better fit the original idea of EVSL, could be selected. Japan, for instance, faces difficult political economy problems at home with regards to fishery and forest products (two of the nine sectors adopted by APEC). These are likely to be subject to WTO negotiation over agricultural products which start in 2000. It would be difficult to negotiate these two sectors within APEC separately from the WTO. The gradual liberalization of Japanese agriculture is necessary but 1998 was not good timing for commencement. Was it not possible to have downsized the package by excluding a few sectors which met strong resistance by members? The passage of a single ITA was highlighted in Manila. Why not four to five EVSL in Kuala Lumpur?

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At the APEC ministerial meeting in Kuala Lumpur in 1998, Asian ministers supported Japan’s contention and decided to forward the tariff element of the nine EVSL sectors to the WTO. Thus, Japan could avoid being isolated in APEC but some members were disappointed with the slow process of liberalization under APEC. The hasty promotion of EVSL was partly responsible for their disappointment. While the tariff element of the nine sectors of EVSL was forwarded to the WTO, the implementation of NTM facilitation, and ECOTECH elements will proceed under New Zealand’s initiative. Facilitation and ECOTECH form a WTO-plus element in APEC. EVSL aims to push them together with trade and investment liberalization, that is, to first achieve a critical mass agreement on a suitable package of liberalization, facilitation, and ECOTECH within APEC and then forward the liberalization element to the WTO in order to bind with the WTO the liberalization commitments. With the tariff element separated from the other two, the implementation of the latter may be more or less discouraged. The EVSL initiative still continues in the form of surveys and sectoral seminars/workshops to move forward the work on NTMs, facilitation and ECOTECH. APEC also promotes sectoral policy dialogue comprising government and industry representatives in auto and chemical sectors. Although EVSL failed to break through the slow process of APEC’s liberalization, it can still be a catalyst in providing a favourable environment for liberalization and competition. The Failure in Seattle The third disappointment about APEC was its failure to successfully prepare for the launch of the New Millennium round negotiation of the WTO liberalization at the third WTO ministerial meeting in Seattle in November 1999. Indeed APEC leaders had declared their support for the launch of the WTO negotiations at their meeting in Auckland only two months earlier and quite a few other reasons were cited for the failure in Seattle. However, APEC trade ministers had not reached an agreement on the agenda of the coming round in their earlier meeting. The same structure of conflict as the one over the EVSL initiative was observed on the agenda for agricultural liberalization among major APEC members. The United States did not concede to including the possible restriction of unilateral resort to anti-dumping measures on the WTO

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agenda. The conflict over agenda was not resolved even at the official meeting immediately before and was forwarded to the ministerial meeting for political settlement. At the Brunei APEC Summit meeting in 2000, APEC leaders declared their wish to launch the New Millenium round in 2001 but members were not informed of any significant efforts for resolving existing conflicts within APEC. On agricultural liberalization, Japan talks only to the EU and opposes the stance of the United States and the Cairns Group members which include many APEC members. On the anti-dumping rule, Japan, Korea and developing economy members look to the Bush administration, expecting it to persuade the protectionist groups in the United States. Nevertheless, the unique fora of APEC can be utilized more to help the WTO prepare for the New Millenium round. It is often said that the informal chats in the “green room” have helped to form a consensus at the WTO ministerial meetings. But with nearly 150 participating members now, far more preparation will be needed to successfully form a consensus on changing the status quo. This would include exchanging information and views, identifying possible conflicts of interests, and seeking pragmatic solutions for these conflicts. Developing economy members of WTO are not very enthusiastic about launching the New Millenium round. However, developing economy members of APEC are generally positive about meeting the globalization challenge and consider liberalization as an indispensable part of it. Capacity Building for WTO Liberalization Notwithstanding these constraints, APEC has started a new initiative for facilitating liberalization of its developing member economies, with a programme that implements technical cooperation to support traderelated capacity building. Developing economy members are often constrained by their limited capacity to implement liberalization, which is a major reason why they cannot actively join the multilateral trade negotiations. Japan proposed this programme at the Trade Ministers’ meeting in June 2000 and undertook a field survey of nine developing economies (China, Indonesia, Malaysia, Papua New Guinea, Peru, Philippines, Chinese Taipei, Thailand and Vietnam) about individual economies’ needs for such assistance. The APEC Ministerial Meeting in

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November 2000 accepted its report and adopted it as an APEC project of supporting developing members’ efforts for liberalization (Government of Japan 2000). A similar programme was started by the WTO earlier, which includes such activities as: • Expanding knowledge and skill for implementation of WTO Agreements; • Developing a legal framework for domestic implementation; • Enhancing physical infrastructure for domestic implementation; • Enhancing negotiation skills to participate in the international system; • Building capacity to participate in the international dispute mechanism of the WTO; and • Contributing to support for accession to the WTO by new members. The WTO provides technical assistance in three modes: training in trade policy, technical missions and seminars, and provision of computerbased resource centres. The Joint Integrated Program of Technical Assistance (JITAP) has been one of them, targeting the least developed economies in Africa since 1996. However, the nine-economy survey showed us that economies at different stages of development need different types of capacity building. The least developed economies, inexperienced in multilateral trade negotiation, need to expand their knowledge about overall WTO affairs and prefer seminars and training courses of general education for their officials. The more experienced developing members of APEC require expanding their knowledge about specific areas of the WTO agreements such as TRIPs, customs valuation and dispute settlement procedures. APEC’s technical assistance programme for trade-related capacity building should meet these specific needs of its members. This is indeed an advantage of regional cooperation to provide tailor-made assistance that meets local needs. The cost of all trade-related capacity building projects is estimated at US$40–50 million. APEC developing members are likely to be among the major participants in the WTO negotiation and this capacity building programme will enable APEC to play an effective catalyst role for WTO liberalization.

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Guiding Sub-regional Trading Arrangements (SRTAs) Consistently with the WTO During the last decade, there has been a prevalence of sub-regional grouping proposals in the APEC region and some economists have warned about the possible erosion of APEC’s fragile efforts for liberalization. The prevalence of FTAs has been a global trend since the last decade. 214 RTAs have been notified to GATT/WTO and 120 RTAs were in force in May 2000, a half of which were formed in 1995–2000. Two APEC members, Singapore and Mexico, have been most active in proposing to form FTAs either with other APEC members (SingaporeNew Zealand; Singapore-Japan; Singapore-United States; and MexicoJapan) or with non-APEC members (Mexico-EU). Japan and Korea have started to seek an FTA relationship with other APEC members such as Japan with Singapore, Mexico, and Korea, and Korea with Chile. These two countries are latecomers in the FTA initiatives. Only five East Asian economies, China, Hong Kong and Taiwan as well as Japan and Korea have not formed FTAs, either bilaterally or plurally. In addition, there are recent regional grouping proposals in East Asia such as Japan-Korea-China, ASEAN Plus Three, East Asian Free Trade Bloc (covering the whole East Asia) as well as Northeast Asian economic cooperation (including North Korea, Russia and Mongolia in addition to Japan, Korea and China). Criticism against East Asian regionalism Some observers warn against this prevalence of regional groupings in East Asia. They contend that new bilateral FTAs are inconsistent with the Bogor goal and will impede the liberalization efforts under WTO. The East Asian Free Trade Bloc will become inward looking so that it will discriminate against non-East Asian members of APEC and thus stimulate similar regional grouping in other regions, especially in North and South America, and APEC will fall apart into the Free Trade Area of America and the East Asian Free Trade Bloc. However, this scenario is unlikely to happen. These regional grouping proposals differ in their feasibility in the near future. Singapore and Mexico have been quick in realizing their FTA initiatives. FTAs between Singapore-New Zealand and Mexico-EU were concluded last year. Singapore has recently completed FTAs with Japan and the United States.

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Korea has been negotiating an FTA with Chile for more than a year and a half. The Japan-Mexico FTA may come in the near future. However, the Japan-Korea FTA will take more time for preparation. There is still a long way to go to achieve an East Asian FTA. The FTA initiatives are criticized for their inconsistency with multilateral liberalization because they incur trade-diverting effects mainly to non-member countries. This is based on the negative static effects of the elimination of tariffs and non-tariff measures between members resulting from the formation of FTA. But many economists admit it is likely to be more than offset by positive dynamic effects of intensified competition, greater economies of scale, promotion of investment and technology flow. Furthermore, it is based on the conventional concept of FTA defined by Article 24 of GATT fifty-three years ago. Many of the current FTA initiatives aim to include greater coverage over such areas as investment and services, rules of origin, harmonization of rules and standards, intellectual property rights, and dispute settlement mechanisms as well as tariffs and non-tariff measures (the “new age FTAs” mentioned by Singapore’s Prime Minister Goh Chok Tong) and to pursue the dynamic effects mentioned above. “New Age” FTAs are open regionalism The dynamic effects of an FTA are realized only through structural changes in the status quo and inevitably meet strong resistance by vested interest groups at home. It succeeds only through breaking their resistance, which is common to WTO liberalization. In this respect, forming an FTA serves as a means to break through domestic resistance and thus contribute to the preparation for liberalization with wider coverage such as APEC and WTO. FTA incurs a negative trade diversion effect to non-members and thus introduces discrimination within APEC. Critics of the new FTAs insist that, for the sake of open regionalism, liberalization and other measures of the FTA should be applied to non-members on a Most Favoured Nations (MFN) basis so that there will be no discrimination. Indeed, it is ideal for a sub-regional FTA to be applied to non-member APEC economies on an MFN basis, which, however, does not take into consideration the difficulty of breaking through the vested interest groups at home. Furthermore, no existing FTAs (NAFTA, ANZCER and AFTA)

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are applied on an MFN basis. It would be unfair if the stricter rule is applied only to latecomers. Having recognized this difficulty in liberalization in practice on an MFN basis, the EPG Report III proposed “Open Sub-Regionalism” to be applied to SRTAs within APEC, admitting both MFN treatment and reciprocal FTA treatment in applying the liberalization. The Bogor Declaration called on the EPG “to review the inter-relationships between APEC and the existing sub-regional arrangements (NAFTA, ANZCERTA and AFTA) and to examine possible options to prevent obstacles to each other and to promote consistency in their relations” (APEC/LM 1994). The Third EPG Report emphasizes that any SRTA acceleration or linkage must be fully consistent with the WTO (APEC/EPG 1995). It recommends that any new SRTA initiatives within APEC be promptly submitted to the WTO for confirmation that they meet this test and for surveillance of their performance in practice. To sum up, it will not be as practical to confine APEC’s open regionalism to the MFN treatment of giving free admission to all applicants to APEC. A more pragmatic interpretation of its open regionalism is “open regional cooperation” or to promote regional cooperation consistently with multilateral rules. In this sense, the current FTA initiatives are consistent with APEC’s open regionalism, if implemented consistently with GATT Article 24, and so long as it serves as a laboratory for breaking through domestic resistance to multilateral liberalization. Toward a true recovery of East Asian economies The East Asian Free Trade Bloc is not likely to be realized for a decade or so. The proposal emerged from the discussion at the Summit Meeting of ASEAN Plus Three (China, Japan and South Korea) in November 2000 without any prior consultation and preparation at the official level. The leaders simply agreed on starting a study and exchange of views on its feasibility in the remote future. Nevertheless, the proposal responds to the need for closer economic cooperation among the East Asian economies resulting from growing economic inter-dependence in the region. ASEAN Plus Three have already implemented a much needed currency swap agreement called the Chiang Mai Initiative in May 2000. Regional cooperation will be extended to technical assistance to strengthen financial systems of individual economies, facilitation of trade

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and investment, and capacity building. China’s entry to WTO will accelerate the integration of the Chinese economy into the region’s business networks, thus resulting in the evolution of the East Asian economic sphere, apart from an FTA. The elimination of tariffs and NTMs will come at a later stage to complete the East Asian Free Trade Bloc. The strengthening of economic cooperation in the ASEAN Plus Three group will complement APEC’s ECOTECH activities to be discussed in the next section. ASEAN economies have made a quick recovery from the crisis of 1997–98 but the structural deficiencies of their economies remain unresolved. This happens to be a major focus of APEC’s ECOTECH. APEC can guide these SRTAs in a manner consistent with the multilateral trade system.

ECOTECH as a Renewed Focus of APEC ECOTECH has been part of the APEC process from the beginning in 1989, although the name itself dates from a later period. By 1991 there were 10 Working Groups concerned with ECOTECH issues. The Bogor Declaration stressed the importance of “development cooperation” in 1994, while the Osaka Action Agenda of 1995 listed 13 specific areas for economic and technical cooperation. A progress report prepared for the Manila meetings in 1996 reviewed 320 separate activities, of which 120 had been completed. The Manila Declaration set out principles and priorities for action, and the term “ECOTECH” was introduced to the APEC vocabulary. Priority areas identified were human resource development (HRD), capital markets, economic infrastructure, technical development, environment and small and medium enterprises. Meanwhile, TILF dominated APEC’s efforts from 1993 to 1998. However, following the financial crisis, it is now recognized that cooperation needs to extend well beyond matters of international trade and investment as capacity building is essential to all of APEC’s activities. Much of the work conducted and promoted by APEC’s committees and working groups is in the nature of ECOTECH. That includes the human resource development activities of all working groups, not just within the HRD group itself, but it also covers activities under the APEC Finance Ministers, and activities under the Committee for Trade and Investment (CTI) to improve the capacity for trade facilitation and for implementing the WTO obligations of APEC economies. At Vancouver

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in 1997, the ECOTECH Sub-committee (ESC) was established to coordinate APEC’s expanding ECOTECH efforts. Priorities agreed at the Kuala Lumpur summit in 1998 included HRD and technical development. Measures strengthening market development were adopted in Auckland in 1999. New focus of ECOTECH The ESC report (APEC/SOM 2000) provides us with a comprehensive review of the ECOTECH activities in a concise but comparative format. Fora for Trade and Investment Data and Economic Infrastructure were completed and the number of ECOTECH projects decreased from 200 to 185, while 35 ECOTECH-related projects under CTI and other APEC committees have been added. The report confirms the recent changes in its focus toward concrete cooperation activities, seminars and training rather than study and research. Human resource development remains a major focus. The report also highlights a successful project with visible impact on the regional economies. The Regional Integration for Sustainable Economies (RISE) project designates two regional growth centres, Jiangmen City in Guangdong Province, China and Manado-Bitung in North Sulawesi, Indonesia, and encourages cross-sectoral activities on the ground linked to support a wide range of APEC priority initiatives such as the APEC Food System, Sustainable Cities, HRD, and Public– Private partnership. The establishment of an ECOTECH clearing house was agreed upon at the Auckland APEC in 1999 and a website was set up to track ECOTECH activities undertaken currently for the benefit of potential beneficiaries. The website is managed by the APEC Secretariat and updated regularly so that effective use of ECOTECH activities is secured by matching supply with demand. Problems that reduce the capacity of ECOTECH to achieve APEC’s broader objectives include the fact that the resources available for ECOTECH activities are limited. The activities themselves are too spread out and that there is considerable overlap and duplication. There has been excessive multiplication of working groups, task forces and “networks” concerned with implementation. APEC has proved unable to coordinate this diffused set of activities in order to achieve its own objectives. The ESC is still handicapped by insufficient authority and inadequate resources to do these tasks. APEC itself has failed to channel

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resources from external agencies (both multilateral and bilateral) in support of ECOTECH activities. These problems were identified as early as 1996, but still remain largely unresolved. Although many useful activities are under way, APEC’s ECOTECH efforts remain poorly understood and largely invisible to the participants in, and observers of, the APEC process. Brunei-China joint initiative for capacity building The November 2000 meeting of APEC leaders in Brunei made an important contribution toward strengthening APEC’s ECOTECH and capacity building strategy (APEC/LM 2000). APEC leaders stressed that capacity building is essential to economic cooperation in the Asia-Pacific — all economies in the region need better policies, institutions, skills, technology and infrastructure. Their declaration makes it clear that ECOTECH is an important input and complement to TILF. APEC leaders also made a significant commitment to capacity building in the region by their ambitious commitment to develop and implement a policy framework which will enable the people in urban, provincial and rural communities in every economy to have individual or community-based access to information and services offered via the Internet. Realizing the vision of access to information technology and the new e-economy for all of the people of the region will make a huge contribution to the productivity and economic integration of the region. Brunei and China jointly organized the APEC High-Level Meeting on Human Capacity Building in Beijing on May 15–16, 2001 and issued the “Beijing Initiative on APEC Human Capacity Building”. It was a big success and attracted media attention due to the increasing business interest in the new economy.

Conclusion Capacity building in the Asia-Pacific, including through APEC’s ECOTECH, is a collective challenge for the private sector as well as the governments of the Asia-Pacific. APEC is not an implementing agency but it should continue to promote capacity building through ECOTECH, based on its acceptable style of voluntarism, flexibility, dialogue and consensus building, to identify opportunities to promote development by sharing information, experience, expertise and technology regionally.

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APEC then needs a practical strategy for mobilizing the development agencies of existing governments, multilateral development agencies operating in the region, as well as the private sector, to implement new opportunities to share information. In this context, APEC needs to consolidate and focus its many ECOTECH activities. This will take time and, to be effective, it will be necessary to strengthen the role and authority of the ESC. The ongoing review of activities should also be used to pinpoint the most successful projects to date and these examples used as models for others and also to inform the community about the contributions APEC has already made to capacity building. To conclude, ECOTECH has been providing an essential base for all APEC activities, not only for development cooperation but also for financial cooperation and capacity building for liberalization and facilitation. Its unique membership of both developing and more experienced economies enables APEC to implement ECOTECH activities effectively and in a tailor-made fashion. ECOTECH could serve as a centripetal force that will benefit all APEC members.

Notes 1

2

3 4

A peer review of IAPs has been conducted at senior officials’ meeting since 1998 but the results have not been broadcast. For a discussion on the methodology of assessing these IAPs, see Yamazawa and Urata (1999). Prototype IAP Project: Development of Formats, CTI, 14 March 2000. Twelfth APEC Ministerial Meeting: Joint Statement, Bandar Seri Begawan, Brunei Darussalam, 12–13 November 2000.

References APEC/Eminent Persons Group (APEC/EPG). A Vision for APEC: Towards an Asia Pacific Economic Community. Singapore, October 1993. ———. Achieving the APEC Vision: Free and Open Trade in the Asia Pacific. Singapore, August 1994. ———. Implementing the APEC Vision. Singapore, August 1995. APEC/LM. APEC Economic Leaders’ Declaration of Common Resolve, Bogor 1994. ———. APEC Economic Leaders Declaration, Connecting the APEC Community, Vancouver, November 1997.

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APEC Ministerial Meeting (AMM). The Osaka Action Agenda: Implementation of the Bogor Declaration, Part I, Liberalisation and Facilitation/Part II, Economic and Technical Cooperation, November 1995. ———. Manila Action Plan for APEC/Vol. II, Individual Action Plans/Vol. III Collective Action Plans, /Vol. IV, Progress Report on APEC ECOTECH Joint Activities and Framework Declaration on ECOTECH 1996. ———. Joint Statement by Ministers, Vancouver, November 1997. ———. Joint Statement by Ministers, Bandar Seri Begawan, November 2000. APEC/TM. APEC Meeting of Ministers Responsible for Trade: Statement of the Chair, Kuching, June 1998. APEC and PECC. Regional Integration for Sustainable Economies, PECC Food and Agriculture Forum 2000. APEC/SOM. APEC Senior Officials, 2000 Report on Economic and Technical Cooperation, Brunei Darussalam, November 2000. Government of Japan. APEC Strategy: Capacity Building in APEC Related to the Implementation of WTO Agreements, submitted to the 12th Ministerial Meeting of APEC, November 2000. Yamazawa, I. and S. Urata. “APEC’s Progress in Trade and Investment Liberalisation and Facilitation”. In Asia Pacific Economic Cooperation (APEC): Challenges and Tasks for the Twenty-first Century, edited by I. Yamazawa. London: Routledge, 2000. ———. Asia Pacific Economic Cooperation (APEC): Challenges and Tasks for the Twentyfirst Century. London: Routledge, 2000.

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2 APEC’s TILF Agenda: Progress and Future Directions Chen-Sheng Ho

Introduction APEC has placed tremendous importance on trade and investment liberalization and facilitation (TILF). This is the reason why TILF is found in two of the three pillars of APEC’s programme. The 1994 APEC Economic Leaders’ Bogor Declaration could be considered as the catalyst for APEC seriously addressing its TILF work. Essentially, the Bogor goal is about the achievement of free and open trade and investment in the Asia-Pacific region by 2010 for developed members and 2020 for developing members (APEC 1994). The momentum to achieve the Bogor goal continued in 1995 with APEC’s creation of the Osaka Action Agenda (OAA). The OAA is APEC’s implementation programme for reaching the Bogor objectives. Subsequently, the Manila Action Plan for APEC (MAPA) was announced during the 1996 Economic Leaders’ Meeting in Subic Bay. MAPA began the process in which Individual Action Plans (IAPs) and Collective Action Plans (CAPs) are presented each year for achieving the Bogor goal.

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The main purpose of this chapter is to describe and evaluate APEC’s TILF agenda. Since the agenda has emphasized IAPs and CAPs, they will also be examined here. In recent years, however, scholars have focused on analysing the ability of IAPs to reach the Bogor goal. The evaluation of CAPs has not been as prominent in comparison. Therefore, this paper analyses CAPs in greater detail. In order to evaluate CAPs, it is necessary to examine the TILF collective actions or deliverables of the various sub-fora of APEC’s Committee on Trade and Investment (CTI) and other APEC fora. CTI is in charge of coordinating APEC’s work on TILF. This paper also discusses the latest issues of concern to CTI, such as the review of OAA guidelines and the creation of the “APEC Principles on Trade Facilitation”. Finally, recommendations for strengthening APEC’s TILF work are presented.

Analysis of APEC’s TILF Agenda Major TILF Work Programmes Individual Action Plans (IAPs) The OAA’s Framework for “liberalization and facilitation” clearly calls for the establishment of IAPs. The Framework states that the APEC’s “liberalization and facilitation” process to achieve goals of the Bogor Declaration will include actions from each APEC member (APEC 1995). As one way of assessing IAPs, it can be seen that APEC economies have consistently followed this instruction since 1996, through the production of IAPs on an annual basis. Thus APEC members should be applauded for being able to produce IAPs on time every year. There are, however, many other ways of assessing IAPs that are more in-depth and meticulous. One, IAPs could be analysed for their ability to reach the Bogor goal. Another way to evaluate IAPs is to determine whether commitments stated in the IAPs are being implemented. The assessment of APEC members’ IAPs is found to be a formidable task because the IAPs are numerous and cover wide areas. Nevertheless, studies have been done to evaluate the IAPs. These studies have performed admirably in assessing the IAPs. For example,

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Yamazawa (1997) has provided a pioneering study of APEC members’ ability to reach the Bogor goal. The study analyses quantitatively APEC members’ IAPs in 13 TILF areas. These TILF areas consist of tariffs, non-tariff measures, services, investment, standards and conformance, customs procedure, intellectual property rights, competition policy, government procurement, deregulation, rules of origin, dispute mediation, and mobility of business people. APEC members are given a score in each of the 13 TILF areas with 100 as the perfect score. The results of the assessment show us that Australia, Canada, Hong Kong, China, Japan, New Zealand, Singapore, and United States are economies that have scores higher than the APEC average scores in many of the 13 TILF areas (Yamazawa 1997). Yamazawa and Urata (1999) provide another study that is essentially similar to Yamazawa (1997) but uses 1998 IAPs. The results of this study show again that industrialized APEC members, including Hong Kong, China and Singapore are moving closer to achieving the Bogor goal compared to other APEC members. All APEC economies, however, still have to cover a lot of ground before achieving the Bogor goal (Yamazawa and Urata 1999). Both studies certainly are comprehensive with the evaluation of 13 TILF areas. Another notable attribute is that the two studies take on the formidable challenge of evaluating every APEC member’s capability to reach the Bogor objective. It is well known that several economies are not particularly satisfied with the evaluation because they pointed out that many economies still have to work hard before they are able to achieve the Bogor goal. The Pacific Economic Cooperation Council (PECC 1999) has also conducted a major assessment of IAPs. It has done an outstanding job in evaluating the IAPs, using a qualitative approach. It is clearly valid and deserves commendation, because it has provided a wealth of information. According to PECC, APEC members in general have made significant efforts toward achieving the Bogor goal since the creation of OAA in 1995. There are, however, variations in progress across policy areas. Examples of good progress in the policy areas include customs procedure, mobility of business people, and information gathering and analysis. The report recommended ways for APEC to enhance its IAPs in each of the policy areas, so that the Bogor goal can be reached

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according to schedule. However, one of the important challenges faced by IAPs is their lack of detail. In addition, many APEC economies do not report on their existing IAP commitments. APEC could also make IAPs more user-friendly and accessible to all members (PECC 1999, pp. 8–9). Several APEC Study Centres have collaborated on a project called the APEC International Assessment Network (APIAN) to assess selected APEC initiatives. APIAN’s mission is to increase knowledge about APEC activities, and encourage APEC members to achieve APEC goals and commitments, recommend ways for APEC to enhance its performance (APIAN 2000, p. v). Two major recommendations regarding IAPs are stated in the TILF section of the APIAN report. First, the commitments stated in the IAPs should be specific, concrete and measurable. Second, APEC economies should be accountable for their IAPs. This means that mechanisms for review of IAP commitments and their implementation should be created. It is suggested that the current IAP peer reviews should have more thorough commentaries. Additionally, APEC should continue to use independent experts to analyse its TILF programmes (APIAN 2000, p. vi). The APIAN report provides precise recommendations for improving the IAPs. APEC economies would certainly see improvements to their IAPs if they follow these two recommendations. If APEC members are not willing to follow the recommendations of the various studies, there is still hope that IAPs could progress in the near term. The advent of e-IAP could be the most important factor for inducing APEC members to overcome challenges faced by IAPs. The eIAP system makes IAPs more transparent and accessible. Therefore, APEC members that have clearly presented their IAPs and make substantial commitments will be known immediately. This would create the incentive to produce good IAPs. APEC Economic Leaders have stated that IAPs are still the most used method by members for achieving the Bogor objective. Furthermore, it is desirable to make sure that action plans are transparent, comprehensive and specific. Action plans should also be successfully communicated to business and the public. Therefore, they have instructed the Ministers to make certain that the e-IAP system is totally operational in 2001 (CTI 2001a).

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APEC has made every effort to ensure that the e-IAP system is ready in 2001. During the APEC Leaders’ Meeting in November 2000, the system was launched as a demonstration website. APEC’s intention was to formally begin the system during the 2001 APEC Leaders’ Meeting. It is also anticipated that a full set of IAPs will be made available on the e-IAP system. The Prototype of IAP Project Team, the APEC Secretariat and Microsoft are in the process of developing a promotional strategy. There will be promotional activities for the e-IAP in 2001 (CTI 2001b). The e-IAP site is now accessible through the APEC Secretariat website. After browsing through the e-IAP site, it is valid to say that e-IAP certainly makes searching for information easier and more enjoyable. A particular section of an economy’s IAP can now be quickly located. Plenty of time is saved, as information is shown with just few clicks. The advance browse function of the system allows for the search and presentation of information on two economies’ IAPs. This feature makes it possible to compare two IAPs. The e-IAP system is undoubtedly a major improvement in making IAPs more transparent and easier to understand. Business people, scholars, government officials and the public will surely find e-IAP useful.

Collective Action Plans (CAPs) The OAA’s Framework for “liberalization and facilitation” has explicitly stated that actions by APEC fora constitute a part of APEC’s process of liberalization and facilitation for reaching goals of the Bogor Declaration. The purpose of this section is to examine CAPs’ collective actions or TILF deliverables that CTI sub-fora and other APEC fora created between 1996 and 2000. Specifically, the objective is to discern in which categories of TILF the deliverables fall under. Categories of TILF include trade liberalization, trade facilitation, investment liberalization, investment facilitation, and their combination. Presently, CTI does not categorize TILF deliverables. The results of the analysis could allow us to know the emphasis of APEC’s collective actions. Additionally, recommendations can also then be given to strengthen the work of CTI’s sub-fora and other APEC fora in developing collective actions that can assist APEC to achieve the Bogor goal.

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The first important task for the evaluation consists of collecting data of TILF deliverables from 1996 until 2000. Five years of data are utilized for analysis, in order to provide a comprehensive review. CTI has published a yearly report titled “Annual Report to Ministers”. Information on TILF deliverables is provided in the reports. From 1998 to 2000, the evaluation uses TILF deliverables listed in Box 1 and Box 2 of the Annual Reports. Box 1 contains highlights of TILF deliverables by CTI sub-fora while Box 2 lists highlights of TILF deliverables by other APEC fora. The Reports for 1996 and 1997 do not follow the same format as later years. Therefore, the evaluation of 1996 TILF deliverables is found in Annex One of the Report called “APEC Collective Actions Action Report for 1996 Overview”. The 1997 TILF deliverables used for analysis come from Appendix One of the Report titled “Matrix of Short Term TILF Deliverables”. The next important part of the evaluation is to categorize the TILF deliverables. Primarily, there are four major categories consisting of: 1) TL: trade liberalization; 2) TF: trade facilitation; 3) IL: investment liberalization; and 4) IF: investment facilitation. A TILF deliverable can be placed in one of the four categories, a combination of categories or all four categories. For example, a deliverable can be categorized as TL, TL & TF or TILF. There are a few guidelines for categorizing the TILF deliverables. The first step is to determine whether the deliverable pertains to trade, investment or both. The CTI’s “Annual Report to Ministers” does contain enough information on the deliverables to make a judgement on this issue. The guideline used at this juncture of evaluation is extremely flexible. This means that if a deliverable concerns both trade and investment, then it is considered to have both characteristics, even if the deliverable might have stronger trade characteristics than investment. The second step is to ascertain whether the deliverable is about liberalization, facilitation, or both. Once again the judgement is based on flexibility. For example, a deliverable will be considered to pertain to both liberalization and facilitation when their characteristics are present. Liberalization refers to the lowering of trade and investment barriers, whereas facilitation concerns the enhancement of trade and investment that is not covered by liberalization. The combination of the first and second steps of the evaluation leads to the results that are shown in Tables 1 to 5 in the appendix.

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Finally, Table 6 was created to show the number of the deliverables by categories and by fora. We can now proceed to interpret the information. One of the results is that there are TILF deliverables in nine categories. These categories are 1) TL; 2) TF; 3) IL; 4) IF; 5) TL & TF; 6) TL & IL; 7) IL & IF; 8) TF & IF; and 9) TILF. The category with the largest number of deliverables is TF or trade facilitation with a figure of 93 deliverables. The deliverables that facilitate trade outnumber other kinds of deliverables by a wide margin. This result indicates that CTI sub-fora and other APEC fora have been concentrating on deliverables that facilitate trade. The category with the second highest number of deliverables is TL & TF, a combination of trade liberalization and trade facilitation. This means that the deliverables in this category strive to promote both trade liberalization and trade facilitation. IF or investment facilitation comes in third place, with TILF placing fourth. In addition, both the TL & IL category and the TF & IF category have few deliverables with only three each. It indicates that the deliverables are not designed to promote only parts of trade and investment liberalization and facilitation. Instead, the deliverables tend to be classified in the TILF category, when they pertain to both trade and investment. This is the reason why there are more deliverables in the TILF category than in the TL & IL category and the TF & IF category. The data further show that when the deliverables seek to promote trade liberalization, they also strive to facilitate trade at the same time. This has resulted in the TL & TF category having more deliverables than just in the TL category. The same pattern holds true for the deliverables in the IL & IF category. The deliverables that seek to support investment liberalization are also able to facilitate investment. Thus the IL & IF category has more deliverables than the IL category. A general comment regarding the deliverables that deal with the subject of liberalization is that the majority of these do not directly reduce trade or investment barriers. Specifically, these are deliverables in the TL, IL, TL & TF, TL & IL, IL & IF and TILF categories. Most of these deliverables are reports and seminars, so that they cannot be considered to have directly lowered trade or investment barriers. None of these deliverables has decreased tariffs, but seek to enhance trade or investment liberalization. However, a few of the deliverables have directly caused trade liberalization, through the alignment of APEC economies’ with

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international standards, development of mutual recognition arrangements (MRAs) and harmonization of regulations. The Sub-Committee on Standards and Conformance (SCSC), Telecommunications Working Group (TELWG), and Transportation Working Group (TPTWG) are APEC fora that have been active in producing deliverables that have directly liberalized trade. When the deliverables are examined from the standpoint of CTI sub-fora and other APEC fora, an important finding was made in the TF category, i.e. that the Sub-Committee on Customs Procedures (SCCP) contributes the most deliverables with 15. The second place in this category goes to the Intellectual Property Rights Experts Group (IPEG) with 14 deliverables. The Government Procurement Experts Group (GPEG) and Informal Experts Group on the Mobility of Business People (IEGBM) have also contributed to trade facilitation with 11 and 10 deliverables, respectively. In the IF category, Investment Expert Group (IEG) has produced the most deliverables with 10. The rest of the fora have zero or only 1 deliverable. This result is expected since IEG deals with investment issues. SCSC has produced the most deliverables in the TL & TF category with 7 deliverables. IEG takes the first place in the IL & IF category with 6 deliverables. Most APEC fora have not significantly come up with deliverables that can be classified as under the TL & IL and TF & IF categories. However, the Energy Working Group (EWG) comes in first place with 5 deliverables in the TILF category. In general, the findings indicate that APEC fora have produced many kinds of deliverables, as they can be classified under nine categories. However, some categories are more popular in comparison to others. The major findings are summarized here. First, APEC fora have emphasized the creation of trade facilitation deliverables, in terms of quantity. Second, deliverables that seek to promote trade liberalization also tend to facilitate trade. The same pattern holds true for deliverables related to investment. Third, SCCP, IPEG, GPEG, and IEGBM have come out with many trade facilitation deliverables. Fourth, IEG has created numerous deliverables facilitating investment. Fifth, SCSC, TELWG, TPTWG have developed deliverables that liberalized trade, through the alignment of APEC members’ standards with international standards, establishment of MRAs, and harmonization of regulations and standards.

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Other Major APEC TILF Agenda Review of the Osaka Action Agenda An important work of CTI in 2001 was the review of the OAA. The CTI Chair had requested Convenors of CTI sub-fora to provide comments on the OAA. APEC members have also been invited to share their thoughts. Initial comments were made available. General principles for reviewing the OAA were established. First, the review sought to enhance the OAA guidelines. Second, meeting the guidelines would remain voluntary, even if they changed. (The guidelines provide direction and guidance to members for the attainment of the Bogor goal. Members themselves determine when and how to fulfil the guidelines, based on the APEC principle of voluntarism.) Third, some areas of the OAA guidelines are rather imprecise and unhelpful in guiding members. These problematic areas should be the focus of the review. Fourth, guidelines that are defined better would allow for better identification of areas that necessitate capacity building and ECOTECH. Since the goals are presently unclear in some areas, it is not certain as to how or where to render such capacity building. The objectives of capacity building are also unclear (CTI 2001c). Comments on the OAA were analysed. One of the important comments was the United States’ suggestion that the objective for tariffs could be amended from “progressively reducing tariffs [to] progressive liberalisation of tariffs, leading to zero tariffs” (CTI 2001c). This suggestion should certainly generate attention in APEC. The reason is that the OAA and the Bogor goals have not clearly defined “free trade”. Particularly, APEC has not equated free trade with zero tariffs. The United States made a bold suggestion to precisely state that an important characteristic of free trade is zero tariffs. If APEC adopts this recommendation, APEC members’ progress in reaching the Bogor goal could be accelarated. It means that APEC members will have to increase the speed of their reduction of tariffs. In the 2000 IAP Format Guidelines, there is a proposal to amend one of the guidelines for non-tariff measures. Originally, the guideline states that each APEC member will “consider extending, on a voluntary basis, to all APEC economies the benefits of reductions and eliminations of non-tariff measures derived from sub-regional arrangements” (CTI 2001c). The suggested amendment is to delete

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“derived from sub-regional arrangements” (CTI 2001c). Several economies such as China, Japan, Malaysia and Chinese Taipei are against the change. China states that the original version is clearer and more complete. Japan relates that there is no reason to make the deletion. Malaysia indicates that the review is to strive for “OAA plus” and not “OAA minus”, so that the deletion is unnecessary. Chinese Taipei states that going ahead with the deletion will make the guideline redundant, since the MFN principle of WTO will then provide the same benefits as the proposed guideline. On the other hand, the original guideline allows for benefits derived from sub-regional arrangements to be extended to non-members (CTI 2001c). It is interesting to note that in the same section, Singapore has recommended adding a new guideline that each APEC member “consider bilateral and/or plurilateral reduction and elimination of non-tariff measures” (CTI 2001c). Singapore has been actively pursuing sub-regional trading arrangements (SRTAs). The expression of interest to include this guideline strongly indicates that Singapore is serious about forming SRTAs and would like other APEC economies to follow in its footsteps. The comments presented point out that SRTAs have become a major but extremely sensitive topic of discussion in APEC. Since the purpose of the OAA review is to come up with “OAA plus”, APEC members should not try to make deletions that would change the meaning of the guidelines. Most importantly, it is a good idea to retain the original guideline, so that non-members of SRTAs would also enjoy benefits accrued by members of SRTAs. APEC economies, such as China and Chinese Taipei probably voiced strong support for the original guideline because they do not presently belong to any SRTAs. Therefore, in order to maintain the spirit of cooperation in APEC, the original guideline should not be changed. Furthermore, it is fine for APEC to add Singapore’s new guideline stated above with the inclusion of the idea that membership in bilateral and plurilateral arrangements will be opened to all interested APEC members. If APEC really wants to promote economic cooperation among its members, then any SRTAs formed by members should have open membership for APEC economies, as long as membership requirements are met.

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Promotion of Trade Facilitation APEC has begun to emphasize its work on trade facilitation recently. APEC Economic Leaders continue to put the highest priority on facilitating the flow of goods and services and decreasing international transactions costs. The main beneficiaries are business, consumers and small and medium enterprises (SMEs). The Economic Leaders called on Ministers and officials to come up with a set of principles on trade facilitation in 2001. Trade facilitation was to be addressed in an integrated way, in order to assist in reducing the cost of doing business in the APEC region (APEC 2000). Woo (2000) has stated that APEC has plenty of room to seriously strive for achieving the Bogor goal through trade facilitation. The analysis of TILF deliverables performed earlier has shown that APEC is seriously working on trade facilitation. According to Woo (2000), a single definition of trade facilitation does not exist. Generally, trade facilitation means simplifying procedural and administrative impediments to trade. Examples of areas where work in trade facilitation has focused on are customs administration, standards and technical regulations, and mobility of business people. In APEC, trade facilitation is also called business facilitation or cutting red tape. Business has been emphasizing the importance of trade facilitation issues. The reason is that customs’ delays, multiple testing requirements, and barriers to business mobility greatly affect costs to consumers (Woo 2000). The APEC Business Advisory Council (ABAC) made recommendations on business facilitation in its 2000 Report to the APEC Economic Leaders, Facing Globalization the APEC Way. The Report recommended that APEC should remove standards and conformance-testing impediments to international business. APEC economies should also align their own domestic standards with international standards. ABAC supports APEC government–business dialogues for promoting APEC’s facilitation agenda, such as the APEC Auto-Dialogue. In addition, ABAC seeks to promote business mobility. ABAC endorses the APEC Business Travel Card (ABTC) programme. The Council also supports pre-clearance procedures for expediting the movement of business travellers. Another recommendation calls on APEC is to streamline visa processing, so that business and professional people can move to work temporarily within APEC economies (ABAC 2000). In recognition of the importance of the trade facilitation agenda, APEC’s CTI has created the Ad-hoc Task Force on the Development of

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APEC Principles on Trade Facilitation. The Task Force encouraged APEC members and relevant sub-fora to support the task of coming out with the APEC Principles on Trade Facilitation (CTI 2001d). The APEC Principles on Trade Facilitation is now available. The document consists of the preamble, ten principles and examples to illustrate the principles. The preamble states the importance of trade facilitation to APEC in providing benefits to governments and business. The advancement of trade facilitation will be accomplished through individual and collective actions. It further relates that principles are non-binding and implementation is voluntary. Additionally, the preamble says that APEC members should provide sufficient protection against unlawful activities, such as commercial fraud and trafficking in illegal goods. Trade facilitation is defined as simplifying and harmonizing international trade procedures in the preamble (CTI 2001e). The preamble has been developed in a clear and precise manner. Two interesting points are presented in the preamble. First, the preamble has pointed out the necessity of preventing illegal activities. This point is important because APEC members would not want to see that in the course of facilitating trade, they also facilitate illegal activities. Stating the trade facilitation definition is also significant, because it provides members with a clearer understanding of APEC’s work in trade facilitation. The APEC Principles on Trade Facilitation consists of nine principles regarding issues of 1) transparency; 2) communication and consultations; 3) simplification, practicability and efficiency; 4) non-discrimination; 5) consistency and predictability; 6) harmonization, standardization and recognition; 7) modernization and the use of new technology; 8) due process; and 9) cooperation. In each of the above issues, examples of actions that APEC members could implement are shown (CTI 2001e). The principles and the illustrative examples are presented in a lucid and precise manner. APEC’s work in trade facilitation will certainly be strengthened with the creation of the APEC Principles on Trade Facilitation.

Conclusion After examining the work that APEC has done with regards to the TILF agenda, APEC has clearly come up with intensive programmes

APEC’s TILF Agenda

33

to achieve its goals. However, there is always room for improvement. Here are several suggestions to strengthen APEC’s TILF work.

Suggestions for IAPs One important suggestion is to classify the commitments in the IAPs according to the TILF categories that have been presented earlier in the evaluation of CAPs. APEC members could indicate in which TILF categories their IAP commitments belong to in their IAPs. The e-IAP system could easily provide this useful information to improve the ability to evaluate the direction of APEC economies’ work in their IAPs. APEC members would also be able to determine which TILF categories need more commitments, so the Bogor goal can be achieved in a balanced and well thought-out manner. APEC would also benefit from implementing the APIAN recommendation, i.e. that IAP commitments should be specific and concrete. The advent of the e-IAP system necessitates the restating of this recommendation, because the new system makes the IAPs more transparent. APEC economies that have not produced specific and concrete commitments will be known to all. An endorsement of this suggestion from the APEC Economic Leaders at their meeting in Shanghai would greatly encourage the implementation of this suggestion. The effect would make IAPs and the e-IAP system more meaningful to business and facilitate the realization of the Bogor goal. APEC could also begin to discuss the possibility of specifying commitments in the IAPs that are WTO plus. This means that commitments that are not negotiated in WTO should be particularly mentioned in the IAPs. The purpose is to focus APEC members’ work in the IAPs. If this suggestion is adopted, APEC members could be pushed towards the development of more commitments that are WTO plus. Once there are substantial commitments that are WTO plus, APEC could then proudly point out that it is truly committed towards free trade and has taken the leadership role.

Suggestions for CAPs The first recommendation is that the APEC CTI sub-fora and other APEC fora could classify the TILF deliverables according to the TILF categories stated in the analysis of CAPs earlier. At present, the deliverables are not categorized in this way, but are simply known as

34

Chen-Sheng Ho

TILF deliverables. The continuous categorization of deliverables would clearly show APEC members’ collective work. The ability to see the trends at any moment would allow APEC fora to save time and effort in making any adjustments to the direction of their work. For example, since it is now known that APEC fora have generally focused on trade facilitation, they could then concentrate on deciding whether to come out with deliverables in other categories. APEC fora would not have to spend time and effort in assessing their deliverables’ direction first. The second recommendation calls on APEC to continue with the production of collective actions that seek to align APEC members’ standards with international standards, develop MRAs, and harmonize regulations and standards. SCSC, TELWG, and TPTWG of APEC fora have developed deliverables in these areas with the capability of directly causing trade liberalization. Therefore, APEC should produce more deliverables in these three areas, in order to cause the direct reduction of trade barriers.

Other Suggestions The review of the OAA is currently underway. It is significant for APEC members to begin to contemplate the meaning of free trade, in terms of tariff rates. The United States has recommended that the objective of tariffs for APEC is to reduce them to zero, as discussed earlier. At present, the OAA and the Bogor goal have not set the final rate of tariffs for APEC. Thus, it is necessary to generate discussions on the meaning of free trade for APEC. It would greatly enhance APEC’s work in trade liberalization if APEC economies came out with a specific rate for tariffs that is low or zero. As consequences, APEC members will have to produce more commitments, in order to reach specific tariff targets. Currently, the OAA does not state the extent of reduction in tariffs needed to achieve free trade.

References APEC. “Leaders’ Declaration-Bogor”. Singapore: APEC Secretariat, 1994.

———. The Osaka Action Agenda. 1995. . ———. Manila Action Plan for APEC. 1996. .

APEC’s TILF Agenda

35

———. “Leaders’ Declaration-Brunei Darussalam”. 2000. . APEC Business Advisory Council (ABAC). Facing Globalization the APEC Way. Philippines: ABAC International Secretariat, 2000. APEC International Assessment Network (APIAN). Learning From Experience. Singapore: Institute of Southeast Asian Studies, 2000. Committee on Trade and Investment (CTI). “Annual Report to Ministers: CTI”. 1996. . ———. “Annual Report to Ministers: CTI”. 1997. . ———. “Annual Report to Ministers: CTI”. 1998. . ———. “Annual Report to Ministers: CTI”. 1999. . ———. “Annual Report to Ministers: CTI”. 2000. . ———. “APEC Tasking Statements 2000”. 2001a. . ———. “Progress Report on e-IAP”. 2001b. . ———. “Reviewing and Building Upon the OAA Guidelines”, 2001c. . ———. “The Ad-hoc Task Force on the Development of APEC Principles on Trade Facilitation-Convenor Report to CTI I”. 2001d. . ———. “APEC Principles on Trade Facilitation”. 2001e. . PECC. Assessing APEC Individual Action Plans and Their Contribution to APEC’s Goals. Singapore: PECC Secretariat, 1999. Woo Yuen Pau. “New Directions for APEC’s Trade Facilitation Agenda”. Speech to the 15th Pacific Economic Community Seminar organized by CTPECC, Tapei, 2000. Yamazawa, Ippei. APEC’s Progress Toward the Bogor Target: A Quantitative Assessment of Individual Action Plans. Tokyo, Japan: JANCPEC, 1997. Yamazawa, Ippei and Shujiro Urata. “Trade and Investment“Liberalisation and Facilitation”. Paper prepared for the 25th PAFTAD meeting, Osaka, Japan, 16–18 June, 1999.

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Chen-Sheng Ho

Appendix TABLE 1 2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora MAG

GOS

1. Created a stocktake of fora’ s work in identifying NTMs for intensifying work on reducing NTMs

X

2. Agreed on a list of ideas for future work programme on NTMs

X

1. Endorsed the Policy Framework for APEC Work in Services

X

2. Completed Phase 1 of the Development of Menu of Options for Voluntary Liberalization, Facilitation and Promotion of Economic and Technical Cooperation in Services Trade and Investment

X

3. Completed the Project on the Identification of Measures Affecting Trade and Investment in Education Services IEG

1. Cross-referenced IAPs and Menu of Options

X

X

2. Held 5 th APEC Investment Symposium

X

3. Held W orkshops on Implementation of the Menu of Options

X

37

APEC’s TILF Agenda TABLE 1 (continued ) 2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora SCSC 1. Endorsed Principles and Features of Good Practice for Technical Regulations and Information Notes on Good Practice for Technical Regulations 2. Adopted a work programme on trade facilitation in information technology products

X

X

3. Completed a comprehensive review of progress on alignment with international standards SCCP 1. Completed multi-year technical assistance programmes on Adoption of the Principles of the WTO Valuation Agreement; Adoption of the Principles of the WTO Agreement on TRIPs; Introduction of Clear Appeals Provision; Introduction of an Advance Classification Ruling System; and Provisions for Temporary Importation 2. Developed an Assessment Approach to measure the implementation of SCCP’ s CAPs 3. Elevated “Paperless Trading” as a new CAP and adopted an action plan

X

X

X

X

38

Chen-Sheng Ho TABLE 1 (continued ) 2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

CTI SubFora IPEG

CPD

1. Adopted a Joint Statement on WTO/TRIPs Agreement Implementation

X

2. Endorsed WIPO Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks

X

3. Held an APEC/IPEG Separate Meeting on IPR Enforcement to exchange information on IPR enforcement between public and private sectors

X

1. Developed an APEC-OECD Joint Cooperation Program on Regulatory Reform for 2000–2001

X

2. Held APEC Seminar on WT O Issues (Investment and Competition) GPEG 1. Agreed format for inclusion in members’ IAPs of specific plans and timetables, as reference for voluntarily bringing their GP systems into conformity with the non-binding principles 2. Established future work programmes for improving information on e-procurement and building capacity in this area and in the area of non-binding principles’ implementation

X

X

X

TL TL IL TF TILF TF IL IF IF

39

APEC’s TILF Agenda TABLE 1 (continued ) 2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora IEGBM 1. Expanded APEC Business Travel Card scheme to at least nine economies by end of 2000

X

2. Implemented streamlined processing arrangements and benchmark service standards for temporary residence of intracompany transfers of senior executives and managers

X

3. Developed an evaluation strategy for measuring the success of previous document fraud training, and exploration of the feasibility of developing a common training platform across economies

X

Other APEC Fora EWG

1. Developed a Programme of Implementation Facilitation to assist APEC member economies to implement agreed energy initiatives, including power and gas sector reform 2. Developed a policy framework for cooperation on energy efficiency standards, and mechanism to facilitate the implementation of a product by product approach to the greater alignment of energy performance test procedures

X

X

40

Chen-Sheng Ho TABLE 1 (continued ) 2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora TELWG 1. Created APEC Principles on International Charging Arrangements for Internet Services of Interconnection 2. Completed the project on “Implementation of the WT O Agreement on Basic Telecommunications” for assisting APEC members with implementation issues related to the Agreement TWG

EC

X

X

1. Adopted the APEC Tourism Charter

X

1. Finished report on “APEC Economies beyond the Asian Crisis,” which examines and identifies the long-term implications of the Asian financial crisis on APEC members and their prospects for future growth

X

2. Completed the project on “Towards a Knowledge-based Economy in APEC,” which promotes the use of knowledge as a factor of production, and develops cooperative action for members

X

Source: CTI. 2000. “2000 Annual Report to Ministers: CTI”. Singapore: APEC Secretariat.

Note: 1. TL: trade liberalization, TF: trade facilitation, IL: investment liberalization, and IF: investment facilitation.

41

APEC’s TILF Agenda TABLE 2 1999 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora MAG

1. Developed a web page in the APEC Secretariat Homepage that hyper links to members’ NTM websites

X

GOS

1. Developed an APEC Directory on Professional Services

X

2. Compiled and compared all existing trade in services arrangements within APEC IEG

X

X

1. Created Compendium of the Initiatives, Development, Ef forts, Aspirations and Strategies for the four stakeholders (foreign direct investor, home economy, host economy, and domestic investor) involved in the international flow of FDI 2. Held APEC Investment Mart

X

3. Held APEC Seminar on FDI Policy and Administration Adjustment

X

4. Held APEC Seminar on Start-up Companies and V enture Capital

X

5. Completed training programme on Strategies to Identify and Facilitate Investment in Specific Areas

X

42

Chen-Sheng Ho TABLE 2 (continued ) 1999 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora 6. Implemented the Menu of Options on Investment Liberalization and Business Facilitation through inclusion in 1999 IAPs and through a workshop on the Menu of Options

X

SCSC 1. Developed a MRA on Conformity Assessment of Electrical and Electronic Equipment

X

2. Developed an Arrangement for the Exchange of Information on Food Recalls and Recall Guidelines

X

3. Compiled Information on Food Labeling Laws, Regulations and Standards in APEC

X

SCCP 1. Completed multi-year technical assistance project for the adoption of UN/EDIFACT standards

X

2. Completed the technical assistance program to implement the WTO Valuation Agreement

X

1. Held a technical cooperation symposium to assist implementation of the TRIPS Agreement

X

IPEG

43

APEC’s TILF Agenda TABLE 2 (continued ) 1999 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora

CPD

2. Completed the first survey on the current status of implementation of the TRIPS Agreement by APEC members.

X

3. Adopted guidelines for the simplification and standardization of Intellectual Property Rights (IPR) administrative systems

X

4. Published the consolidated survey on the IPR enforcement system through the Internet

X

1. Developed non-binding principles for competition policy and regulatory reform in APEC

X

2. Published the APEC Study on Competition Law for Developing economies

X

GPEG 1. Completed a set of nonbinding principles on government procurement

X

2. Contributed to the WT O’s work on transparency in government procurement IEGBM 1. Completed Phase Two of APEC Business Travel Card trial 2. Held training in document fraud techniques, according to needs identified by economies

X

X X

44

Chen-Sheng Ho TABLE 2 (continued ) 1999 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora EWG

1. Finished report on Assessing the Impact on the Energy Sector of Liberalizing Trade and Investment in APEC Member Economies

X

2. Completed review of energy efficiency test standards and regulations in APEC economies FWG

X

1. Finished study on the X economic analysis of tarif fs on the fisheries sector in the AsiaPacific region for assessing the qualitative and quantitative economic impact of tarif f removal 2. Published a manual explaining different market and trading requirements for air shipping live and fresh seafood to selected APEC economies

TELWG 1. Progressive harmonization of administrative procedures governing certification of consumer telecommunications equipment 2. Completed APEC Framework and Principles for Telecommunications Interconnection

X

X

X

45

APEC’s TILF Agenda TABLE 2 (continued ) 1999 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora TWG

1. Conducted compilation of and comparative study on examples of best practice environmental initiatives within the APEC region

X

TPTWG 1. Conducted final phase (Phase V) of Road Transport Harmonization Project for developing over a five-year period, a harmonized vehicle regulation system for APEC

X

2. Developed an inventory of APEC members’ international shipping policies and activities

X

3. Completed Phase I of the electronic commerce project, a program to assist the implementation of electronic commerce for commercial messages

X

Source: CTI. “1999 Annual Report to Ministers: CTI”. Note: 1. TL: trade liberalization, TF: trade facilitation, IL: investment liberalization, and IF: investment facilitation.

46

Chen-Sheng Ho TABLE 3 1998 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora MAG

1. Collaborated with the WT O on developing an Internet mirror site of the WT O Integrated Database relating to APEC economies on the APEC homepage

X

2. Developed a mechanism for developing information on NTMs for greater transparency

X

GOS

1. Continued with the development of the APEC Directory on Professional Services

X

IEG

1. Created a list of options for investment liberalization and business facilitation 2. Continued with the updating of the APEC Guidebook on Investment Regimes

SCSC 1. Agreed on aligning APEC members’ standards on electrical and electronic equipment with international standards in respect of safety and electromagnetic compatibility by 2004/2008 2. Agreed on the part of exchange of information of the MRA for electrical and electronic equipment

X

X

X

X

47

APEC’s TILF Agenda TABLE 3 (continued ) 1998 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora SCCP 1. Completed 1998 targets of Public Availability of Information with the implementation of at least 3 methods of information dissemination by APEC members

X

2. Developed a work programme for common data elements, risk management, and express consignment clearance

X

3. Continued with the implementation and updating of the Blueprint for APEC Customs Modernization

X

4. Established an informal Virtual Customs Group to share experiences, and explore and develop common approaches for developing a compendium of APEC Customs initiatives on e-Commerce

X

IPEG

1. Agreed on a Framework for Facilitation of Technical Cooperation on intellectual property rights

X

CPD

1. Examined the possibility of APEC principles for competition policy and regulatory reform

GPEG 1. Agreed on a set of elements regarding principles of transparency, value for money, open and effective competition, and fair dealing, together with lists of practices on elements’ implementation

X

X

48

Chen-Sheng Ho TABLE 3 (continued ) 1998 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora IEGBM 1. Continued with the implementation of the APEC Business Travel Card scheme in five participating economies

X

2. Facilitated APEC members’ implementation of the Trade Ministers’ directive to grant multiple entry visas to regular business travellers through unilateral or bilateral agreements

X

Other APEC Fora EWG

1. Completed a set of policy recommendations to be presented to APEC Ministers on ways to accelerate development of natural gas in the APEC region

X

TELWG 1. Completed Mutual Recognition Arrangement for Telecommunications Equipment

X

2. Completed a report on Legal and Regulatory Issues pertaining to Electronic Commerce

X

TWG

1. Examined the development of a “Database of Core Statistical Information” to assist industry and governments to develop more effective Marketing and Planning Regimes

X

49

APEC’s TILF Agenda TABLE 3 (continued ) 1998 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora WGTP 1. Established APECNet for business to post and search for business opportunities

X

2. Held an APEC International Trade Fair

X

X

TPTWG 1. Held International Road Vehicle Standards Harmonization Seminar 2. Initiated pilot EDI trial programme EC

X

1. Undertook a project on TradeRelated Environment Measures and Environment-Related Measures, which includes a survey of APEC members’ practices in this area for developing an information database

X

2. Contributed a literature survey on the impact of trade liberalization and investment liberalization, as part of the project on Communicating the Impact of Liberalization

X

Source: CTI. “1998 Annual Report to Ministers: CTI”. Note: 1. TL: trade liberalization, TF: trade facilitation, IL: investment liberalization, and IF: investment facilitation.

50

Chen-Sheng Ho TABLE 4 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

CTI SubFora MAG

1. Created tariff database of the applied tariffs of APEC members, accessible through the Internet

X

GOS

1. Created directory of databases containing statistical information on services trade in APEC

X

2. Created contact network for information on service trade laws/regulations

X

IEG

1. Held Third Public/Private APEC Investment Symposium

X

2. Continued with the updating of the Guidebook to APEC Investment Regimes on the Internet

X

3. Held Seminar on Implementation of TRIMS Agreement

X

SCSC 1. Completed guidelines for the preparation, adoption and review of technical regulations

X

2. Held Seminar on “Environmental Management Standards and their Implications on Global Trade”

X

TL TL IL TF TILF TF IL IF IF

51

APEC’s TILF Agenda TABLE 4 (continued ) 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora 3. Completed APEC Food MRA supplementary materials 4. Completed APEC-specific survey on Technical Infrastructure Development for Measurement Standards, Laboratory Management and Accreditation, Inspection Bodies, Quality System and Product Certification Bodies’ Accreditation SCCP 1. Held Customs/Industry Symposium

IPEG

X X

X

2. Published “best practices” on customs laws, regulations, administrative regulations and rulings

X

3. Published Compendium on Rules of Origin

X

4. Agreed on broadening and deepening of collective actions through developing a compendium of common trade data elements, implementing risk management techniques and implementing WCO guidelines on express consignment clearance

X

1. Published on the Internet a survey on the current status of IPR protection in the APEC region

X

52

Chen-Sheng Ho TABLE 4 (continued) 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

CTI SubFora

CPD

2. Created IP Information Mall, publicly accessible through the Internet

X

1. Held competition policy seminars for APEC officials

X

2. Completed first stage of an APEC competition policy and law Internet database

X

3. Published on the Internet of deregulation initiatives undertaken by APEC members in 1997

X

GPEG 1. Held Seminar on Remedy Systems and Bid Challenge Procedures

X

2. Expanded APEC Government Procurement homepage on the Internet

X

3. Agreed on elements of transparency

X

CTI/ 1. Published on the Internet IEGBM APEC Business Travel Handbook 2. Conducted trial of the APEC Business Travel Card in the three participating APEC members

X

X

TL TL IL TF TILF TF IL IF IF

53

APEC’s TILF Agenda TABLE 4 (continued) 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora EWG

1. Published an outlook report on regional energy supply and demand for 2010

X

2. Held first in a series of APEC Coal Trade and Investment Liberalization and Facilitation workshops

X

3. Developed Manual of Best Practice Principles for Independent Power Producers FWG

X

1. Completed study on fisheries X sector tariffs in APEC economies 2. Held Technical Conference on Quality and Safety of Fishery Products

X

3. Held Phase I of W orkshops on Improved Seafood Inspection Regimes

X

4. Held W orkshop on Fish Inspection System of ANZEC

X

TELWG 1. Compiled procedures for equipment certification in each APEC economy

X

2. Agreed on framework for developing and implementing MRA for conformity assessment of telecommunications equipment 3. Completed e-Commerce SME Survey

X

X

54

Chen-Sheng Ho TABLE 4 (continued) 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora 4. Developed a model implementation procedure for Harmonized Electromagnetic Compatibility management in the region

X

5. Provided information on development and financial assistance resources by economy in the APEC TELWG website 6. Created webpage on the APEC TELWG website, linking APEC members to other sources of spectrum policy and meeting information TWG

X

X

1. Published Report on Impediments and Barriers to Tourism in the APEC Region

X

X

WGTP 1. Held meeting of Trade Promotion Organizations (TPOs) for enhancing role of TPOs in APEC trade promotion activities 2. Held Second APEC International Trade Fair TPTWG 1. Established MRA for automotive products 2. Held W orkshop on Privatization of Transport Infrastructure Projects

X

X X

55

APEC’s TILF Agenda TABLE 4 (continued) 1997 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora 3. Held Seminar on Electronic Data Interchange Implementation in Transportation EC

1. Published Study on the impact of trade liberalization on APEC economies

X

X

2. Published Study on the Impact of Investment Rulemaking and Liberalization 3. Published Study of Subregionalism’s significance and impact on APEC

X

X

Source: CTI. “1997 Annual Report to Ministers: CTI”. Notes: 1. CTI/IEGBM means that CTI was undertaking the work of IEGBM, as IEGBM did not exist in 1997. 2. TL: trade liberalization, TF: trade facilitation, IL: investment liberalization, and IF: investment facilitation

56

Chen-Sheng Ho TABLE 5 1996 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

1. Published a new edition of APEC Investment Guidebook

X

2. Held a business symposium in Tokyo

X

TL TL IL TF TILF TF IL IF IF

CTI SubFora IEG

SCSC 1. Completed an APEC guide on alignment of APEC members’ standards with international standards

X

2. Completed APEC Food MRA

X

3. Completed Arrangement for the Exchange of Information on Toy Safety between APEC members

X

4. Held first APEC Conference on Standards and Conformance in Manila

X

SCCP 1. Harmonized tariff nomenclature among APEC members to the six digit level

X

2. Held customs seminars on computer applications and risk management

X

3. Held a direct Customs-Industry Dialogue

X

IPEG/ 1. Held the APEC Industrial IPR-GT Property Rights Symposium in Tokyo

X

57

APEC’s TILF Agenda TABLE 5 (continued) 1996 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

CTI SubFora

CPD

2. Completed a survey of domestic IPR legislation

X

3. Completed a study of trademark systems in each member economy

X

4. Compiled a Contact Points List

X

X

1. Held second workshop of APEC experts to discuss competition policy and deregulation issues

GPEG 1. Developed a list of Government Procurement contacts

X

2. Established an APEC GP Homepage

X

3. Held an APEC seminar on GP Agreements

X

CTI/ 1. Published APEC Business IEGBM Travel Handbook

X

Other APEC Fora EWG

1. Adopted 14 non-binding energy policy principles by Ministers

X

58

Chen-Sheng Ho TABLE 5 (continued) 1996 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora

Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora 2. Conducted Phase II of the Power Infrastructure Initiative for facilitating investment by business

X

TELWG 1. Completed an agreement by APEC members to conform to the APEC Guidelines for Trade in International Value-Added Network Services 2. Adopted a list of elements of a fully liberalized telecommunications services sector expected to be present in each APEC economy by 2010/ 2020 TWG

X

X

1. Held a seminar on overcoming impediments to tourism movements and investment in tourism

X

TPTWG 1. Completed Phase III of the Road Transportation Harmonization Project to analyse 51 vehicle design features subject to regulation in the region

X

2. Conducted EDI messaging trials in 10 APEC economies

X

3. Produced a “best practices” manual outlining policies to alleviate transportation congestion

X

59

APEC’s TILF Agenda TABLE 5 (continued) 1996 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora Fora

Major TILF Deliverables

TL TF IL IF

TL TL IL TF TILF TF IL IF IF

Other APEC Fora 4. Completed an options paper on more competitive air services

X

5. Completed Phase I of the Seafarers Project evaluating the supply and demand of trained seafarers in the region

X

Source: CTI. “1996 Annual Report to Ministers: CTI”. Notes: 1. CTI/IEGBM means that CTI was undertaking the work of IEGBM, as IEGBM did not exist in 1996. 2. TL: trade liberalization, TF: trade facilitation, IL: investment liberalization, and IF: investment facilitation.

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Chen-Sheng Ho

TABLE 6 1996–2000 Major TILF Deliverables: CTI Sub-Fora & Other APEC Fora TL

TF

IL

IF

TL & TF

Tl & Il

IL & IF

MAG

0

4

0

0

2

0

0

0

0

GOS

0

4

0

0

2

1

0

0

1

IEG

0

0

0

10

0

0

6

0

0

SCSC

1

8

0

0

7

0

0

0

0

SCCP

0

15

0

0

1

0

0

0

0

IPEG

0

14

0

0

0

0

0

0

0

CPD

0

5

0

1

0

0

0

2

1

GPEG

0

11

0

0

0

0

0

0

0

IEGBM

0

10

0

0

0

0

0

0

0

EWG

0

0

0

1

2

1

0

1

5

TELWG

1

6

0

1

5

0

0

0

1

TWG

0

2

0

0

2

1

0

0

0

EC

2

0

1

0

1

0

0

0

3

FWG

2

4

0

0

0

0

0

0

0

TPTWG

0

7

0

0

5

0

1

0

0

WGTP

0

3

0

0

0

0

0

0

1

Total

6

93

1

13

27

3

7

3

12

Fora

TF & TILF IF

CTI Sub-Fora

Other APEC Fora

Source: author.

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61

3 Economic and Technical Cooperation in APEC: New Beginning or Revised Agenda? Medhi Krongkaew

Introduction At almost every APEC meeting, whether within or outside the official APEC circle, the subject of economic and technical cooperation (ECOTECH) is likely to be brought up and discussed among participants. In 2000, ECOTECH was a major focus of discussion at the APEC Summit in Brunei. ECOTECH was discussed from the first senior officials meeting (SOM1) to the last senior officials meeting (Informal SOM or SOM4), culminating in the Ministerial and Leaders’ statements that emphasized human capacity building as one of the main deliverables for that year.1 This special focus on human capacity building was carried over from Brunei to China in 2001. There was a meeting that was organized in Beijing in mid-May 2001 called the High-Level Policy Meeting on Human Capacity Building, where policy-makers and high-ranking officials in member economies,

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business and community leaders, and educators throughout the APEC region were invited to share their ideas on how to build human capacity in APEC member economies and exchange views on ECOTECH. Even at the meeting of APEC Trade Ministers in June 2001 in Shanghai, progress on ECOTECH initiatives was one of the main items in the agenda. Why is there so much interest in ECOTECH? Perhaps the failure of major trading nations of the world, particularly in North America and Europe, to agree on the launch of a new round of multilateral trading negotiations in Seattle in late 1999 was one of the reasons for the setback in trade liberalization, which, relatively speaking, gave added importance to ECOTECH matters. Others have argued that the increased movement towards bilateral free trade agreements (FTAs) among APEC members in the last two years have also raised the profile of ECOTECH — perhaps at the expense of the “trade and investment liberalization” element of APEC. While the above reasons are not entirely valid or accurate, they have helped to strengthen the position of ECOTECH in APEC. More important reasons may lie in the fact that several real attempts had been made by APEC and outsiders who are associated with APEC to initiate changes in the ways APEC has set and operated its ECOTECH agenda. The pertinent question to be asked is: Is this true? If it is, what is happening represents a new beginning for ECOTECH in the APEC process. If not, what has happened is a transient phenomenon that will lose public appeal after a while. The main purpose of this chapter, therefore, is to investigate the status of ECOTECH in APEC and to examine whether the changes that have taken place over the last few years represent a new beginning for ECOTECH or whether this is simply an old agenda that has been given a facelift. The chapter is divided into 5 sections. After the introduction, Section 2 briefly discusses the origin of ECOTECH in the APEC process, and provides an overview of the ECOTECH agenda with an emphasis on its structure, outcomes and problems associated with its implementation. Section 3 analyses plans for the reorganization of ECOTECH operations in APEC. Section 4 considers three specific areas that promise to bring a new beginning for ECOTECH in APEC i.e. the Updating of Part Two of the Osaka Action Agenda, the preparation of the Human Capacity Building

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Strategy Report, and the establishment of the Individual Action Plan on ECOTECH or ECOTECH-IAP. Section 5 provides concluding remarks.

ECOTECH: Origin, Structure and Problems Although the origins of APEC are well documented, the same cannot be said about the origins of the ECOTECH component in APEC. While it is true that several working groups were set up alongside APEC with its main emphasis on “trade and investment liberalization and facilitation” (TILF), these working groups were not created to directly promote economic and technical cooperation among members. Economic and technical cooperation was first suggested for inclusion in APEC alongside TILF at the Ministerial and Leaders’ meetings in Indonesia in 1994. At the time, Indonesia as the host for the APEC Summit that year, made it clear that TILF should be accompanied by “development cooperation” aimed at improving the capacity of the developing economies to be able to take part in the liberalization process. The term “development cooperation” was later changed to “economic and technical cooperation” or ECOTECH to make sure that APEC would not turn into another forum for developmental aid. The clearest sign of the birth of ECOTECH was when Japan announced its Osaka Action Agenda (OAA) during its 1995 APEC Summit. In Part Two of this document, the subject of “economic and technical cooperation” was clearly discussed, and the action plans laid out. According to this, the three basic principles of ECOTECH development for APEC economies were as follows: (a) APEC economies “… pursue economic and technical cooperation in order to attain sustainable growth and equitable development …, while reducing economic disparities among APEC economies and improving economic and social well-being”. It was expected that such efforts would also facilitate the growth of trade and investment in the region. (b) APEC economies “… conduct economic and technical cooperation on the basis of the principles of mutual respect and equality, mutual benefit and assistance, constructive and genuine partnership and consensus building”.

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(c) In pursuing the above objectives, APEC economies will develop an environment favourable to the effective operation of market mechanisms and integrate into the cooperation process the business/private sector as well as involve wherever possible other pertinent institutions”. Thirteen specific areas were listed in this part of the OAA where Common Policy Concepts, Joint Activities, and Policy Dialogue were the three essential elements to be taken into account.2 These 13 specific areas for ECOTECH include (1) human resource development; (2) industrial science and technology; (3) small and medium enterprises; (4) economic infrastructure; (5) energy, (6) transportation; (7) telecommunications and information; (8) tourism; (9) trade and investment data; (10) trade promotion; (11) marine resource conservation, (12) fisheries; and (13) agricultural technology. In 1996 the Philippines was the host for that year’s APEC Summit. ECOTECH was further refined by APEC leaders. The Manila Declaration on an Asia Pacific Cooperation Framework for Strengthening Economic Cooperation and Development identified 6 priority areas of ECOTECH, namely: • • • • •

Development of human capital; Development of stable, safe and efficient capital markets; Strengthening of economic infrastructure; Harnessing of technologies for the future; Safeguarding of the quality of life through environmentally sound growth; and • Development and strengthening of the dynamism of small and medium enterprises. Together, this 1996 Manila Declaration and the 1995 OAA have become the guiding principles of how the ECOTECH agenda would be set in APEC. Note that while priority areas were set and plans of action suggested, these ECOTECH activities were left for all economies and existing APEC working groups and other fora to be handled by themselves. Whereas the coordination of trade and investment liberalization and facilitation was being undertaken by the Committee on Trade and Investment (CTI), there was no similar organization or administrative institution to take care of ECOTECH matters. This gave rise to a debate the following year, in Canada, which played host to

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the 1997 APEC Summit. Some major developed economy members objected to the creation of this special administrative unit to coordinate the ECOTECH work, saying that such creation might dilute the importance of TILF which was the primary objective of APEC and it might turn APEC into a mutual aid-giving and aid-receiving organization. Meanwhile, some major developing economy members insisted that a special administrative unit to coordinate ECOTECH activities was needed, as the main issue was economic and technical cooperation, not aid-related developmental activities. In the end, a compromise was reached whereby an administrative unit to coordinate ECOTECH activities was set up. It is not a committee like the CTI or the Economic Committee (EC), but a sub-committee attached to SOM and to be officially known as the SOM Subcommittee on ECOTECH or ESC for short. As this ESC works with, and reports to, SOM directly, it has the same status as the CTI or the EC, except that it normally does not report to APEC Ministers Meeting (AMM) like the other two committees. So, the ESC came to life in 1998 when Malaysia hosted the 1998 APEC Summit. The ESC is headed by a Chair who is selected from nominations by member economies for a term of two years. Members of the ESC can be senior officials of APEC member economies themselves, or they can designate their representatives to participate in the ESC meetings which take place at the same time as the SOM meetings (either before or after the SOM meetings). Apart from serving at the instruction of the SOM, the ESC has no oversight authority over any other APEC fora, except one subgroup called Group on Economic Infrastructure (GEI). 3 The APEC Secretariat now assigns one senior officer to work with the ESC Chair, while the ESC Chair usually has his or her own special assistant. In 1999, the post of Vice Chair was created but the roles of the ESC Chair and Vice Chair are still not clearly defined (although it is assumed that the Vice Chair may be asked to perform the duties of the Chair if and when necessary). As can be seen from the Terms of Reference of the ESC in Annex 1, the ESC is tasked to assist the SOM in coordinating and managing APEC’s ECOTECH agenda, and in identifying value-added initiatives for cooperative action. ESC seeks to advance effective implementation of Part Two of the 1995 Osaka Action Agenda and the 1996 Manila

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Framework for Strengthening Economic Cooperation and Development through consultation with APEC fora and the development of policy management tools and guidelines for projects. During 1999 and 2000, the ESC successfully completed the following tasks:4 • examined and reported on the 220 ECOTECH projects that were ongoing or completed in 2000 with assistance from the APEC Secretariat; • evaluated the completed HRD ECOTECH projects; • reviewed the implementation of Part Two of the Osaka Action Agenda; • monitored and reported on the implementation of projects/ activities that flowed from the Kuala Lumpur Action Programme on Skills Development and the APEC Agenda for Science and Technology Industry Cooperation into the 21st Century endorsed by APEC Leaders in Kuala Lumpur, Malaysia in 1999; • established a system of focal points (coordinators) to review progress in the implementation of the six ECOTECH priority themes under the 1996 Manila Declaration. In 2000, the ESC reported on the themes relating to Capital Markets, Economic Infrastructure and Sustainable Development; • reported on the implementation by APEC fora of its Guidance on Strengthening Management of APEC ECOTECH Activities; • proposed refinements to the ECOTECH Weightings Matrix, that was designed to provide APEC fora with a better appreciation of the overall ECOTECH priorities, including desired project outcomes; and • launched the ECOTECH Clearing House (www.apec-ECOTECH. org), a website that indexes all relevant information on APEC ECOTECH activities. The Clearing House also facilitates the exchange of information between potential partners in ECOTECH activity, in particular the identification of ECOTECH requirements and the capacity to provide appropriate expertise to meet those needs. In the eyes of the public, the above achievements look quite impressive. And imagine that all these activities were carried out on voluntary basis by the personnel of the economies involved, plus the work of officers at the APEC Secretariat Office in Singapore, who are

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themselves officials from APEC economies on temporary secondment from their home offices. It is undeniable, therefore, that the cooperative spirit is still very strong within APEC, and this spirit keeps reinforcing itself through frequent meetings among these APEC officials throughout the year, creating what could be called “peer pressure” to keep up the good work. However, it is undeniable also that the work of the ESC is not without problems. There are several analyses on the problems of ECOTECH activities in APEC.5 It suffices to briefly mention some of the problems here.

Lack of Resources APEC has intentionally maintained a very small secretariat to save costs, but then the professional staffs of the APEC Secretariat can do no more than just keep and publish records of the meetings, facilitate various meetings of APEC fora, and follow up on the tasks assigned by senior officials, ministers or leaders. They do not have time or the orientation to seriously analyse specific issues such as the appropriateness of a certain initiative, or the effectiveness of a certain project. Some economies which volunteer to perform certain tasks face the same problem i.e. lack of resources. The post of ESC Chair is rotated among APEC members and depends on the financial support of the government to which he or she belongs, which can seriously hamper his or her work if these resources are lacking. Some economies do provide financial assistance to the operations of various APEC activities, but there are inequalities of treatments among these activities. For example, the Japanese government provides up to 500 million yen annually to promote research and activities on TILF projects but does not allow this money to be used for ECOTECH projects.

Lack of Authority Although the ESC is the only subcommittee that SOM has created to work directly under it, SOM does not give much power or authority to its subcommittee. The ESC Chair or his representative has no right to participate in any meetings of the working groups or APEC committees or subcommittees unless invited, even though those meetings are about economic and technical cooperation, and one of the duties of the ESC is to coordinate the operations or outcomes of those activities. Perhaps this

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is the prevailing etiquette and practice within APEC, where members are very sensitive to one another regarding interference in their own internal affairs. But this can lead to inefficiency or ineffectiveness of policy decisions. To give one concrete example: the ESC has designed the so-called ECOTECH Weighting Matrix as a tool for members or APEC fora to rank their projects submitted for the APEC Central Fund, using a points system. But these points are given by the proposers themselves, not by outside evaluators, and they are assessed and evaluated by the fund manager, the Budget and Management Committee (BMC) without any participation from the designer of this Matrix, the ESC.

Lack of Technical Capability But even if the ESC is to be given an opportunity to assess or evaluate these projects, it is doubtful whether members of the subcommittee would be qualified to do the job well. The lack of technical capability of the ESC to do this assessment and evaluation of APEC proposals and project outcomes was evident in the ESC attempt to evaluate the completed human resources development (HRD) projects in 1999. The assessment was done by individual economies (self-assessment), and the results were so varied that no meaningful conclusions could be made out of this exercise. The ESC was forced to ask the permission of SOM to engage outside experts to do this assessment and evaluation.6

Too Diverse ECOTECH Activities There are several parties or bodies that can generate ECOTECH work programmes for the ESC. Economic leaders are of course the supreme source of initiatives that will be filtered down to the ESC to do, coordinate, or evaluate. Then come the decisions or initiatives of various ministers, senior officials, other committees, or various working groups. As can be seen from Box 1, the APEC Secretariat has currently listed 19 initiatives that fall under ECOTECH. Not all of these activities are equal in size and significance, but no one knows how to rank them. They have neither a definite beginning nor ending. Thus, there is a tendency for some activities to bunch up and divert attention from more important activities.

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A good case in point is the APEC Food System Initiative which was conceived in 1999. In 2001, it was still unclear how this initiative could be handled in the ESC. Apart from these initiatives, various working groups also have their own agenda and interests. Many of these activities are of course ECOTECH in nature, but few know what has taken place at each working group. The lines of communication between the working groups and the APEC process at large is very thin. The leaders of all working groups are required to meet with SOM only once a year (normally at SOM1), at a meeting that lasts only a few hours. There is no way that the ESC could coordinate the ECOTECH agenda emanating from all working groups at present.

Box 1

APEC ECOTECH Initiatives

Since 1995, APEC leaders and ministers, and other of ficials in various APEC fora, have initiated several activities under the broad framework of ECOTECH. As of May 2001, the following ECOTECH Initiatives are being implemented by APEC economies, the ESC, and various other fora in APEC. • • • • • • • • • • • • • • • • • • •

Action Agenda for the New Economy Agenda for S&T Industry Cooperation into the 21st Century Asia Pacific Information Infrastructure (APII) Beijing Initiative on APEC Human Capacity Building Blueprint for Action on Electronic Commerce (e-Commerce) Cleaner Production Strategy Early Voluntary Sectoral Liberalisation (EVSL) Economic Governance Capacity Building Initiative Emergency Preparedness Integrated Plan of Action for SME Development (SP AN) Kuala Lumpur Action Programme on Skills Development Manila Declaration on ECOTECH Mexico Declaration on Science & Technology Cooperation Natural Gas Initiative Osaka Action Agenda — Part 2 (ECOTECH) Partners for Progress Sustainability of the Marine Environment Sustainable Cities Vancouver Framework for Infrastructure Development

Source: APEC Secretariat, at

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Lack of Cooperation and Support from Within and Outside While APEC senior officials should be commended for their hard work and devotion to the ideal principles of APEC (and part of this could be explained by the camaraderie that they maintain throughout their APEC assignments), the same thing cannot be said with respect to officials in other ministries, or ministers in other ministries, or the economic leaders themselves. Fortunately, however, in most economies, these APEC senior officials are influential and can sway or attract the attention of ministers or leaders to the common causes of APEC. But outside the official circle, APEC still suffers from a lack of support from the business and private sectors, the academic community, the non-governmental organizations, and civil society at large. Without the support of all these non-official circles, the success of APEC in the domestic economy will be difficult. It is not only that these non-official organizations should be informed of what APEC is doing, they may have to be invited to participate more in the decision-making and the operation of APEC policies. Plans for the Reorganization of the ECOTECH Agenda The above problems would be obvious to anyone who has a chance to participate in the APEC process and engage in its activities. As far as ECOTECH activities are concerned, the ESC has been trying to do some reorganization of the ECOTECH agenda and its ensuing activities. There are three areas that define ECOTECH agenda: coordination of ECOTECH activities through the outcomes of various projects, including their assessments and evaluation; dissemination of these results to other organizations both in public as well as private sectors; and participation in activities that many outside the official APEC circles are involved. Under this broad framework, the reorganization plans are now taking shape.7

Plans for Better Coordination As mentioned in the Terms of Reference, a major function of the ESC is to assist SOM in coordinating ECOTECH projects in APEC. This would involve both the compilation of all ECOTECH projects in APEC and the evaluation of these projects. The ESC in 2000 supported the New Zealand initiative to sponsor an effort to compile and index all ECOTECH projects undertaken by all APEC working groups and fora during the last 5

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years and organize them in a web-based database. This project was completed in late 2000 and the outcome, the ECOTECH Clearing House Facilities System, was launched by the Economic Ministers in Brunei in November 2000. As this ECOTECH Clearing House is a “live” system, meaning that new information will be regularly added to the basic structure, it should provide up-to-date information on all ECOTECH projects, past and present. However, the evaluation of finished ECOTECH projects is more difficult. As mentioned earlier, the self-assessment of completed projects by responsible economies does not work, and some outside experts are needed to conduct this evaluation. In 2000, the APEC International Assessment Network or APIAN, a consortium of scholars from APEC Study Centres throughout the APEC region, was asked to participate in the meeting of the ESC to explain the work that they were then doing. This was done with a possibility that APIAN may be invited to act as an external assessor and evaluator of the ECOTECH projects. In November 2000, APIAN succeeded in completing its first policy report on APEC with relevant sections on the evaluation of the performance of APEC in various areas (including ECOTECH areas).8

Plans for Better Dissemination That APEC is run mainly by government officials is not disputed, but because governments need public support to survive, what government officials have done in APEC must also be supported by the public. First, the public must be constantly or regularly informed about APEC’s activities. Second, the public should be provided with an avenue or opportunity to take part in the decision-making process (especially with regard to policies that will affect their lives), or to express their views on APEC issues. This is an important policy that the ESC has put a great deal of effort into. It has succeeded in getting the attention of SOM through its repeated reports and reference to the importance of this dissemination or outreach aspect of APEC. Picking up on SOM’s directives, the Public Affairs Division of the APEC Secretariat has recently launched a project to create a better outreach for APEC. A private media consultant firm has been contracted to help the APEC Secretariat to carry out this public relations policy with the aim of informing as well as enlisting popular support from among the APEC communities.

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Plans for Better Participation Coordination and dissemination are part of the activities that fall into what is known as Type I of ECOTECH functions or activities. This is a narrow function of ECOTECH in APEC. It concerns what government agencies within APEC have carried out among themselves. The ESC has argued that APEC, especially ECOTECH, can no longer confine itself to this Type I of activities. On the contrary, APEC has to reach out, to participate in others’ activities, or invite or encourage other individuals, institutions, or organizations to participate in APEC activities. These broad functions of ECOTECH which involve people outside the official APEC circles are called Type II ECOTECH function or activities. This does not mean that APEC has never engaged people outside the official APEC circles. In fact, one of the strongest supporters of APEC comes from the business sector i.e. the APEC Business Advisory Council (ABAC). But even in this case, there is still room for improvement. 9 Other organizations that have been associated with APEC within this category of Type II function of ECOTECH include the Pacific Trade and Development Conference (PAFTAD), the Pacific Economic Cooperation Council (PECC), the Foundation for Development Cooperation (FDC), the Pacific Basin Economic Council (PBEC), and the APEC Study Center Consortium.10

Examples of New ECOTECH Activities In light of the plans to improve various aspects of ECOTECH activities, there are several activities currently being undertaken by member economies under the aegis of the ESC. Some of these activities clearly show innovations in the areas of ECOTECH which could be looked upon as a new beginning for ECOTECH in APEC. Three of these new activities could be described as follows.

The Updating of the OAA Part Two The APEC Summit in 1995 produced one of the most important APEC documents about the realization of free trade and investment in the Asia Pacific region in the years 2010 and 2020: the Osaka Action Agenda. Part One of this OAA deals with TILF matters, whereas Part Two deals with ECOTECH. The OAA also contains an annex which discusses action

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programmes in specific areas, and these areas usually coincide with the main focus of each working group in APEC. In 2000, four years after the announcement of this Action Agenda, SOM asked the ESC to review the implementation of ECOTECH activities under this Part Two of the OAA. The result of the review has shown that many of these programmes had been implemented or accomplished. Jaroenjit Pothong (2001) classified the main substance of the OAA Part Two into two categories. One are short-term activities aimed at eliminating the technical barriers to trade in order to facilitate free trade and investment, and the other are the long-term activities which aim to enhance capacity building necessary for members to achieve sustainable development. Jaroenjit found that essential achievements were found in short-term activities aiming at the elimination of technical barriers to trade. Best practices and mutual recognition agreements across wide areas of trade and investment such as in telecommunications, transportation, marine resource conservation, and fisheries, were developed. Database and networks to promote information sharing were also established.11 The long-term capacity building activities were more difficult to assess. However, Jaroenjit was of the opinion that best practices and mutual recognition could be important elements in capacity building.12 Based on the result of this review of the 1995 OAA Part Two, APEC Ministers at their meeting in Brunei in November 2000, instructed the ESC in 2001 to “develop further the Joint Activities/Dialogue sections of the OAA guidelines”. The ESC, therefore, will be updating the text of relevant sections of the OAA Part Two and its Annex, with a view to removing those activities that have been accomplished and incorporating new activities that have been endorsed by Ministers and Leaders since 1995.13 On the surface, this may look like a revision of an old agenda. But there are several new features that make this updating activity a new beginning in the ESC. For the first time in the history of APEC, members of the ESC and the working groups have been brought together in a working relationship, as member economies were asked to volunteer to liaise with the working groups or APEC fora in their reviewing and updating of those ECOTECH activities in the OAA Part Two.14 Moreover, the extensive participation of all APEC fora in this endeavour should guarantee that the outcome of the updating will be important and useful for the ECOTECH activities for many years to come.

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Human Capacity Building Efforts If there is any single topic that has received the greatest attention from any forum that talks about ECOTECH in APEC, it is human capacity building. Actually, this is not at all a new phenomenon. Human Resources Development was identified by Ministers when they first met in 1989 as part of future regional cooperation, and interest in this topic has been high ever since. The interest in HRD is also manifested in the frequency of meetings of the HRD Working Group as well as the number of projects undertaken by economies and APEC fora during the past 5 years.15 In the APEC Summit in Malaysia in 1998, Malaysia tried to set up human resources development as the main theme for that year’s Summit and indeed was able to come up with the Kuala Lumpur Action Program on Skill Development. But it was unfortunate that East Asia was deep in economic crisis that year, which overshadowed this new APEC resolve. In 1999, the focus of the APEC Summit in New Zealand was shifted to trade liberalization with strong emphasis on competition and market strengthening policies, but in 2000 in Brunei, the focus was shifted back to human resources development again. In 2001, the theme in China was somewhat broad, but there was little doubt if one looks closely at the preparation of China toward the year-end Summit that China takes ECOTECH in general, and human capacity building in particular, very seriously.16 In cooperation with Brunei, China organized the High-Level Policy Meeting on Human Capacity Building (HLP-HCB) meeting in Beijing during 15–16 May 2001, where more than 500 government leaders, top business executives, educators, and representatives from nongovernmental and international organizations specializing in human resources development attended. This HLP-HCB meeting has produced the “Beijing Initiative on APEC Human Capacity Building” (see Appendix 2) which sets a framework for future development of human capacity in APEC in the years to come. It should be mentioned that, in a separate effort, the Chinese Academy of Social Sciences under the leadership of Professor Zhang Yunling, in cooperation with Professor Peter Drysdale of the Australian National University, has completed a study on China’s APEC agenda for the 2001 Summit in Shanghai (Zhang and Drysdale 2001). In the part that is related to ECOTECH, Zhang and Drysdale clearly state that APEC’s capacity building strategy needs to be sharpened in two fundamental

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ways: (1) the vast list of ideas needs to be reviewed and reduced to a more manageable set of coherent programmes, and (2) a few capacity building activities that have been found to be successful on a small scale be implemented on a larger scale. They suggested that the ESC begin to review the large range of activities underway or under consideration. According to Zhang and Drysdale, to be effective, the review process must be able to devise a SMART programme to do it. In this case, SMART stands for Strategic (S), Measurable (M), Achievable (A), Realistic (R), and Time-bound (T). As for the ESC, which is at the centre of all these new changes, it has been given a completely new role to play. The APEC Ministers during their meeting in Brunei in November 2000 stated that the emergence of the New Economy had created a new dimension for human capacity building. So, in this regard, they had tasked the ESC to prepare a human capacity building strategy that would define the objectives, priorities and principles for APEC to respond to the challenges of the new environment. A special coordinating group of HRD representatives led by the ESC was established during SOM1 in China in February 2001 to prepare annually a Report on Human Capacity Building in APEC. Due to its potentially wide scope and relevance, the ESC has requested SOM to limit its attention to human capacity building in the New Economy first, and expand to other areas as it becomes more experienced.

Individual Action Plans of ECOTECH (ECOTECH-IAP) So far, it could be argued that ECOTECH has made an inroad into the thinking of many people as to its promising role in bringing about a faster realization of freer trade and investment in the Asia-Pacific, and also more sustainable development among less developed APEC members. At the APEC Ministers 12th meeting in Brunei in November 2000, delegates reaffirmed the importance of ECOTECH in achieving the Bogor goals of free trade and investment in the APEC region by 2010 and 2020, and as a means to a more focused and intensified action agenda, instructing APEC officials to consider the possibility of establishing individual action plans or IAPs on ECOTECH.17 To understand this new concept of ECOTECH-IAP one must start with the older and more established concept of TILF-IAP. Part One of the OAA recommended that each APEC member initiate individual

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action plans for its own “trade and investment liberalization” with the year 2010 or 2020 in the horizon. The first TILF-IAP format was developed by the CTI in 1996, and then one after another, members were able to construct their own TILF-IAPs in subsequent years. A typical IAP would consist of a summary cover sheet which gives a summary on specific changes against the last version of the IAP. It is in a matrix form, consisting of detailed actions for the short term, the medium term, and the long term for each TILF issue specified in the OAA, and a summary of the highlights of the IAP, heading statements, and detailed statements. Members will take turns offering their IAPs to be reviewed by their peers regularly during SOMs. Despite a report by a group of researchers that the progress of these IAPs among all APEC members was slow and uneven, the TILF-IAP concept remains one of the most progressive examples of concerted unilateral efforts of “trade and investment liberalization”. At least the concept of IAP has become so well known that it is often used to show the uniqueness of APEC’s voluntarism. In other words, IAP has assumed a special meaning that goes beyond the matrix of tariff and non-tariff changes. The TILF-IAP has reflected the individual, unilateral commitment of APEC members towards free trade. The proposal for an IAP on ECOTECH can be traced to new thinking on the role of the latter; ECOTECH now means more than just a mode of preparation for free trade and investment, it also means a separate, stand-alone, endeavour to develop each individual economy into a selfsustaining and economically sustainable entity. A new way of thinking has replaced the narrow, self-serving view of free-trade-at-all-costs. Free trade should bring in mutual net benefits, not gains to one and loss to the others. So, to help these economies attain the level of development in which trade and investment will begin to produce mutual net benefits with one another is part and parcel of the new thinking on the meaning of ECOTECH. Therefore, an individual action plan on ECOTECH can be looked upon as a commitment by APEC members to achieve either one of the two or both ECOTECH goals mentioned above. As these two goals will converge in the end, there is no conflict if one is achieved ahead of the other.18 But it could be argued that ECOTECH can be very wide, encompassing a large area of economic and other social activities. What parts or aspects of ECOTECH should members be involved in their

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individual plan of action? Taking note of the existing system of activities being undertaken by various working groups under APEC, these activities could be adopted as chosen activities under ECOTECH-IAPs. Or to make the whole process more manageable and more focused, only one or two major ECOTECH activities may be selected first, with other activities to be added or included later on. A good candidate for the first activity to be selected is of course human resources development or human capacity building as this is a well-recognized area that can bring about desired growth and development in any economy.19 But this should not limit the choice and selection of any economy which finds a more appropriate activity in other areas. Another way of looking at the true meaning of ECOTECH-IAP is to consider this new APEC activity as the missing link that will complete the whole circle of the APEC process. As things stand, only TILF has its individual action plans and collective action plans (CAPs), and as pointed out earlier, these activities are explicitly mentioned in the OAA Part One, whereas no equivalent actions are given on ECOTECH in the OAA Part Two. As Japan, one of the proponents of ECOTECH-IAP, put it, while this OAA Part Two has suggested a variety of ECOTECH measures to be undertaken by member economies, their implementation has not been followed seriously by member economies. In this respect, Japan has proposed that APEC be equipped with another separate engine to promote ECOTECH activities, that is to say, while all members, on the one hand, collectively implement the decisions made by leaders and ministers concerning ECOTECH, each member is, on the other hand, expected voluntarily to take such individual actions as listed in the OAA Part Two. Despite the enthusiasm of the proponents of this ECOTECH-IAP, this concept is not without its skeptics. The following are some reservations on the idea of ECOTECH-IAP expressed by some APEC economies: • There is no added value in an ECOTECH-IAP • ECOTECH-IAP idea and concept overlaps with the already existing ECOTECH Clearing House Facilities • The ECOTECH-IAP outcome, unlike TILF-IAP outcome, is nonquantifiable • ECOTECH is a collective activity; it is possible to do this alone or unilaterally

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• ECOTECH-IAP is an Official Development Assistance (ODA) programme in disguise • The term IAP causes confusion because it belongs to TILF. This is not the place to debate the accuracy above.20 Suffice to say that proponents of ECOTECH-IAP have successfully explained the true nature of ECOTECH-IAP to its critics, so that some kind of prototype of ECOTECH-IAP could be forthcoming at the end of the year. It is possible that this ECOTECH-IAP prototype could be one of the deliverables that the APEC Leaders will announce in Shanghai in October 2001.

Conclusion In this chapter the origin of ECOTECH in the APEC process, the organizational structure and the problems involved in conducting ECOTECH’s agenda in APEC have been discussed. ECOTECH elements in APEC have become much more important due to the varying levels of economic development of some APEC members, to enable all members to engage in freer trade and investment with one another. Also, ECOTECH could assist members to achieve this goal through the process of human resources development, human capacity building, and other forms of economic and technical cooperation. In keeping with ECOTECH’s growing importance in APEC, there have been several new initiatives, and new procedures installed, to make a new beginning. There have been plans for better coordination, dissemination, and participation in ECOTECH, with decisions to update Part Two of the OAA, to start working on Human Capacity Building Strategy, and to consider establishing the individual action plans on ECOTECH (ECOTECH-IAP). The ECOTECH component in APEC is often referred to as the third leg or third pillar of APEC, the other two pillars being trade and investment liberalization, and trade and investment facilitation or TILF. At other times, ECOTECH is also referred to as the heart of APEC without which the grouping could not be sustained. Recently a new metaphor for ECOTECH in APEC has been devised. ECOTECH is now seen as the rear wheel of a bicycle that, together with the front wheel of TILF, enables a bicycle to move forward.21 This is an interesting change from the old static three-pillar concept of APEC in the sense

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that the new concept elicits the sense of forward movement and balance. This may result in greater importance given to ECOTECH in comparison to TILF. Another separate APEC development which can be seen as a boost to the position of ECOTECH is the advent and proliferation of bilateral free trade agreements (FTAs). To some, this poses a threat to the cohesion of APEC in its trade liberalization efforts. To others, it does not. Those who dismiss FTAs as a threat to APEC usually believe that bilateralism and multilateralism can go hand in hand. Indeed, the emergence of these FTAs can enhance the ECOTECH aspects in APEC (and possibly the trade and investment facilitation aspects as well) by default. How? Once the Bogor goals are set and the IAPs on trade and investment liberalization are in place, the urgency in this aspect will lessen (but pushed along concurrently by bilateral or regional FTAs). In its place, ECOTECH will become more important as members are trying to prepare for eventual free trade and investment in the Asia Pacific. The disappointment of the failure to launch a new round of multilateral trade negotiations (not the fault of APEC), will be more than made up by the success of this ECOTECH-IAP.

Notes 1

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The position of Brunei on this ECOTECH matter was expressed in its major document called “Human Capacity Building in APEC: Meeting the Needs of the 21st Century” in September 2000. A Common Policy Concept requires a setting up of goals, basic principles and priorities in each specific area of APEC economic and technical cooperation. A Joint Activity would call for compilation and sharing of data and information, surveys, training, seminars, research and technical demonstrations. Finally, a Policy Dialogue on economic issues pertaining to these 13 specific areas of interest must be conducted. The former name of this subgroup was the Infrastructure Workshop (IWS) and was part of the Economic Committee (EC). In 1999, it was moved from the EC to the ESC for better working arrangements. In 2000, the IWS requested the ESC and SOM to change its name to GEI, which the ESC and finally SOM approved. This information is obtained from the website of the APEC Secretariat, . See, for example, APIAN (2000); Medhi (2000b); and FDC (2001).

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Medhi Krongkaew Although the permission was granted in principle, the actual engagement of outside experts for this assessment may still take some time as some members are still reluctant to allow their projects to be assessed or evaluated by outsiders. It should be mentioned that there is no such thing as a physical “Reorganization Plan”. The plans described here are the author’s own initiatives to improve the functioning of the ESC on its ECOTECH agenda. Only those plans receiving support (or at least acquiescence) of ESC members were mentioned here. Since APIAN did not have the opportunity to explain the outcome of its study at the APEC Ministerial Meeting in Brunei in 2000 (although APEC Ministers were presented with copies of this Report), the ESC invited the Coordinator of APIAN (Professor Richard Feinberg of the University of California at San Diego) to explain the APIAN Report to the Second ESC Meeting in Shenzhen in May 2001. Each year ABAC comes out with advice for APEC, but in the past several years, there has been no joint project or activity between the government agencies of APEC with the private sector ABAC, especially in ECOTECH areas. See a plea for these closer relations between the ESC and ABAC in Medhi (2000a). For more detail on how these organizations have become involved in APEC, see Medhi (2000b). And this is one of the reasons why the Trade and Investment Database Working Group was disbanded in 1999. Jaroenjit Pothong is Special Assistant to the ESC Chair. In the beginning, there were some doubts and apprehension from some members as to how relevant APEC fora could carry out these assignments. Some regarded OAA Part Two as a historical document that should not be altered; some saw it as a living document which must change with the time. Eventually a compromise was reached that only the Joint Activities/Dialogue component of Section B is to be reviewed (for the purpose of updating it); the rest of the document will remain unchanged. In the Annex, each forum will have to determine what amendments should be made, taking into consideration its annual or longer term work programme and priorities. However, the Goals and Basic Principles in the Common Policy Concepts section would not be changed. Again there is a great deal of sensitivity involved in this move by the ESC. As the Working Groups have been working independently from the beginning, any attempts to get involved in their work could be construed as intrusion or interference. The ESC was at pains to explain to the Working Groups that this was not an intrusion but an opportunity to work together.

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The word used is for the ESC members to “latch on” to the work of the Working Groups. In 2000, the APEC Secretariat conducted a survey of how all the ECOTECH projects could be classified among the six priority themes of ECOTECH. It was found that 70 out of 220 projects or about one-thirds fell under the category of developing human capital. The rest spread around the other five themes. See APEC Secretariat (2000c). The main theme of the 2001 APEC Summit in China is “Meeting New Challenges in the New Century: Achieving Common Prosperity through Participation and Cooperation”, with 3 sub-themes consisting of (1) sharing the benefits of globalization and the New Economy; (2) advancing trade and investment; and (3) promoting sustained economic growth. One of the first activities under this new task of the ESC is to agree on some common definition of the New Economy. Apart from the definition by Catherine L. Mann of the Institute of International Economics, who volunteered to help the Economic Committee on its work on the New Economy, several economies have also expressed their views on the definition of the New Economy. It is expected that the meeting of the Human Capacity Building Coordinating Group (HCBCG) during SOM2 in Shenzhen will agree on the definition which will set the framework upon which a strategy for human capacity building could be built. It was reported that this idea of the ECOTECH-IAP which was the basis for the Ministerial agreement in 2000 came from Kono Yohei, then Foreign Minister of Japan. Although many people have mentioned about IAP on ECOTECH before — I myself mentioned this during SOM2 in Brunei in May 2000, and Andrew Elek also wrote about this in his paper in October 2000 (Elek 2000). Kono should be given full credit for successfully pushing forward this innovative idea among his ministerial colleagues. It should be noted also that as the Japanese Foreign Minister in another government, he also proposed the idea of the Partnership for Progress (PFP) in 1995 in Osaka which became one of the earliest models of ECOTECH activities that are qualified to be called an ECOTECH-IAP in the present discussion. This is a matter of domestic politics and strategies rather than international relations matters. Some economies may opt for free trade first and use the change brought about by free trade to mount domestic policy changes that will bring faster and more sustainable growth later. Other economies may do the opposite, that is to develop the local economy first before open up more fully. This was indeed the position taken by Singapore in its proposal to prepare a prototype of an ECOTECH-IAP on human resources development for

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Medhi Krongkaew members to consider for adoption. This position and proposal received wide support among APEC member economies in the meeting. For detailed discussion on how these questions or reservations are answered see, for example, Medhi (2001). This was heard this for the first time from Wang Guangya, the SOM Chair of China for 2001, in his opening remark at the Policy Dialogue Group Meeting organized by the Foundation for Development Cooperation and the China National Committee of the Pacific Economic Cooperation Council in Beijing on 20 April 2001.

References APEC International Assessment Network (APIAN). “Learning from Experience: the First APIAN Policy Report”, November 2000. APEC Secretariat. “Leaders’ Declaration — Brunei Darussalam: Delivering to the Community”, Bandar Seri Begawan, 15 November 2000. ———. “Twelfth APEC Ministerial Meeting: Joint Statement”, Bandar Seri Begawan, 12–13 November 2000. ———. 2000 Report on Economic and Technical Cooperation: Ministerial Meeting XII, November 2000. Brunei National APEC Secretariat. “Human Capacity Building in APEC: Meeting the Needs of the 21st Century”, Brunei, 2000. Chan, Mignon. “The Role of PECC in Support of APEC: Problems and Prospects”. Paper presented at the regional conference on APEC Update 2000: the Role of Institutions in Support of APEC, organized by the Thai APEC Study Centre, Bangkok, 1 September 2000. Elek, Andrew. “Forging New Partnerships: Economic and Technical Cooperation and the APEC Process”. Foundation for Development Cooperation, 1998. ———. “Capacity Building in the Asia Pacific: A Way Forward for ECOTECH”. Foundation for Development Cooperation, October 2000. Elek, Andrew and Hadi Soesastro. “ECOTECH at the Heart of APEC”. Paper presented at the 25 th conference of the Pacific Forum for Trade and Development (PAFTAD). Foundation for Development Cooperation, 1999. Foundation for Development Cooperation (FDC). “Promoting ECOTECH in APEC: Bridging the Digital Divide and Other Issues — Review of Meeting and Potential Next Step”. Report of the meeting of a policy dialogue group organized by the Foundation for Development Cooperation and the China National Committee for Pacific Economic Cooperation in Beijing, 20 April 2001. Jaroenjit Pothong. “Report of the Brainstorming Session on How to Make ECOTECH Come True in Thailand”. Office of the ESC Chair, in cooperation with the Thai APEC Study Centre, Bangkok, 20 November 2000.

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———. “Review of OAA Part II”. Paper submitted to the first meeting of the ESC, Beijing, 15–16 February 2001. Krongkaew, Medhi. “Closer Relations between ABAC and the ECOTECH Subcommittee: A New Development”. Paper presented at the Symposium on Themes for APEC 2001, organized by the Shanghai Institute for International Studies, Shanghai, 8–10 May 2000. ———. “Problems and Prospects of ECOTECH in APEC: A Way Out or A Way Forward”. Paper presented at the Annual Japan’s APEC Study Center Consortium. Institute of Developing Economies, Chiba, 17 December 2000. ———. “Emerging Forms of Regional Cooperation in East Asia: An Examination of Bilateral Free Trade Agreements and Their Trade and Investment Consequences”. Paper presented at the International Conference on the United States, Japan, and Economic Recovery: Foreign Investment in Asian Developing Economies. Department of Political Science and the Center for Southeast Asian Studies, Northern Illinois University, De Kalb, 29–30 March 2001. ———. “ECOTECH-IAP: A New Challenge for APEC?” Paper presented at the International Workshop on Promoting ECOTECH in APEC: Bridging the Digital Divide and Other Issues. Foundation for Development Cooperation (FDC) and the China National Committee for Pacific Economic Cooperation, Beijing, 20 April 2001. Soesastro, Hadi. “APEC After 10 Years’. Paper presented at the APEC Study Centre Consortium Conference 1999. New Zealand APEC Study Centre, Auckland, 31 May to 1 June 1999. Yamazawa, Ippei. “On Pacific Economic Integration”. Economic Journal 102, no. 415 (1992): 1519–29. Zhang Yunling and Peter Drysdale. “China’s APEC Agenda: Shanghai 2001”. Special Report, Beijing and Canberra, January 2001.

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Box 2

Chronology of Human Capacity Building Activities in APEC

1989–91: Human Resources Development (HRD) was identified by Ministers when they first met in 1989 to be part of future regional cooperation. Early areas for cooperation in HRD included business management, training in industrial technology and education. 1992: First Education Ministerial Meeting (Washington DC): identified need for research into effective instructional practices that meet the needs of the 21st Century, including the appropriate and effective use of new technologies for instructional purposes, and widespread dissemination of the results. 1993: In Seattle, Leaders endorsed an Education Program (leading to establishment of APEC Study Centers and APEC Education Foundation) and Business Volunteer Program (volunteer exchange program to promote HRD). 1994: In the Bogor Declaration, Leaders identified HRD as a means to sustain growth and reduce economic disparities among APEC economies. APEC Human Resources Development Framework endorsed by Ministers sets out the goals, principles, and priorities for HRD in APEC. Goals: promote well being of region’ s peoples through economic growth and development by planning, developing and implementing practical and appropriate education and training for present and private sectors (including non-workers). Priorities: basic education, regional labour market analysis, SMEs, entrepreneurship, lifelong learning, improved education/training materials, skills development opportunities. 1995: Osaka Action Agenda provided template for future APEC to work in 13 identified priority areas of economic and technical cooperation, including HRD. The Action Program for Human Resources Development included work on facilitation, mobility of researchers, higher education. 1996: First HRD Ministerial Meeting (Manila) endorsed the creation of a Labour Market Information Database and highlighted importance of SMEs, mobility of persons in HRD, services and executive education/development. APEC Framework for Strengthening Economic Cooperation and Development endorsed by Ministers in Manila identified “developing human capital” as one of six priorities for ECOTECH. 1997: Second HRD Ministerial Meeting (Seoul) highlighted the need for linkages between learning and work, skills development, enhanced labour and management cooperation in HRD. ECOTECH Sub-committee (ESC) was established to coordinate ECOTECH ef fort across APEC.

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Box 2 (continued ) 1998: “Development human capital” was a priority throughout 1998. Kuala Lumpur Action Program on Skills Development endorsed by Leaders provides for mutually beneficial partnership between public and private/ business sector in skills development. Leaders endorsed the Agenda for Science and Technology Cooperation into the 21 st Century proposed by China in 1997 which encourages enhanced collaboration and cooperation in S&T within APEC through innovation and sustainable regional S&T networks and partnerships. 1999: Third HRD Ministerial Meeting (US) endorsed the HRD Plan of Action on labour market policy , social safety nets, and workplace security. Specific action items include mutual recognition of professional skills, labour–management relations, retraining, and school–industry linkages. 2000: Second Educational Ministerial Meeting (Singapore) identified four strategic areas in gearing education systems for the 21 st Century, including IT as a core competency in learning and harnessing it to enhance teaching and lifelong learning (other areas relate to quality of teaching and teacher development; sound management practices among education policy-makers and practitioners; and active engagement among APEC economies in education cooperation). Leaders acknowledged the need for HRD to adapt to the changing and globalizing economy, and endorsed the Human Capacity Building initiative to bring in stakeholders into APEC HRD ef forts. Components of the Initiative are: (a) APEC High Level Meeting on Human Capacity Building; (b) APEC Strategy on Human Capacity Building; (c) Annual Report on Human Capacity Building. 2001: China as APEC Chair 2001 will jointly host with Brunei a High Level Meeting (HLM) bringing together government/public of ficials, business people and education/training providers to shape the way forward for HRD/ HCB in APEC into the new economy . Fourth HRD Ministerial Meeting (Kumamoto, 29–30 September 2001) will focus on the theme “HRD for both the advancement of society and economy and the sharing of prosperity with people in the context of globalization”.

Source: APEC Secretariat

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Appendix 1: Terms of Reference of the SOM Sub-committee for Economic and Technical Cooperation A. Background 1. SOM has been mandated by Leaders to mandate and coordinate the APEC Economic and Technical Cooperation (ECOTECH) agenda. In Vancouver, Ministers have committed to further strengthen economic and technical cooperation in APEC by fully implementing the Framework for Strengthening Economic Cooperation and Development, which was agreed in Manila. In this connection, Ministers endorsed the proposal by Senior Officials to establish a SOM Sub-Committee for Economic and Technical Cooperation. 2. The SOM Sub-Committee will assist the SOM in coordinating and managing APEC’s ECOTECH agenda, as well as identifying valueadded initiatives for cooperative action. B. Objectives 3. The main objective of the SOM Sub-Committee is to advance more effective implementation of the APEC’s ECOTECH agenda by consulting with and integrating the efforts of various APEC fora through a results-oriented, outcomes-based approach which benefits all member economies; providing a policy management tool for strengthening and streamlining APEC’s work; and providing guidance on possible actions which could be undertaken to achieve APEC ECOTECH goals, namely: • To attain sustainable growth and equitable development in the Asia-Pacific region; • To reduce economic disparities among APEC economies; • To improve the economic and social well-being of the people; and • To deepen the spirit of community in the Asia-Pacific. 4. The pursuit of the ECOTECH goals through concrete projects will take into consideration members’ diverse and complementary capabilities and guided by the principles of: • Mutual respect and equality; • Mutual benefit and assistance;

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• Constructive and genuine partnership; and • Consensus building. 5. The SOM Sub-Committee will serve as a forum to discuss, formulate as well as coordinate action-oriented integrated strategies in consultation with existing APEC groups and the business community, as necessary to implement the APEC Framework for Strengthening Economic Cooperation and Development which has identified the following six priority themes: • • • • •

Develop human capital Develop stable, safe and efficient capital markets Strengthen economic infrastructure Harness technologies for the future Safeguard the quality of life through environmentally sound growth • Develop and strengthen the dynamism of SMEs. C. Activities 6. The SOM Sub-Committee will: • Report to SOM on its proposed work programme and assist the SOM to effectively implement the 1996 Framework for Strengthening Economic Cooperation and Development. In so doing, the SOM Sub-Committee shall ensure that all the elements of the Framework are developed. • Review progress of APEC activities towards achieving APEC ECOTECH goals. • Identify and recommend for Senior Officials’ consideration specific issues and value added initiatives to assist the achievement of ECOTECH goals taking into account the economic situation, requirements and capacities of all member economies. • Examine and evaluate ECOTECH programmes and activities and recommend to Senior Officials means to achieve visible, targeted and result-oriented deliverables to address member economies priorities. • Assist the SOM to improve the management and coordination of ECOTECH activities among APEC fora, including APEC working groups and policy level committees, with a view to improving the identification and coordination of new cross-cutting issues.

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• Evaluate proposals to include new priority areas within the Framework for Strengthening Economic Cooperation and Development. • Encourage active participation of the private sector in the activities of economic and technical cooperation. Consider the recommendations of ABAC regarding the process of economic and technical cooperation in APEC. • Undertake ECOTECH-related tasks as directed by Senior Officials. Source: APEC Secretariat, 2000 Report on Economic and Technical Cooperation, Ministerial Meeting XII, November 2000.

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4 Trading with Favourites: Free Trade Agreements in the Asia-Pacific Christopher Findlay, Mohd Haflah Piei and Mari Pangestu

Introduction Bilateral and regional agreements — often referred to broadly as regional trading arrangements (RTAs) — have proliferated in East Asia in recent years. In this paper, we examine the motivations for countries to enter into such arrangements, identify the risks involved, analyse the significance of the risks and argue the case for the application of a new set of principles for risk management. The arrangements for RTAs usually include two distinct elements. One concerns liberalization — the traditional free trade area (FTA), in which parties to an agreement remove cross-border barriers to trade and investment on a preferential basis. The other concerns cooperation to facilitate trade and investment by removing various non-tariff and other administrative barriers. In this paper, we focus on liberalization, because this is the area where most of the risks or downsides of RTAs can be found. By definition, the FTA component of RTAs does not actually

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create free trade in terms of market access on most-favoured-nation (MFN) terms; instead, it provides a system of access on preferential terms. In essence, it promotes a regime of trading with favourites.

Recent proliferation of RTAs in the Asia-Pacific region In the East Asian region, interest in negotiating trading arrangements among small groups of economies has been led by shifts in attitude by some of the richer countries of the region. For example, Japan and Singapore have concluded an economic partnership agreement; Singapore has negotiated agreements with New Zealand and Australia; and Australia is currently negotiating an agreement with the United States. Hong Kong and Chinese Taipei have also examined options for FTAs. More recently, there has been a surge of interest in FTAs among other members of ASEAN and by China. At the end of 2001, China and ASEAN reached agreement on a framework to establish an FTA and on a tariff elimination programme which includes agriculture products in the socalled “early harvest component” of the agreement, in which some products would be accepted under the agreement in advance of agreement on its whole coverage. This development is interesting not only because of the developing-economy character of the participants, but also because China initially began with ASEAN rather than pursuing bilateral arrangements and because the negotiators adopted a comprehensive approach from the outset. China has also signed an Economic Partnership Agreement with Hong Kong. Not to be outdone by China, the other major trading partners of ASEAN have also proposed initiatives for regional cooperation. For example, Japan has stepped up its expressions of interest in agreements with ASEAN members.1 Japan is still pursuing an FTA with ASEAN as a whole, but is now giving higher priority to bilateral free trade agreements with individual ASEAN countries. The United States is also showing interest in FTAs with ASEAN countries. In the APEC meetings in Los Cabos in 2002, President Bush announced the “Enterprise for ASEAN” initiative, in which the United States and individual ASEAN members will together determine if they are ready to launch FTA negotiations. The United States expects a potential FTA partner to already be a member of the WTO and to have concluded a trade and investment framework agreement (TIFA) with

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the United States (already in place for Indonesia, the Philippines, Brunei and Thailand). The United States reached agreement on an FTA with Singapore on 19 November 2002 and with Chile on 11 December 2002.2 The United States is likely to also pursue bilateral agreements with other individual ASEAN countries. Other large countries and groups are also showing interest. India is currently negotiating a framework agreement for an FTA with ASEAN. This would be along the same lines as the agreement with China, although the sectoral coverage is expected to be less comprehensive. The European Union (EU) has approached ASEAN on the possibility of regional cooperation; it is not clear what form any agreement will take, but it is clear that the EU intends to deal with ASEAN as a group rather than with individual members bilaterally. Individual ASEAN members are also negotiating bilaterally with trading partners. The initiatives of Singapore have been noted. Thailand is following Singapore’s lead and is aggressively pursuing a parallel bilateral approach. Malaysia, in a significant shift in policy, has started talks with Japan. Many other countries in the Asia-Pacific region are also involved or have just concluded agreements, including Mexico, Chile, Canada and South Korea.

Motivations for entering FTAs Countries expect to gain from their participation in FTAs, although it is hard to determine empirically the net outcome of various effects on national economic welfare.3 Countries’ motivations clearly have a considerable political component, including responding to domestic pressures and pursuing ambitions in international relationships. In particular, different decision-makers may give different relative weights to overall national interest and the more specific political gains from accession.4

General considerations When people analyse the gains of participation in FTAs, they often focus on gains and losses associated with the impact on import-competing sectors. Gains to a member’s exporters from the application of a preferential tariff by a trading partner are also important. They can be predicted with more confidence than the net welfare effects, and exporters are important drivers in the domestic political economy of all the

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participants. As explained again below, their role in these agreements also affects the prospects for progress on the WTO agenda. Non-members are affected via their terms of trade.5 Some empirical work suggests that such effects may be relatively small, especially when players are relatively small actors in the relevant markets.6 However, there is a recent trend for small economies to sign FTAs. Whether nonmembers are large or small, they tend to react to FTAs by their larger trading partners. Either they want to join to ameliorate those effects or they want to sign their own agreements to try to generate their own terms of trade effects. “We can’t afford to stand still”, they will say. Proponents of the FTA route to reform might argue that the economies involved are not acting in a way which contradicts regional cooperation and that, in some special circumstances, the process might lead to free trade as more and more preferences are exchanged until the entire world is a member of the same agreement. Some proponents go further and seek to use preferential agreements in an offensive manner, hoping to stimulate non-members to develop their own proposals or accede to requests to negotiate in order to avoid the losses from discrimination. For example, Edmund L. Andrews7 commented on the US approach as follows: “Mr. Zoellick’s strategy is based on what he calls ‘competitive liberalization’, the idea that a bilateral trade agreement with one country puts pressure on others to seek their own deals with the United States.” Proponents of the FTA route might also say that the multilateral institutions are not delivering market access rapidly enough, and that the region should become — and in fact is already becoming — more self-reliant. This is especially important as the sources of growth that might be expected from developed economies in the rest of the world diminish. Furthermore, after its experience in the financial crisis, the region is seeking its own identity and greater self-reliance through a regional financial architecture. A new set of trading arrangements within East Asia can contribute to both objectives, it might be argued.

Political economy We have already noted that elements of the domestic political economy and the role of export interests may motivate countries to pursue the FTA route to reform. FTAs are easier to sell at home than is MFN liberalization.

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The benefits of MFN reform are more diffuse than those of bilateral arrangements, which are more specific and concrete and whose political costs are easier to manage.8 This was always the case, but until recently politicians understood the risks in terms of longer-term interests (retaliation leading to a final position in which their economy could be worse off). Their choice on this trade-off appears to have shifted; perhaps the parameters have been forgotten by the current generation of policymakers or perhaps people are making a different assessment of the costs of the outcome which is not preferred. In particular, people may make an assessment that the intensity of regional trade is increasing and that the growth of trade indicates not that impediments to intraregional trade are diminishing but that more could be done locally to remove remaining impediments and let trade grow even faster. While the data may indicate that intra-regional trade is growing rapidly, the phenomenon may be the result of the growth of cross-border transactions along the supply chain rather than a shift away from the fundamental reliance on global markets. Even if people believe that FTAs can contribute to important policy goals, is the preferential route the best way to obtain them? For example, some people see tariff impediments as important, but may also be motivated by the aim to fix elements of the so-called “new age agreements”, such as various types of non-tariff barriers. Some of these non-tariff barriers — systems of standards, rules on movement of people and payment of taxation on income from foreign investment, for example — require explicit cooperation between pairs of economies in order to introduce new arrangements. An FTA could include such negotiations but a Trade and Investment Facilitation Agreement or TIFA9 may also be proposed. Especially important are the various forms of contingent protection. Policymakers hope that these will apply less vigorously to those with whom they have negotiated FTAs. It will be interesting to see whether such hopes will be fulfilled. Will such economies be less likely to apply those measures against trading partners with whom they have FTAs? Mobilizing domestic reform is another important factor for proponents of an FTA. This is particularly the case in Japan, where FTA proponents argue that international commitments are required to shift the most difficult issues on the domestic agenda. However, it is not clear that a preferential agreement generates enough “grunt” to shift the resistance.

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Negotiations often appear to get stuck on issues which have relatively little impact on the whole economy but which matter in the domestic political economy.

Security There are important two-way connections between deeper economic relationships and a lower risk of conflict. But will FTAs actually add to the stock of security-creating political assets in the region? And even if they do, could other forms of cooperation, including economic cooperation based on MFN principles, be more effective without the same risks? It is important to assess the alternatives. In any case, it is not clear that structures which embed favouritism and which force economies to choose their partners make the region less likely to risk the sorts of disputes which could lead to conflicts. A specific issue in the application of this route to reform is the treatment of Chinese Taipei. A multilateral approach to the design of trade policy provides a formula for the inclusion of Chinese Taipei for its own benefit as well as for the benefit of the rest of the region. But few economies would sign preferential trade arrangements with Chinese Taipei. The risk of the FTA route is therefore a higher degree of economic isolation of Chinese Taipei. What are the implications of that position? How would it affect the risks of conflict in the region? Given the extent of activity on FTA-related agreements in East Asia, it was inevitable that the United States would start taking a stronger interest in the region. The United States has its own market access ambitions and will try to avoid suffering from discrimination. An example is its decisive move in Los Cabos to set up an initiative on ASEAN. The timing of this move might also have been prompted by the development of the US security agenda, which is another illustration of the linkages between economic and political motivations in the FTA agenda. The design of the anti-terrorist agenda perhaps strengthens the US interest in the negotiation of FTAs with Southeast Asia. The implementation of that agenda is likely to be more demanding than current forms of cooperation over security, because of its domestic dimensions. It is not just a matter of defence cooperation on matters which apply between economies — sea-lane security for instance, or joint defence exercises. Rather, cooperation demands joint activity within the border in ways which will affect the domestic community. FTAs can

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help tie commitments to economic cooperation with more stressful cooperation on security issues. At the same time, an FTA with a large economy offers substantial rents to the trading partner as a reward for cooperation. The problem in this linkage is that, in an environment in which favourites have been selected, anti-terrorist programmes could add new dimensions of discrimination to economic relationships. The extent of this discrimination — and its contribution to the perception of there being different clubs of economies divided by culture, religion or stage of development — has long-term consequences that undermine the main security agenda. Facilitation arrangements that remain open and that include capacity-building components are valuable in order to avoid this consequence. Risks In this section, we examine some risks of entering into FTAs. A theme is that the tactic of favouritism appears to contradict the strategy of cooperation. Some commentators argue that cooperation will prevail in East Asia because of gains from consolidating bilateral agreements and having greater bargaining power with blocs in the rest of the world. This recognition of the value of work to consolidate the agreements will be intensified by progress on the Free Trade Area of the Americas (FTAA) negotiations, for example. We offer more comments on the hypothesis of consolidation below. i) Resource allocation The first risk concerns the effects of favouritism on the efficiency with which resources are allocated in the economy. Trade is diverted to trading partners in the agreement. The trade diversion effect is important for services as well as goods. Further, the diversion effect might be “stickier” for services than for goods, given the nature of competition in markets for services, and the strong position acquired by “first movers”.10 Participating economies might be locked in for longer with “secondrate” suppliers because of this effect.11 ii) Retaliation The second risk is that associated with retaliation by others. Unlike agreements in North America and Europe, where the regional market is

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significant, the rationale for a regional agreement in East Asia is to enhance complementarities and increase competitiveness to sell to major markets outside East Asia. Therefore, East Asia continues to depend on access to world markets. A series of agreements in East Asia feeds back into the momentum for preferential reform in the rest of the world, for the reasons just noted. In addition, there is a demonstration effect from economies like Japan and Korea appearing to sanction such an approach to reform. The risk is that East Asia will be discriminated against in other markets outside the region on which it still depends. A related point is that creating a series of FTAs contradicts the patterns of commerce in the region. A key feature of the pattern of development in East Asia has been the relocation of industry as its host lost its comparative advantage in that sector. These shifts have occurred quite rapidly. They have been an important driver of East Asian investment in China. In recent years, they have been evident in Korea and, even more so, Japan. Until recently Hong Kong was managing the process of integration with southern China very successfully. Chinese Taipei is making a rapid adjustment to more capital and technology intensive production. This process works best in an MFN environment. A series of agreements with favourites impedes the process of relocation. Further, a lot of value adding, while based in a series of locations in East Asia, creates a final product which is sold outside the region: again, MFN rules facilitate the adjustment of market shares amongst the economies that take turns to host the final stages of production. iii) Political economy The third effect concerns the political economy of reform. There has been some argument that the use of preferential agreements will, through the threat they impose, drive the world to make faster progress on the WTO negotiations and the application of MFN principles. However, it is more likely that the political economy effect will be to create a new set of interests who are opposed to further reform because it would remove their favoured positions in offshore markets. These are the very export interests whose commitments are so important in the domestic political economy processes for the adoption of WTO commitments. The extensive use of FTAs in this scenario does not accelerate the WTO process; it retards it. Therefore the final outcome is not independent of the path taken.12

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A further effect on the political economy comes from the misnomer of “free trade agreements”. In the context of bilateral negotiations, it is not likely that there will be capacity to mobilize sufficient political support to deal with very difficult and sensitive issues (areas in which tariffs are already high, for example).13 Groups hoping to gain better market access from the negotiations will be frustrated by the lack of effectiveness of the negotiation. iv) RTA architecture The fourth risk concerns the architecture of RTAs. An argument in favour of RTAs is that their proliferation will lead to global free trade. However, it is not clear how this will occur. The political sensitivities in each bilateral arrangement will vary; excluded sectors from the agreements are therefore also likely to vary, and they will not naturally evolve to an MFN liberalization. The specification of the rules of origin is another such issue (one among many). It is more likely that a series of differentiated agreements will develop with different tariff schedules and rules, including rules of origin. The architecture could look like the famous spaghetti bowl, but with modern Asian characteristics. v) Political considerations The fifth set of risks is political. FTAs are often lauded for their contribution to the political relationship between two economies. Foreign ministers ask to be allowed to use all the instruments available to deepen a relationship. President Bush said that his East Asian initiative will “enhance the already close US ties with ASEAN”. But do FTAs necessarily lead to a net positive contribution to deeper political linkages? They are not without their own costs. The negotiating process can define new tensions — for example, on trade policy questions which would otherwise be dealt with in a multilateral setting and its institutions but which now are examined under the spotlight of the bilateral negotiations. Once the agreement is established, direct conflicts arise over proposals to extend similar benefits to other trading partners. A rule of open accession might be used from the start, but it is more likely that accessions will not be automatically accepted (because of the presence of sensitive sectors and therefore the possibility of carve-outs). Accordingly, it is likely that every accession will need to be negotiated.

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Finally, although FTAs are supposed to create political benefits within their own sphere, they can add to tension outside it. Others, by implication, are not favourites. In the MFN regime, they were equals but now they are discriminated against. This signal risks diminishing the quality of the relationship with non-members, reduces the information flow, impedes the understanding of the motives of the FTA, and raises the ambitions in that field among the non-members which accelerates the whole process.

ASEAN members: hub or spokes? China, Japan, the United States and the EU are making offers to ASEAN, and in at least one case making explicit individual offers to ASEAN members. ASEAN is talking with India and the closer economic relationship members. This focus by big economies on the negotiation of FTAs with smaller economies is a new shock in the region. Is this situation a threat or an opportunity for ASEAN? Can ASEAN capitalize on this situation and become the hub of this set of agreements? If it can, ASEAN might be able to go even further, consolidate the regional agreements into one and so lead the response in the Western Pacific to the FTAA development in the other hemisphere. The problem is that, given the sensitivities in each ASEAN economy, any agreements actually signed might differ among the ASEAN members, who would then assemble around each hub in a series of spokes, rather than in a single agreement. The ASEAN members would become the spokes rather than ASEAN as a whole being the hub. There is already a sign of this outcome in the framework agreement between ASEAN and China, where each economy has the opportunity to list various exceptions, and in the individual initiatives of the member economies. It is also evident in the differences in the bilateral agreements that Singapore has signed with the major partners. For instance, the rules of origin range from simple in the case of AFTA (40 per cent ASEAN content) to more complex in the US-Singapore bilateral agreement, where it runs to 240 pages of text. This outcome also undermines the scenario of regional consolidation led by ASEAN that we have outlined above. As bilateral agreements proliferate, the big economies in the Western Pacific would tussle to become the lead hub in the region, though China would be the favourite to win that particular race. Japan currently has

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less to offer in terms of long-term market growth potential or as a host for FDI from relocating industry. Indeed, the United States may rank above Japan as a partner for ASEAN, particularly as some members have established security ties with the United States. Meanwhile, for now at least, there is a relatively small economic downside for China in its approach to ASEAN. A hub and spoke structure has some important implications for ASEAN. Consider such a structure built around China. ASEAN members may be able to sign as a group, but there are sensitivities among them, as has been evident in the evolution of AFTA. Even if a framework agreement is signed, there may have to be variations for each member economy, for example, in the product coverage of the agreement as it applies to their trade with China. What will be the effect of this architecture on the choices of foreign investors? The hub (China) would be a better choice than the spokes (the ASEAN economies), since market access and sourcing are guaranteed with each spoke. Being in a spoke provides less coverage, so one of ASEAN’s original motivations for stepping into this process with China would not be met; further, China may be even more competitive than individual ASEAN members as a host for FDI. Meanwhile, ASEAN could be fractured by the tensions which would emerge in this scenario. Further progress on AFTA would become even more difficult as the members shifted attention to accelerating their integration with their favourites in the rest of the world, rather than with each other. The tactic of the FTA route appears to offer large rewards, but only if ASEAN can emerge as a hub and subsequently establish a consolidated regional approach. If ASEAN breaks into a series of spokes of other competitive hubs, the scope for regional consolidation is much less and the ASEAN membership is unlikely to be better off than if it had not engaged the tactic of FTAs. The tactic also has implications for ASEAN as a whole and its capacity to deal with the other issues on its agenda, including other regional security matters. Overall, to use an analogy from business, ASEAN members are “betting the firm” when they use this particular tactic. How might this pressure on ASEAN be avoided? Ideally ASEAN should come to an agreement on a common framework of what constitutes a well designed RTA which will maximize the benefits for ASEAN and minimize downside risks already outlined. This framework

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should then be used for all negotiations — ASEAN-wide as well as bilateral. Expectations of formal economic integration in the Americas and the value of responding to that development might be another important consideration in pushing for a common framework of the type just suggested, in order to increase ASEAN’s bargaining position. But in the present environment in ASEAN it is not clear that it is possible to reach agreement on a common framework. Nor is it clear if there is the capacity to define and build a consensus on that solution in ASEAN right now.

Risk management The scenario of the emergence of competitive hubs in East Asia challenges what might have been a more relaxed attitude to FTAs and supports the case for continuing to consider strategies for risk management. Prospects for significant progress in the WTO are important. The challenge is to demonstrate the capacity of the WTO to deliver on liberalization. Rules in the WTO process would help. The Doha Ministerial Declaration endorsed the idea of a new round of negotiations on rules on preferential agreements. Rules are important to set out the principles by which these agreements can be assessed. They serve to codify the principles. Even if the WTO rules are not enforced, they provide a reference point. The rules are necessary, given the risks, but they may not be sufficient. Just like other forms of governance, black letter law is not usually sufficient to avoid a problem. It can never specify all the relevant circumstances. Also, the more it tries to do so, the more scope it creates for abuse, since the exceptions receive implicit endorsement by their failure to be listed. A commitment to work by the principles on which the rules are based is important and that requires leadership, that is, choices which are designed to encourage others to act according to the principles, and which therefore cannot be interpreted as abuse of those principles. ASEAN’s own capacity to reach a coordinated position on these issues is doubtful, given the recent experience in AFTA and given the moves by some of its members to negotiate their own agreements with non-members. But with further analysis, and with contributions from the research community, it may be possible to build a wider coalition in East Asia to take a common position on this issue.

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APEC could have had a role in establishing this leadership, by reiterating its own Osaka Action Agenda principles and by engaging in dialogue on the motivation for the members’ use of FTAs and how members see FTAs contributing to their progress to the Bogor goals. However, the experience of the individual action plan peer review processes, where apparently there has been little debate on the issue of the impact of FTAs, and the statements from the Los Cabos meetings, suggest that APEC will not be effective on this issue. Its wide membership and diverse interests appear to make it incapable of proceeding beyond the same gridlock that binds the review processes in the WTO. A subgroup may make better progress. There is certainly value in transparency. Garnaut (2003) stresses the contribution of transparent and independent policy analysis to previous reform in Australia and suggests that trade policy initiatives with significant implications, including preferential agreements, should be subject to a public inquiry. As noted earlier, the problem of perception can be an important driver of a response to the initiatives of others who negotiate FTAs. Non-members’ concerns about new initiatives can be exacerbated by lack of information. The issue is whether information should be provided before or after agreement has been reached. The rationale for the ex ante provision of information is that non-members’ concerns should be made clear before any agreement is concluded. However, it is more likely that the details of agreements will be distributed ex post. Some people suggest that an important discipline is provided if FTAs are not made exclusive. This condition means that others can join on the same terms as original members. However, the building up of members by gradual accession is more likely to stall free trade than to lead to it (see the discussion on political economy effects above). Ultimately, the key to managing the risks in the proliferation of FTAs is the commitment to MFN application of any agreements reached on preferential terms. This transfer of concessions to favourites into MFN treatment has been part of the ASEAN experience so far, and of the experience of the CER members. The economies involved have credibility on that score; between them, they could develop a position to take to the WTO. Such an approach would make a critical contribution to dealing with key risks in the FTA route to reform, including its efficiency effects, its domestic political economy problems and its proliferation tendencies.

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One way to implement this approach is to include in each agreement a schedule by which the members promise to multilateralize the commitments. Margins of preference would diminish to zero over the time frame specified. Rather than working from within the structure of the agreements, the same outcome could be imposed from outside the agreements. This is probably a more feasible route. Banks (2003) suggests that we should “redouble our efforts to ensure progress in multilateral liberalisation within the WTO and APEC” (p. 17). Garnaut (2003) proposes that, in addition to a resumption of focus on multilateral negotiations, APEC leaders recommit to the Bogor goals and to “make these objectives operational by committing to multilateralise all preferential liberalisation by (the Bogor deadlines) in the context of a successful outcome of the Doha Round” (p. 31).

Conclusions Even a year or two ago, observers could have been relatively sanguine about the boom of interest in FTAs. Progress was much slower than people originally expected, and negotiations seemed to drag on without agreement being reached. Readers may recall the anecdotes about the negotiations between South Korea and Chile which have only just concluded after four years. Some commentators in ASEAN have already questioned the likely progress on China–ASEAN talks. Slow progress of negotiations or even failure to reach FTAs with various major partners would undermine the credibility of FTAs and drive the participants back to the WTO, where at least they could mobilize sufficient forces to reach agreement. Also, business could be expected to realize that FTAs add to the cost of doing business and could therefore push for a different agenda. Agreements which were reached but which imposed costs that were too high would be expected to collapse, as they have done before. Agreements which survived are more likely to be “dirty”, so they are not actually very effective and therefore not very costly, though they may create some systemic problems along the way. In that case, the main costs of bilateralism are the waste of resources in the negotiating process. Economies in the Western Pacific at that time were members of FTAs. But the perception of any risk was small. They were seen as facilitating

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reform programmes leading to more open economies, and there was a track record of multilateralization. Other large economies — Japan and Korea — were committed to the WTO. China had applied to enter the WTO. In effect, the architecture of the region had imposed on FTAs the disciplines discussed above. That situation has now changed. The large economies — not just the United States but also China, Japan and South Korea — are pursuing FTAs. We have reviewed some of the motivations, including their contribution to domestic and international political targets, the mobilization of reform and dealing with new types of impediments in order to intensify trade flows in the region. Meanwhile, there are doubts about ASEAN’s capacity to reach a consensus on trade policy issues. The demonstration effect of the larger economies in the region has been significant, many people seeing China’s initiative as the turning point. While its members might hope otherwise, a hub-and-spoke outcome in which ASEAN members make up the spokes, and not the hub, is a plausible scenario, and one of the worst in terms of a regional trading regime. In this paper, we therefore argue the case for the application of a new set of principles to provide a framework for risk management. We suggest that, in the longer term, failure to do so could not only impose significant economic costs on participants but also diminish the stock of political assets in the region. The stock of such assets contributes to the reduction of risks of disputes and of more significant conflicts among economies there. The diminution of that stock makes it more difficult to respond to the new security agenda in a cooperative and therefore efficient manner. The elements of a risk management strategy include progress in the WTO on liberalization, new WTO rules on regional agreements, higher levels of transparency, and more work on TIFAs. Overall, multilateralization of preferential tariff reductions should be the main benchmark in any new set of principles for risk management in the tactic of trading with favourites.

Notes This chapter was based on a paper prepared for the East Asia Trade Strategy Conference, the Australian National University (ANU), 20 and 21 March 2003. It is an edited version of a paper of the same title which appeared in the Pacific

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Economic Paper series of the Australia Japan Research Centre at the ANU. Earlier versions of part of the paper were presented at the PECC Trade Policy Forum, Vancouver, 11 November 2002 and at the APEC Roundtable, ISEAS, Singapore, 8–9 June 2001. 1

2

3

4

5 6

7

8

See the press release of 5 November 2002, accessed at . Also on the agenda for the United States are FTA negotiations with Central America and Morocco, an exploration with the South African Customs Union and negotiations with Australia. These small group negotiations are proceeding alongside the FTAA negotiations. At present, apart from NAFTA, Singapore and Chile, the United States only has FTAs with Israel and Jordan. Following the presentation of these effects by Pomfret (1997), they include the welfare gains (triangles under both the demand curve and domestic supply curve) from a lower price of the imported product, the loss from the higher expenditure on goods now imported from a high cost supplier, and the gain from the lower expenditure on goods imported from nonmembers. The trading partner gains unambiguously from producer surplus on the new exports. One complication to this story is that the economy offering the tariff concessions to the favoured trading partner loses tariff revenue: the cost of replacing those funds should also be taken into account. Coincidentally, this issue is a matter of current debate in Chile which has been vigorous in its efforts to sign preferential agreements. The literature on the modelling of the adoption of trade agreements assumes governments are motivated by a combination of national welfare and political support — see, for example, Maggi and Rodriguez-Clare (1998), Mitra (2002) and Ornelas (2002). The terms of trade effects are reviewed by Pomfret (1997, ch. 9). Maggi and Rodriguez-Clare (1998) point out that an explanation of trade agreements which focuses on terms of trade effects may not be the whole story since they observe that many small countries tend to reduce tariffs as they enter trade agreements like the WTO. Edmund L. Andrews, “Singapore and US Near a Trade Deal”, New York Times, 20 November 2002. Gary Hufbauer has also been quoted as saying, in the context of a presidential election in November 2004, that the Bush administration prefers FTAs since “they don’t give the same level of grief to the election strategy”, contrasting that approach to the “concessions” that might be required to settle the Doha Round or the FTAA (see Peter Hartcher, “US trades principles of power”, Weekend Australian Financial Review, 16–17 November 2002).

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10 11

12

13

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We now have two interpretations of this acronym: in the Western Pacific version, “F” stands for “facilitation”; in the US version, “F” stands for “framework”, which is referred to as a first step to an FTA. This argument is made by Mattoo and Fink (2002). Some economies may have the capacity to manage all the tracks of trade policy (unilateral, bilateral and multilateral) to minimize the risk of welfare loss, and to manage the consequences of the other political economy effects noted below. This point is argued by policy commentators in Singapore for example. The difficulty is that not all may have that capacity and that actions by a significant member of a small group on the grounds of its own calculus may generate responses in other group members which ultimately diminish the welfare of the initiator. Ornelas (2002) has a model in which signing a preferential agreement lowers the external tariff. This is because the rents generated by the external tariff are shared with foreign firms after the adoption of an FTA. The returns to lobbying for an external tariff are reduced and the political equilibrium shifts. However foreign exporters (or investors in the case of services “exports”) would also be expected to join the domestic political process and argue against falls in the external tariffs. In the Ornelas model, political contributions are made only by domestic firms so this effect is not taken into account. Furthermore, profits made offshore might be affected by the domestic tariff (contrary to a condition in the Ornelas model): for example, home exporters lose from a reduction in the external tariff in the partner market once they have preferential access. They may enter the political economy process in that economy by offering to help resist the reduction in the home external tariff if their counterparts in the partner economy do likewise. In a non-preferential setting, the only way to gain access in the partner market is by a reduction in its external tariff. Exporters in the home economy in that case could offer to support a reduction in the home external tariff to help shift the political equilibrium in the partner economy. If tariffs do not fall in these sensitive sectors, then there is no diversion and the cost associated with trade diversion in that sensitive sector is avoided. It is argued, for example, that agreements involving Korea or Japan will not lead to trade diversion in agricultural markets for this reason. However the overall dispersion of effective protection can still increase, with welfare consequences, and the participation in the FTAs can contribute to the systemic effects which are the theme of this paper.

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References Banks, Gary. “Gaining from Trade Liberalisation: Some Reflections on Australia’s Experience”. Paper presented to the IIBE&L/CEDA Conference on New Horizons in Trade: the WTO Round and Australia’s Free Trade Negotiations, Adelaide Convention Centre, 5 June 2003. Garnaut, Ross. “Requiem for Uldorama: A Plain but Useful Life”. Paper presented to the IIBE&L/CEDA Conference on New Horizons in Trade: the WTO Round and Australia’s Free Trade Negotiations, Adelaide Convention Centre, 5 June 2003. Maggi, G. and A. Rodriguez-Clare. “The Value of Trade Agreements in the Presence of Political Pressures”. Journal of Political Economy 106, no. 3 (1998): 574–601. Mattoo, A. and C. Fink. “Regional Agreements and Trade in Services: Policy Issues“. World Bank Policy Research Working Paper 2852, June 2002. Mitra, D. “Endogenous Political Organization and the Value of Trade Agreements”. Journal of International Economics 57 (2002): 473–85. Ornelas, E. “Rent Dissipation, Political Viability and the Strategic Adoption of Free Trade Agreements”, mimeo, Department of Economics, University of Georgia, 2002. Pomfret, R. The Economics of Regional Trading Agreements, Oxford: Clarendon Press, 1997.

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5 Preferential Trading Agreements in the Western Hemisphere Fernando Gonzalez-Vigil

Introduction A Huge Web of Agreements As of 30th June 2001, there were 26 Preferential Trading Agreements (PTAs) in force within the Western Hemisphere (WH). These are listed in Table 1. From that total, 4 are sub-regional PTAs, each aimed at becoming a common market and are now trying to complete the customs union stage. 1 These are the Central American Common Market (CACM), the Andean Community (before named Cartagena Agreement or “Andean Group”), the Caribbean Community and Common Market (CARICOM), and the Common Market of the South (MERCOSUR). This latter emerged in the early 1990s, whereas the first three are the oldest sub-regional PTAs existing in the WH and all the three modernized and deepened their integration process during the 1990s.2 At the other end of the spectrum, there are 4 PTAs of Partial Scope (PS) in the sense that they are agreements mostly limited to tariffs and

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whereby the phasing out of barriers to merchandise trade is either negotiated on a product-by-product basis or covers all products but it is not complete. These characteristics make them belong to the so-called “old generation” of LAFTA (Latin American Free Trade Association)/ LAIA (Latin American Integration Association) agreements.3 Two of them have the additional feature of being non-reciprocal, that is, least developed parties either do not have to reciprocate the tariff preferences (CARICOM-Venezuela agreement) or are bound by “postponed reciprocity” on an agreed list of products (CARICOM-Colombia agreement).4 In between, there are 18 PTAs (10 bilateral, 7 plurilateral and 1 subregional) that aim to complete the free trade area (FTA) stage only, but differ among themselves in the type of FTA pursued. The most advanced of this kind is the comprehensive (“full”) type of FTA envisaged by the sub-regional North American Free Trade Agreement (NAFTA), which goes beyond the elimination of tariffs and reduction of various nontariff measures (NTM) in merchandise trade. It also includes advance rules and provisions on most disciplines (services, investment, intellectual property, competition policy, government procurement, dispute settlement) needed for the functioning of a common market, although without the commitment to adopt supranational institutions and mechanisms similar to those of the European Union.5 This NAFTA-type of FTA is the current model being pursued elsewhere in the WH through its 11 agreements (6 bilateral and 5 plurilateral). These have been the result of the following initiatives: bilateral negotiations of two NAFTA members (Canada and Mexico) with Chile and Costa Rica, respectively; negotiations of Mexico with three Andean countries and four Central American countries, either bilaterally (with Bolivia and with Nicaragua) or plurilaterally (with Colombia and Venezuela on one side, and on the other with El Salvador, Guatemala and Honduras); Chile’s plurilateral negotiations with the five CACM members; and Dominican Republic’s plurilateral negotiations with CACM countries as well as with CARICOM members.6 On the other hand, there are 7 agreements (5 bilateral and 2 plurilateral) following a LAIA-type of FTA, which provide for the elimination of tariffs and reduction of many NTM in most product lines, and also include rules on some other disciplines which are not confined to merchandise trade. These belong to the so-called “new generation”

1. CACM (Central American Common Market)1 2. Andean Community (thus named since 1996)2 3. CARICOM (Caribbean Community and Common Market)3 4. MERCOSUR (Common Market of the South)4 5. Chile-Mexico 6. Chile-Venezuela 7. CARICOM-Venezuela 8. NAFTA (North American Free Trade Agreement)5 9. Colombia-Chile 10. CARICOM-Colombia 11. Group of Three (Colombia-MexicoVenezuela) 12. Costa Rica-Mexico 13. Bolivia-Mexico 14. Chile-Ecuador 15. Chile-MERCOSUR 16. Canada-Chile 17. Bolivia-MERCOSUR 18. Mexico-Nicaragua 19. Chile-Peru 20. Central America-Dominican Republic

Agreements in Force (as of 30 June 2001) 1961–63a 1969 1973 1995 1992/99b 1993 1993 1994 1994 1995 1995 1995 1995 1995 1996 1997 1997 1998 1998 1999

1969 1973 1991 1991/98b 1992 1992 1992 1993 1994 1994 1994 1994 1994 1996 1996 1996 1997 1998 1998

Year Entry Into Force

1960

Year Signed

FTA, FTA, FTA, FTA, FTA, FTA, FTA, FTA, FTA,

NAFTA-type NAFTA-type LAIA-type LAIA-type NAFTA-type LAIA-type NAFTA-type LAIA-type NAFTA-type

FTA, LAIA-type PS-NR FTA, NAFTA-typec

FTA, NAFTA-typeb FTA, LAIA-type PS-NR FTA, "full" type

Customs Union

Customs Union

Customs Union

Customs Union

PTA Stage Being Purchased

TABLE 1 Preferential Trading Agreements within the Western Hemisphere

Bilateral Bilateral Bilateral Plurilateral Bilateral Plurilateral Bilateral Bilateral Plurilaterald

Bilateral Plurilateral Plurilateralc

Bilateral Bilateral Plurilateral Subregional

Subregional

Subregional

Subregional

Subregional

Format

Preferential Trading Agreements in the W estern Hemisphere 109

2000 2001

2000 2000 2001

2000e 2001f 1999

Year Entry Into Force

1998 1999 1999

Year Signed

FTA, NAFTA-type

FTA, NAFTA-type

PS, LAIA

FTA, NAFTA-type FTA, NAFTA-type PS, LAIA

PTA Stage Being Purchased

Bilateral

Plurilateral

Plurilateral

Plurilateral Plurilaterald Plurilateral

Format

Abbreviations: FTA = Free Trade Area; LAIA = Latin American Integration Association; PS = Partial Scope; NR = Nonreciprocal Notes: 1 The 5 members of CACM are: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. 2 The 5 members of Andean Community are: Bolivia, Colombia, Ecuador, Peru and Venezuela. 3 The 13 members of CARICOM are: Antigua & Barbuda, Barbados, Belice, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago and Montserrat (UK Overseas Territory). Haiti will become a member once it deposits its instruments of accession. The Bahamas, the British Virgin Islands and the Turks and Caicos Islands are associate members. 4 The 4 members of MERCOSUR are: Argentina, Brazil, Paraguay and Uruguay. Bolivia and Chile are associate members. 5 The 3 members of NAFTA are: Canada, Mexico and United States. Before, a bilateral Canada — USA FTA agreement was signed in 1988 an entered into force in 1989. a It entered into force in 1961 for El Salvador, Guatemala and Nicaragua; in 1962 for Honduras and in 1963 for Costa Rica. b The NAFTA-type FTA agreement was signed in 1998 and entered into force in 1999 replaced a bilateral LAIA-type FTA agreement signed in 1991 and entered into force in 1992. c Between Colombia and Venezuela apply the Andean Community goals and rules. d It applies bilaterally with each Central American country. e That year a protocol to implement the agreement was signed. f The process of legislative approvals is yet to be completed. Sources: ASCUP, based on data from IDE — Integration and Regional Programs Department, and OAS Trade Unit

21. CARICOM-Dominican Republic 22. Central America-Chile 23. Brazil-(Colombia/Ecuador/Peru/ Venezuela) 24. Argentina-(Colombia/Ecuador/Peru/ Venezuela) 25. Mexico-Northern Triangle (El Salvador/ Guatemala/Honduras) 26. Canada-Costa Rica

Agreements in Force (as of 30 June 2001)

TABLE 1 (continued ) Preferential Trading Agreements within the Western Hemisphere 110 Fernando Gonzalez-Vigil

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agreements under the LAIA framework, and are those that emerged during the 1990s from bilateral negotiations of Chile with each of the Andean Community members, as well as from the plurilateral negotiations of Bolivia and of Chile, each one with the four MERCOSUR countries, as part of their respective incorporations as associate members of this sub-regional agreement. In all these cases, the new agreements have replaced the respective bilateral PS-PTAs before existing under the LAFTA/LAIA frameworks, and have considerably upgraded the liberalization and cooperation processes between the named parties.7 It thus follows that there are two main types of FTA agreements in the WH, the majority of which have NAFTA as the model sought for. Mexico has been an active and consistent promoter of the dissemination of the NAFTA-type FTA in the WH, particularly through its dealings with Chile and agreements signed with countries in the Andean and Central American sub-regions. Chile, in turn, has implemented a twotier strategy: it has adopted the NAFTA-type FTA for its agreements with countries in the North American and Central American sub-regions and, at the same time, it has used the LAIA-type FTA at the South American level, for its agreements with Andean countries and with the MERCOSUR sub-region. The above, it can be summarized that: a)

The existing web of PTAs within the WH is very big indeed, and their proliferation is a recent phenomena. The overwhelming majority of them (23 out of 26) emerged during the decade of the nineties. b) There is a complex, juxtaposed co-existence of the Common Market (European-inspired) and NAFTA-FTA models of integration within the Andean, the Central American and the Caribbean sub-regions. c) The “Common Market Model” still officially prevails in the two South American sub-regional agreements (Andean Community and MERCOSUR) and with relatively strong supranational institutions in the Andean case. Yet the “NAFTA Model” has already made important inroads within the Andean sub-region. d) There seems to be quite advanced the making of a sort of “Great NAFTA” zone comprising NAFTA, Chile, Central America and Caribbean.

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Other Trade Agreements and Preference Programmes And yet Table 1 does not tell us the whole story. As detailed below, even more PTAs are in the making, both within WH countries and between some of them and countries outside the hemisphere. At the same time, some American developing economies do benefit from non-reciprocal trade preferences given by the two developed countries of the WH as well as by the European Union and Japan. a)

Formal negotiations or pre-negotiation consultations are proceeding for establishing the following PTA agreements within the WH:8 • • • • • • • •

b)

Free Trade of the Americas (FTAA) Andean Community-MERCOSUR CACM-Panama Chile-USA Mexico-Ecuador Mexico-Panama Mexico-Peru Mexico-Trinidad and Tobago

There are also 3 Generalised System of Preferences (GSP)-type of nonreciprocal preferential programs:9 •

•

The Caribbean Basin Initiative (CBI), enacted by the United States in 1983 and subsequently extended in time and expanded in product coverage in 1990 through the Caribbean Basin Economic Recovery And Expansion Act (CBEREA) and in 2000 through the Caribbean Basin Trade Partnership Act (CBTPA). It now applies to 24 CBI countries potentially eligible as beneficiaries subject to specific criteria, and it is to remain in effect until the earlier of two dates: September 30, 2008 or the date the FTAA enters into force. The Andean Trade Preference Act (ATPA), enacted by the United States in 1991. Four Andean countries (Bolivia, Colombia, Ecuador and Peru) are potentially eligible as beneficiaries subject to specific criteria. Compared to CBI, ATPA is a narrower programme in key products coverage and NTM benefits. Andean countries are currently lobbying for an ATPA extension in time and product coverage expansion.

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•

c)

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The CARIBCAN programme, enacted by Canada in 1986. It covers an extensive list of products originated from 18 eligible Caribbean countries or territories, with no subject to specific criteria for qualifying as beneficiaries.

On the other hand, WH countries are also involved in the following preferential arrangements with parties in other regions of the world:10 •

•

•

• •

Regarding Europe, already in force are the Mexico-European Union FTA agreement (2000) and the Mexico-European Free Trade Association FTA agreement (2001). At the negotiation stage are the possible Chile-European Union and MERCOSUR-European Union FTA agreements. Regarding Asia-Pacific economies, there are under negotiation a Chile-South Korea FTA agreement, a Chile-New Zealand FTA agreement and a Mexico-Singapore FTA agreement, while other possible bilateral agreements are at the study or consultation stages. The three NAFTA countries do also each have bilateral FTA agreements with Israel, in force since 1985 in the case of the United States, since 1997 in the case of Canada and since 2000 in the case of Mexico. Under negotiation, there is a MERCOSUR-South Africa FTA agreement. Finally, Andean countries, as well as Central American and Caribbean countries, do also benefit from different nonreciprocal preferential treatment granted by the European Union and Japan through their respective GSP-type programmes.

Origins and Radical Transformations Competing Integration Models and Changes in Leadership Since its modern (post-WWII) origins in 1960, the integration process among Latin American countries harboured two models of economic integration: the FTA model (first adopted by LAFTA) and the Common Market model (first adopted by the CACM sub-regional grouping). The latter has the European integration staged programme as a source of

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inspiration, and calls for going beyond the stage of FTA up to the formation of a Customs Union plus the free circulation of production factors plus the harmonization of trade policy and other trade-related policies, all this with increasing levels of supranational mechanisms and institutional governance. As for the FTA model, its call has been confined to the complete liberalization of trade in goods until NAFTA came into the scene representing, as said before, the pursuit of a comprehensive (“full”) version of FTA encompassing the complete liberalization of most barriers to trade in goods and services, as well as the inclusion of advanced rules and provisions on most disciplines needed for the functioning of a single enlarged market, yet all of this is without the commitment to adopt supranational mechanisms and institutions. During the 1960s,11 concrete steps toward fulfilling those models were either limited in scope and depth (the LAFTA case) or got stalled after rapid initial progress (the CACM case), due to political and macroeconomic instability as well as to the highly protected and inefficient Latin American version of the import-substitution development strategy. LAFTA gave birth to numerous bilateral PS-PTAs (signed by each member with each one of the other members), whereby efforts to liberalize trade were often stalled by an exhausting method of productby-product tariff-cutting negotiations on a limited list of goods usually involving unimportant sectors. It was such that, disillusioned with very slow progress in LAFTA and determined to counterweight its largest members’ (Argentina, Brazil and Mexico) influence, five medium and small countries created the “Andean Group” (1969) and shaped it along the lines of the Common Market model.12 Few years after, the Caribbean economies created CARICOM (1973), following a similar model. Thus, the European-inspired Common Market model reigned in the three sub-regional PTAs existing in the Latin American and Caribbean (LAC) region in the 1970s. Along that decade, the named model made its way to progressively replacing the FTA model embodied in LAFTA as the Integration Vision for the region as a whole. This is because, even though the “Andean Group” and the CARICOM versions of the Common Market model also suffered from some of the same constraining factors which had previously slowed-down the pace of integration in the CACM, all the three sub-regions achieved integration results substantially larger than LAFTA’s and progress was particularly impressive within the “Andean Group”.13 As a consequence, the “Latin America Common

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Market” emerged as a superior integration vision for the region, and so it was made explicit in the Treaty of Montevideo (1980) that transformed LAFTA into LAIA. Unfortunately, economic integration among Latin America countries (LAC) was abruptly reversed during the first half of the 1980s. One of the consequences of the debt-led crisis and the ensuing severe adjustment programmes was that intra-regional and intra- each PTA trade decreased more than total LAC trade, as widespread recessions sharply curtailed import demand and the urgent need for foreign currency focused LAC countries on hastily increasing their primary exports directed mainly to industrialized economies outside the region. Mounting balance of payments deficits made most LAC countries return to protectionist and “managed trade” measures. In such a context, an important buffer role was accomplished by the LAIA Reciprocal Payments Compensation Mechanism in preventing intra-regional trade from an even worst fall.14 But the bad period for the region’s integration process did not last too long. Signs of LAC economic integration revival started in the mid1980s, with the signing of the bilateral Programme of Integration and Economic Cooperation between Argentina and Brazil in 1986. Although it was cautiously initiated under a sector-by-sector approach, the success of some of the ensuing sectoral protocols made both countries upgrade their bilateral integration efforts through the signing of a more embracing Treaty of Integration, Cooperation and Development in 1988.15 This was, perhaps not so coincidentally, the same year of the emergence of the Canada-US bilateral FTA agreement. Later on, with the addition of Paraguay and Uruguay, the “Treaty of Asuncion” signed in 1991 replaced the 1988 Treaty and gave birth to MERCOSUR, the latest Common Market-aimed sub-regional agreement in the WH. The Argentina-Brazil integration process exerted a significant “demonstration effect” all over the American continent. It played an important influential role in the revival of the Andean Group, which started with the approval of the “Quito Protocol” (1987) instructing for the removal of “managed trade” practices and few years after became integral, thanks to the formulation and implementation of the “Strategic Design” approved by the Andean Presidential Council in 1989, which modernized the Andean sub-regional integration process and settled the programme for the accelerated completion of its FTA stage though

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keeping it as part of a more ambitious Customs Union mandate.16 At the same time, integration events between Argentina and Brazil, together with the Canada-US FTA agreement, were also very influential in Mexico’s approaches towards the United States, first to sign in 1987 a bilateral framework agreement which yielded a number of sectoral trade negotiations,17 and then during 1989–90 about negotiating a FTA agreement. Chile was somehow informed early about the Mexico-US talks and lobbied intensively to be advantageously considered in the outcome. In 1990, the United States launched the Enterprise for the Americas Initiative (EAI) embracing three components on trade, investment and debt-relief, respectively. The trade component had as the ultimate goal the progressive building-up of a Western Hemisphere-wide Free Trade Area (WHFTA), through a gradual process consisting in the signing of bilateral FTA agreements with LAC countries judged by the United States as being ready for such an endeavour.18 Among these, Chile was the only other LAC country besides Mexico officially mentioned by the US government when it launched the EAI. That is, America adopted in the EAI a bilateral “hub-and-spoke” approach which meant that the WHFTA build-up would be implemented sequentially and by means of a possibly arbitrary “picking-the-winners” selection method. Such a full incursion of the United States in the integration process among countries in the WH brought about two crucial consequences: a)

b)

The emergence of the WHFTA (later renamed FTAA) as a new economic integration vision for the whole American continent, thus larger in scope than the previous vision confined to the LAC region only. Moreover, the new vision adhered to an FTA model of integration, different to the Common Market model prevailing in all the sub-regional PTAs existing in the named region. The ensuing possible incompatibilities notwithstanding, most LAC countries welcomed the new vision. But the bilateral “hub-and-spoke” approach, then chosen by the United States for building up the WHFTA and which was the official approach until the end of the first Bush administration, generated a proliferation of bilateral and plurilateral FTA-type agreements then conceived as platforms for the projected WHFTA. These agreements destabilized the LAC sub-regions ongoing efforts to configure their respective Customs Unions,

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and made it very difficult for them to find ways to constructively co-exist, as a group, with the announced WHFTA. In this respect, the credibility of the Andean Group countries commitment to the Customs Union goal was severely hurt when Mexico started talking in 1991 with Colombia and Venezuela about a “Group of Three” FTA agreement (which finally was signed in 1994). In the same year, Chile initiated with Venezuela a series of bilateral talks that gradually resulted in FTA-type agreements between that country and each of the Andean Group members.19 A similar path was implemented by Mexico with regards to CACM members during the second half of the 1990s. As for MERCOSUR, although this sub-region managed to stay united before the bilateral moves coming from Chile and Mexico, Argentina and Brazil clearly had different views on how to react regarding the US invitations to bilateralism embodied in its “hub-and-spoke” approach towards the WHFTA.20 All the above notwithstanding, in practice, none of the four Common Market modelled sub-regional PTAs were left abandoned. On the contrary, all four continued working on the formation of their respective Customs Unions and two of them (Andean Community and MERCOSUR) had made considerable progress by the mid-1990s. To the point that Chile had to change its mind and concluded a LAIA-type FTA agreement with MERCOSUR in 1995. Chile has since become an associate member of MERCOSUR. A year later, Bolivia did the same and led the subsequent process of negotiations between Andean Community and MERCOSUR members.21 These developments can be attributed to two sets of factors: a)

b)

With the arrival of the Clinton administration, the United States changed its ways to realize the new hemispheric integration vision, replacing the bilateral “hub-and-spoke” approach for what it can be called the “Western Hemispheric Round” (WHR) approach, which since the Miami Summit of the Americas (1994) which included all countries in the hemisphere except Cuba. Economic and political motivations for economic development and integration advised LAC countries to accelerate and make deeper their sub-regional PTAs at the same time that they participated actively in the construction of a hemispheric-wide

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integration agreement. The motivating rationale is discussed below. The Political and Economic Motivations The already seen proliferation of PTAs within the WH during the 1990s and the somehow astonishing cohabitation of “old” and “new” regionalism in the American continent resist any single-minded attempts at explanation. They have rather been the fabric of a combination of factors, a priori not necessarily congenial among them but which the American countries have so far been able to melt them in a way that, up to now at least, it has made them de facto accomplices of a very vivid and fruitful regionalism exercise. Particularly important among those factors are the following ones:

The impact of market-based economic reforms A radical change in development strategy, from a highly-protected and inefficient LAC version of the import-substitution strategy to an outwardoriented strategy, relying on the private initiative as a growth engine and to this aim implementing deregulation, privatization and the opening of trade and capital accounts (in a context of abundant and cheap availability of foreign savings), brought about a bold unilateral liberalization process. The average tariff in the LAC region has declined from 45 per cent in the mid-1980s to 12 per cent in 1999, accompanied by a sharp reduction of tariff dispersion. At the same time, many NTMs have been either dismantled or adjusted in compliance with Uruguay Round commitments.22 Although market-based reforms appear to explain unilateral liberalization, such reforms by themselves do not necessarily give birth to negotiated liberalization. In fact, most WH countries do not rely solely on unilateral liberalization but rather on a three-tier liberalization approach, which combine unilateral with multilateral and with regionalism-led liberalization measures.23 Additionally, in most LAC countries the economic reform packages were not implemented before the early or even mid-1990s.24 Thus, when trying to explain the revival of PTAs in the LAC region from the mid-1980s onwards and the soon after incursion of North America into PTAs, one has to take into the account the workings of some important regionalism-specific factors.

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Regionalism-specific factors: political motivations There is widespread consensus in the relevant literature25 that countries “feel” the need to get closer and group themselves for reasons far more than just market economic rationale, especially when they are neighbours or countries that belong to the same geographically-shaped region. This is not only due to the need to increase their bargaining power internationally and to ensure for themselves a better and respected place in the world arena, but also because of the usual centripetal forces — rooted in a common heritage, culture and language — that tends to prevail in the long run over centrifugal forces coming from national rivalries or the sometimes dividing influence of powers outside the region.

Regionalism-specific factors: sustainable trade liberalization A reciprocal agreement of circumscribed scope (either regional or subregional or even some important bilateral agreements) usually meets less political resistance and provides a more predictable and controlled environment for sustained liberalization. Not only does it add a compensatory ingredient to import liberalization by fostering reciprocal exports in tandem with reciprocal imports, but it also does so with much less unfavourable effects on fiscal income compared to the liberalization of imports from the world at large. It also reduces the level of protection compared to its pre-agreement level, thereby creating trade, raising competition and promoting specialization within the enlarged market provided by the agreement.26

Regionalism-specific factors: investments attraction Regionalism-led liberalization serves to lock-in open economy policy reforms by allowing for a more balanced mix of positive and negative effects on economic activity, thereby projecting good signals to investors. This is particularly important to investors in modern manufacturing and services activities, because these activities tend to cluster and locate together due to externalities and agglomeration economies. Given such a trend, the enlarged market resulting from the agreement is expected to stimulate inflows of foreign investment by improving the location advantages of the member economies as a group, though not necessarily each of them.27

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Regionalism as a strategic tool for industrialization and competitiveness Economic integration can assist national efforts to diversify export supply and upgrade output towards goods and services with more value-added and longer learning curves. This would be so if the enlarged market induces new domestic investment and improve attractiveness for foreign investors, to the extent that it facilitates greater specialization through economies of scale and agglomeration, enhances competition and accelerates information flows specifically focused on the regional or sub-regional opportunities and potential. As a result, the enlarged market may encourage the emergence of new exports of goods and services as well as of new exporters, incubated under preferential access to similar and more familiar neighbouring markets with shorter learning curves, thus providing a sort of platform for better reaching, less familiar and more exigent markets elsewhere in the world.28 All the above implies that the agreement may function as a tool for a progressive upgrading of the group’s industrialization level and international competitiveness. In summary, when considering the set of five factors combined, it can be hypothesized that: • Before the 1990s, when liberal economic reforms (factor a) were unpopular and trade liberalization (factor c) was not first in the LAC regional agenda, the dominance of political and strategic motivations (factors b and e) was then overwhelming and made the Common Market model appear superior to the FTA model, because this latter does not contemplate common mechanisms to temper asymmetries among participant countries by giving to the weaker countries the means to ensure that their national development and industrialization goals will not be hindered by their stronger partners. • Since the 1990s, the wave of liberal reforms in foreign trade and domestic markets, in the context of rising globalization of production networks and corporate operations, it has not only pushed up the importance of unilateral and negotiated liberalization (factors a and c) but it has also given a great urgency to investment attraction (factor d) and, even more significantly so, it has radically changed the contents of, and the strategies for, achieving the political and economic development motivations of

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nations which underlie factors b and e, yet seemingly without making them step down from the top priority in the country agendas and in the agendas of some their PTAs as well.29 • As a consequence, during the 1990s accelerated liberalization has occurred but administered according to three-tier (unilateral, multilateral, regional) strategies, and the US-led FTAA (and its predecessor the WHFTA) was mostly welcomed. Nevertheless, many LAC countries kept alive (in word at least, though not always in deed) their Common Market-aimed PTAs and strived for “deep” integration (and not just liberalization) at that sub-regional level as a precaution against the potential inequity intrinsic to the FTA model. In short, the fundamental rationale behind the “old” LAC regionalism is not dead but lives transformed in consonance with the imperatives of the “new” and “open” regionalism now reigning in the WH as a whole.30

Main Achievements in the 1990s This section highlights two important sets of achievements of regionalism in the American continent during the 1990s. One being the increased convergence among WH PTAs in terms of rules and work agendas, despite the more or less marked differences in their specific traits. This convergence reflected the general consensus in favour of economic openness and liberalization of trade and investment flows, together with the basic framework for trade negotiations provided by the post-Uruguay Round multilateral system, and it can be attributed to the common challenges posed by globalization as well as to the strong leadership exerted by the United States in the modelling of the “new” regionalism in the Americas, with the ensuing spreading of NAFTA-style FTAs over the continent. Such a convergence not only facilitated the cohabitation of subregional PTAs pursuing the Common Market Model with mostly bilateral PTAs adhering to the FTA Model, but it also triggered synergies among most of the existing PTAs. Their competitive and at times quite tense juxtaposition notwithstanding, have made them all contribute to one another and even more importantly, accomplish a set of achievements in terms of growth and diversification of trade and investment attraction.

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Key Characteristics Common to PTAs in the WH Most of the main PTAs now existing in the WH share among themselves (even those attached to different models of integration) the following key characteristics:

Deep merchandise trade liberalization The coverage of tariff lines is universal or near universal, with some exceptions normally in the agriculture, energy and automotive sectors,31 and the envisaged tariff elimination process is very rapid. Most tariff lines have been totally liberalized upfront, i.e. bringing them down to zero tariff level right from the date the PTA was implemented. For the rest, the scheduled tariff reduction programme is typically completed within a 10-year period. Negotiated exceptions rarely exceed 6 per cent of total tariff lines. This would imply that the bulk of intra-PTA trade within the WH will already be at zero tariff level by around 2005, the agreed year for the approval of the Treaty which will give birth to FTAA.32 At the same time, as mentioned earlier, average external tariffs have sharply declined, though some will remain at levels above 20 per cent especially in some excepted sectors or under special regimes. In addition, many NTMs (e.g. import prohibition, surcharges, and quotes) have also been dismantled upfront. The rest (usually safeguards, some subsidies) are being phased out gradually under agreed PTA schedules or adjusted according to WTO commitments. But, on the downside, rules of origin have become more complex in NAFTA and NAFTA-type agreements, because the absence of common external tariffs makes these rules the main mechanism for preserving the functions of FTAs, and the use of this mechanism is even more crucial when FTAs aim to be comprehensive and/or when there are multiple PTAs with several partners. In turn, more complex rules of origin open the way for discretionary administrative procedures which may have trade and investment diverting effects greater than the relatively high external tariffs.33

WTO — Plus Liberalization of Trade in Services34 Regarding GATS principles, all PTAs contain basic obligations about National Treatment. All PTAs except CARICOM also provide for MFN, either in an unqualified form (Andean Community, MERCOSUR) or with some country-specific exceptions (NAFTA-type FTAs) to be specified

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at federal, state or local levels. All PTAs adhere to the principle of transparency and contain rules on the matter. As for market access provisions, all PTAs cover the four modes of service supply, thereby including investments (commercial presence), though the treatment of natural persons movement varies. All PTAs aim at universal coverage of sectors, though exceptions typically included are air transport, education, health, and also financial services in some NAFTA-type FTAs. The right of countries to have their own domestic regulations is certainly acknowledged, but all PTAs state that such regulations should not include measures restricting the service supply under any mode (though NAFTA-type FTAs tend to narrow this to cross-border supply only); contain obligations to achieve mutual recognition of licences and certifications of service suppliers; prohibit (MERCOSUR) or request notification (NAFTA-type FTAs) of new non-discriminatory quantitative restrictions and, in order to qualify the denial of benefits right, extend (all but MERCOSUR) the definition of beneficiary service supplier to a legal entity conducting substantial business operations in the territory of any WTO member.

More Investment-friendly Legal and Regulatory Regimes35 Coverage of investment chapters or provisions includes, in all PTAs, investments made before the agreement entered into force. The definition of investment is asset-based in most PTAs, including portfolio and intangible assets, with qualifications to avoid coverage of non-investment related (purely monetary or speculative) flows. When defining the investor, citizenship is the basic criterion for natural persons, sometimes including permanent residents. The criterion varies for juridical persons, with the place of incorporation used in NAFTA-type FTAs, and location of management used by MERCOSUR. Regarding principles, all PTAs provide for National Treatment and all but Andean Community and CARICOM provide for MFN treatment as well. There are, however, some important limitations in NAFTA-type FTAs, which usually qualify the granting of those treatments to “in like circumstances” and make reservations for non-conforming measures at federal and sub-federal levels. Yet on the upside, all PTAs include the right of establishment with no admissions provision but often with a list of country-specific

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exceptions. Thus, WH PTAs add a market access component to the protection element traditionally found in investment agreements. Another WTO-Plus feature refers to specific performance requirements, which are prohibited in NAFTA-type FTAs for both goods and services. Although this does not apply to export promotion, foreign aid programmes, state enterprise procurement, and rules of origin content qualifications. Moreover, subsidies or investment incentives can be granted to locate production, provide a service, employ and train workers, construct or expand facilities, carry out research and development (R&D). In summary, based on the characteristics common to current PTAs in the WH, it can be argued that these PTAs are compatible parts of a modern rules-based system and are committed to economic openness and liberalization of goods and services flows. This, together with the obvious incentive provided by the exchanged preferences in market access, have undoubtedly contributed to the trade and investment results examined in the next section. Effects in Trade and Investment Salient trends in the 1990s Table 2 shows that total exports of the Latin American and Caribbean (LAC) region taken as a whole grew at an average annual rate of 8.4 per cent during the 1990–99 period, compared to 6.4 per cent in the 1980s36 and higher than the 7.5 per cent growth rate registered by total exports of the entire WH in the same period. The export performance of each of the five WH sub-regions shown in the table ranged from 11.9 per cent in the CACM to 3.5 per cent in the Andean Community, but in all cases trade growth recovered significantly in the 1990s compared to the 1980s. The same table also shows that total imports grew even faster at 11.3 per cent for the LAC region in 1990–99, compared to only 4.1 per cent in the 1980s and higher than the 8.3 per cent rate for the whole WH in the 1990s. Import growth rates were quite similar among the five WH sub-regions, and in all cases (except CACM) higher than the respective export growth rates. Faster import demand plus the fact that extra-LAC region exports and each of the extra-(sub-regional) PTA exports grew at rates higher than in the 1980s, means that LAC integration had in the 1990s one of the traits which characterize the Latin American version of an “open regionalism” process.37 Such a trait was present in the LAC sub-regional

136,177 119,260 16,917 12.4

Latin America & Caribbean Extra-LA & C Intra-LA & C Intra / Total 4,096 3,388 658 16.3

537,226 307,297 229,930 42.8

NAFTA Extra-NAFTA Intra-NAFTA Intra / Total

CACM Extra-CACM Intra-CACM Intra / Total

632,702 330,379 302,322 47.8

Western Hemisphere Extra-Hemispheric Intra-Hemispheric Intra / Total

1990

7,778 6,192 1,586 20.4

249,332 203,074 46,257 18.6

918,077 485,698 432,379 47.1

1,071,955 496,479 575,475 53.7

1996

11.9 11.3 14.9

8.4 8.0 11.1

8.0 5.2 10.9

7.5 4.4 10.3

Annual Avg. Growth 1990–99*

Exports

6,538 5,897 641 9.8

111,970 95,346 16,424 14.7

676,970 449,865 227,104 33.5

744,149 442,285 301,864 40.6

1990

12,300 10,739 1,561 12.7

247,943 202,019 45,925 18.5

1,053,426 636,292 417,134 39.6

1,213,204 651,197 562,008 46.3

11.9 11.5 15.7

11.3 11.2 11.6

8.2 6.8 10.8

8.3 7.0 10.1

Annual Avg. Growth 1990–99*

Imports 1996

TABLE 2 Western Hemisphere—Total and Intra-Regional Trade, 1990–99 (Millions of US$ and percentages)

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46,402 42,275 4,127 8.9

MERCOSUR Extra-MERCOSUR Intra-MERCOSUR Intra / Total 74,998 57,960 17,038 22.7

45,687 40,996 4,691 10.3

5,439 4,568 872 16.0

1996

5.4 3.8 15.6

3.5 2.9 12.9

3.7 2.9 9.5

Annual Avg. Growth 1990–99*

29,293 25,053 4,240 14.5

17,315 16,139 1,176 6.8

5,526 5,056 469 8.5

1990

* The annual average growth rates of CARICOM were calculated from the 1990–97 period Source: IDB Statistics and Quantitative Analysis Unit, based on official country data

31,751 30,427 1,324 4.2

4,647 4,156 491 10.6

Andean Community Extra-AC Intra-AC Intra / Total

CARICOM Extra-CARICOM Intra-CARICOM Intra / Total

1990

Exports

83,217 66,124 17,092 20.5

36,965 32,067 4,898 13.2

7,708 6,922 786 10.2

11.8 11.1 15.4

8.2 7.6 14.9

8.2 8.0 10.4

Annual Avg. Growth 1990–99*

Imports 1996

TABLE 2 (continued ) Western Hemisphere—Total and Intra-Regional Trade, 1990–99 (Millions of US$ and percentages)

126 Fernando Gonzalez-Vigil

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127

PTAs as well, even in the more vocal followers of the Common Market model viz. the Andean Community and MERCOSUR. This important feature implies that these sub-regions were successful in their efforts to be consistent with the open-economy development strategy then prevailing in the region. At the same time, growth of intra-PTA trade occurred in all subregions and in all cases (intra-PTA exports and intra-PTA imports) higher than total trade growth during the 1990s. The same was true for the entire LAC region and the WH as a whole, given the trade weight of the five sub-regions shown in Table 2. Since there can be little doubt that integration as such has been the main factor behind the significant dynamism of intra-PTA trade, it would be fair to say that “PTA-led trade growth”38 has been an important component of the positive trade performance of WH countries during the last decade. What makes this result even more noteworthy is the fact that it coincided with the positive performance in extra-PTA trade as mentioned earlier. In qualitative terms, the contribution of integration to growth of manufactures exports, which was considerably higher than total export growth (particularly in NAFTA, Andean Community and MERCOSUR) has been very significant. As a result, the share of manufactures in intraPTA trade increased during the 1990s.39 The increase was very sharp in the case of Mexican exports to NAFTA. In the Andean Community and MERCOSUR, it underlined the dominant manufactures composition of their respective intra-exports, a truly remarkable feature given the dominant primary composition of the total exports of most of their member countries (Table 3). Due to the dominant weight of the US market, most of the manufactures exported by LAC sub-regions have traditionally gone to the WH. This has been the case throughout the 1990s except for the CACM (Table 4). But the novel trend has been that, within the WH, the LAC region has gained importance as a destination market for the export of manufactured goods of not only all of the LAC sub-regions (the CACM being the exception again) but for those of NAFTA as well. When total exports are considered and Mexico is excluded from the total LAC figure (as in Table 5), a similar trend regarding the rising importance of LAC as a destination market applies, and this time without sub-regional exceptions.40 Such a trend was only partially reversed during the crisis years of 1997–99.

4,495 3,854 641 51.1

22,562 20,347 2,215 59.1

Andean Community Extra-AC Intra-AC % manufactures intra-trade

MERCOSUR Extra-MERCOSUR Intra-MERCOSUR % manufactures intra-trade

Source: United Nations Statistics

13,032 2,624 10,408 49.4

Mexico Extra-NAFTA Intra-NAFTA % manufactures intra-trade

1990

37,516 26,695 10,821 59.1

9,187 6,350 2,837 56.7

80,304 9,868 70,436 80.6

1996

9.3 4.6 30.2

10.3 5.9 25.9

32.5 22.5 34.5

Annual Avg. Growth 1990–97*

Exports

20,553 18,339 2,215 51.6

15,216 14,574 641 51.1

32,221 7,654 24,567 82.3

1990

TABLE 3 Intra-Regional Trade of Manufactured Goods, 1990–97 (Millions of US$ and percentages)

70,444 59,623 10,821 59.1

30,705 27,868 2,837 56.7

76,997 16,061 60,936 85.5

1996

22.4 21.2 30.2

13.5 12.8 25.9

16.6 15.0 17.1

Annual Avg. Growth 1990–97*

Imports

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Preferential Trading Agreements in the W estern Hemisphere TABLE 4 Destination of Manufactured Exports (Percentage of total manufactured exports) NAFTA

CACM

1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99 Western Hemisphere Intraregional European Union East Asia1 Rest of W orld

50.3 45.1 21.4 15.1 13.2

55.5 48.8 16.0 19.1 9.5

49.0 43.2 16.1 14.9 10.0

95.0 48.7 3.2 0.3 1.5

Andean Community

92.4 45.3 5.4 0.4 2.3

92.3 46.9 4.4 1.4 1.8

MERCOSUR

1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99 Western Hemisphere 70.5 Intraregional 14.5 European Union 15.2 East Asia1 5.6 Rest of W orld 8.8

83.6 38.5 9.0 3.1 4.3

81.9 32.6 9.7 3.4 5.1

52.2 10.5 22.5 10.8 14.5

70.3 34.2 16.2 6.0 7.5

66.0 26.7 17.5 6.8 9.7

1

Hong Kong, Indonesia, Korea, Japan, Malaysia, Philippines, Singapore, Taipei-China and Thailand Source: IDB Integration and Regional Programs Department

Another interesting feature of LAC sub-regional PTAs is the concentration of their respective exports in the two largest member economies of each PTA. During the 1990s, Jamaica and Trinidad & Tobago on average accounted for almost 80 per cent of total CARICOM exports while Colombia and Venezuela on average accounted for about 40 per cent of intra-Andean Community exports. In the same period, Argentina and Brazil dominated MERCOSUR trade.41 With respect to investment flows, the positive signals given by economic reforms and open regionalism have increased the attractiveness of both the Andean Community and MERCOSUR countries as recipients of FDI inflows during the 1990–97 period. However, FDI inflows to the Andean Community decreased sharply in the crisis years that came after (Table 6). Within the Andean Community, the main recipients of FDI inflows during the 1990s have been Colombia, Venezuela and Peru; and within MERCOSUR, it was Brazil and Argentina. In explaining the preferred country locations of manufacturing FDI, the size of the market

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Fernando Gonzalez-Vigil TABLE 5 Western Hemisphere — Direction of Trade (Percentage of total exports or imports by region) Exports to

NAFTA Andean Community CARICOM CACM MERCOSUR Latin America & Caribbean1 NAFTA Western Hemisphere European Union East Asia2 Rest of W orld

Imports from

1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99 1.4 0.5 0.6 1.4 4.9

1.6 0.4 0.8 2.3 6.4

1.7 0.4 0.8 2.1 6.1

2.5 0.3 0.5 1.8 5.8

2.1 0.3 0.7 1.3 5.0

1.9 0.3 0.7 1.4 4.9

42.8 47.7 20.7 17.7 13.9

47.1 53.5 15.8 20.1 10.6

48.0 54.1 16.8 17.8 11.2

33.5 39.3 18.2 24.5 18.0

39.6 44.6 15.9 25.2 14.3

38.5 43.4 16.5 25.0 15.1

Exports to

Imports from

CACM

1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99

Andean Community CARICOM CACM MERCOSUR Latin America & Caribbean1 NAFTA Western Hemisphere European Union East Asia2 Rest of W orld

0.8 1.1 16.3 0.2 21.4

1.7 0.7 20.4 0.2 26.5

1.5 0.7 20.9 0.2 26.7

9.2 0.1 9.8 2.6 24.0

6.5 0.3 12.7 2.1 24.9

6.6 0.4 12.5 2.3 25.0

45.3 66.7 25.1 3.3 5.0

43.2 69.7 23.8 2.4 4.0

44.6 71.3 21.4 3.3 4.0

46.2 70.2 13.6 8.6 7.6

52.5 77.4 9.9 6.8 5.9

52.1 77.1 10.0 7.6 5.3

Exports to

Imports from

CARICOM

1990 1996 Avg. 1990–97 1990 1996 Avg. 1990–97

Andean Community CARICOM CACM MERCOSUR Latin America & Caribbean1 NAFTA Western Hemisphere European Union East Asia2 Rest of W orld

1.1 10.6 0.1 1.3 14.1

2.2 16.0 0.4 1.0 21.5

2.0 13.9 0.5 1.6 19.7

4.8 8.5 0.5 3.7 17.8

7.8 10.2 0.7 2.1 21.4

5.8 9.2 0.7 2.3 18.7

40.8 54.9 21.6 2.0 21.6

44.0 65.5 19.1 2.4 13.1

41.8 61.5 20.8 2.2 15.6

49.0 66.8 17.4 5.6 10.1

49.8 71.2 16.0 7.0 5.7

50.9 69.6 16.0 7.4 7.0

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Preferential Trading Agreements in the W estern Hemisphere TABLE 5 (continued ) Western Hemisphere — Direction of Trade (Percentage of total exports or imports by region) Exports to

Imports from

Andean Community 1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99 Andean Community CARICOM CACM MERCOSUR Latin America & Caribbean1 NAFTA Western Hemisphere European Union East Asia2 Rest of W orld

4.2 0.9 1.6 2.8 13.7

10.3 1.1 1.7 3.6 20.7

9.8 1.4 1.8 3.6 20.6

6.8 0.4 0.2 8.7 19.1

13.2 0.3 0.3 7.2 24.3

11.0 0.4 0.3 7.7 22.4

49.0 62.7 19.1 5.1 13.1

49.3 70.0 15.9 4.5 9.6

47.3 67.9 16.5 4.6 11.0

42.7 61.8 23.8 7.5 6.9

42.2 66.5 18.7 9.8 6.4

41.8 64.2 19.1 10.4 6.2

Exports to

Imports from

MERCOSUR

1990 1996 Avg. 1990–99 1990 1996 Avg. 1990–99

Andean Community CARICOM CACM MERCOSUR Latin America & Caribbean1 NAFTA Western Hemisphere European Union East Asia2 Rest of W orld

3.1 0.3 0.3 8.9 15.3

4.2 0.2 0.3 22.7 31.8

4.4 0.2 0.4 19.5 28.5

3.3 0.2 0.0 14.5 20.5

2.4 0.1 0.0 20.5 25.1

2.3 0.1 0.0 19.5 24.2

23.9 39.2 31.8 11.1 17.9

17.4 49.2 24.4 10.9 15.5

19.3 47.8 26.8 10.0 15.5

22.3 42.8 22.6 9.1 25.4

24.5 49.6 26.4 10.5 12.1

24.6 48.8 26.4 10.9 13.9

1

Excludes Mexico Hong Kong, Indonesia, Korea, Japan, Malaysia, Philippines, Singapore, Taipei-China and Thailand Source: IDB Statistics and Quantitative Analysis Unit, based on official country data

2

has continued to be the dominant motivation. However, in the 1990s, the market sought for has increasingly been not just the country’s domestic but also the extended market provided by PTAs. Countries that benefited most out of it were those that implemented a mix of trade policies and macroeconomic policies (exchange rates, in particular) specifically aimed at grasping the manufacturing FDI-attraction advantages of such extended markets. This seems to be the case of

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Fernando Gonzalez-Vigil TABLE 6 Share of FDI Inflows by Western Hemisphere Subregion Subregion

1990

1997

1999

NAFTA Andean Community MERCOSUR CARICOM CACM

91.7 1.8 4.6 0.6 0.1

71.5 7.9 15.3 0.9 0.2

80.3 2.0 14.2 0.4 0.2

Source: OAS Trade Unit, based on UNCTAD data

TABLE 7 FDI Ouflows (Millions of US$ and Shares)

Region World Developed countries Developing countries Africa Latin America and the Caribbean Developing Europe Asia The Pacific Central and Eastern Europe

1990

1997

198,143 95.8% 4.2% 0.5% 0.3% 0.0% 3.9% 0.0% 0.0%

799,928 91.5% 8.2% 0.1% 3.4% 0.0% 4.7% 0.0% 0.3%

1991–99 % Change 303.7% 285.6% 688.5% –2.8% 3996.7% 376.3% 850.0% 6727.0%

Source: OAS Trade Unit, based on UNCTAD data

Colombia and Venezuela in the Andean Community sub-regional market, and of Brazil in the MERCOSUR market. Whereas privatization programmes (especially public utilities and services) have been weighted relatively more in explaining the FDI inflows to Argentina and Peru.42 Simultaneously, the economic reforms and open regionalism have also allowed for LAC to become the developing region with the highest increasing rate in FDI outflows (Table 7), most of which have been invested within the same LAC region, very often in order to take advantage of the opportunities given by privatization and deregulation measures.43

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Some relevant implications There can be no doubt that the reviewed trends referring to the manufactures composition of intra-PTA exports and to investment flows are, to some extent, the result of trade and investment-diverting effects typical to most PTAs. Available studies point clearly to restrictive rules of origin as the main source of such effects in the case of NAFTA,44 whereas for MERCOSUR there has been a debate on the matter. While relatively high tariff preference margins have been signalled as the main source of similar diverting effects in MERCOSUR, other studies have found evidence of important trade creation effects.45 But the aforementioned trends do show that LAC PTAs have performed in the 1990s as effective tools for their members’ objectives of industrialization and economic development. This strategic contribution explains why LAC countries have deepened their sub-regional integration efforts instead of neglecting them, their interest in the new hemispheric integration vision notwithstanding. The concentration of trade and investment flows registered at the level of each PTA (intra-PTA flows included) in a few member countries, raises concern about the possible devastating effects of the bilateral “huband-spoke” approach to free-trade in the WH. These concerns are in terms of the ensuing realignments in the location of investments and in the directions of trade within the WH as well as the possible survival of sub-regional agreements.

The FTAA Process In all fairness, what it is really going on in the WH is a “FTAA cum summitry” process, as Richard Feinberg correctly defines it when he explains “from its inception the FTAA has been imbedded in the broader process of the summits of the Americas (…). Free trade is just part — albeit a critical part — of the comprehensive economic, social and political mandates issued at the Americas’ summits (…) the trade initiative is deeply imbedded in a much broader hemispheric agenda”.46 This agenda was set out in the Americas Plan of Action approved at the First Summit of the Heads of State and Government (Miami, December 1994), which points out four fundamental objectives which are: preserving and strengthening the community of democracies; promoting prosperity through economic integration and free trade;

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eradicating poverty and discrimination; and guaranteeing sustainable development and conserving the natural environment for future generations. In order to implement the plan, 23 cooperative initiatives with over 150 action items were included: 8 initiatives dealing with democracy, 12 with poverty and 3 with sustainable development. All together amounting to form a truly strategic agenda for interdependence and cooperation for development in the WH,47 whose umbilical ties with the trade initiative become more visible when, in their Third Summit (Quebec, April 2001), the leaders of the Americas adopted a “democratic clause” where they made the commitment to a democratic government a condition to participate in the summitry process, a condition that would likely apply to the FTAA (sub-) process as well.48 Yet the scope of this paper, focused on PTAs, justifies the concentration of the discussion that follows on the trade component (FTAA) of such a comprehensive hemispheric agenda. It is useful to distinguish three phases in what has happened thus far since the FTAA process was launched at the First Summit of the Americas.49 First, there was a preparatory phase, elapsed from December 1994 until the Second Summit (Santiago, April 1998), during which the mechanisms for the negotiations were implemented. These being the Ministerial meetings; a Trade Negotiations Committee (TNC); 9 Negotiating Groups (on market access; agriculture; investments; services; government procurement; intellectual property rights; subsidies, antidumping and countervailing duties; competition policy; and dispute settlement); 3 non-negotiating committees (on smaller economies, participation of civil society, and electronic commerce); and a Tripartite Committee, in charge of providing technical and logistical support to the negotiations and composed by the Organization of American States (OAS), the Inter-American Development Bank (IADB) and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). The Ministers responsible for trade exercise the ultimate oversight and management of the Negotiations, while the TNC, composed of the Vice Ministers Responsible for Trade, plays a central role in managing the negotiations and has the responsibility of guiding the work of all the groups and committees aforementioned. Their work, along with the preparatory phase, generated comprehensive databases and

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compendiums of laws and regulations in countries and PTAs of the WH, as well as other background information and technical analysis useful for the upcoming negotiations. Then came the second phase, from April 1998 until the Third Summit of the Americas (Quebec, April 2001), where the substantive negotiations actually started, and the main achievements can be summarized as follows: the preparation of the first complete draft of the FTAA agreement (with brackets where no consensus was reached) for it to serve as the text for negotiations thereafter; the decision to implement 18 specific business facilitation measures, 8 of these customs-related and 10 transparency-related;50 and significant increases in the supply of traderelated technical cooperation and capacity-building activities, in the face of a growing demand for them propelled by the ongoing and programmed negotiations. Since the Third Summit, the FTAA process has entered into its third phase, where the “real action” will likely take place.51 Early in April 2001, the Sixth FTAA Ministerial Meeting held at Buenos Aires adopted the first complete draft of the FTAA agreement, which was released to the public in a demonstration of transparency and communicative attitude towards civil society, and instructed the TNC to prepare (between May 2001 and October 2002) a second version of the draft agreement to eliminate the brackets to the maximum extent possible. At the same time, Ministers agreed on a deadline for the negotiations on Market Access and instructed the related negotiating groups to submit their recommendations on methods and modalities to the TNC by April 1, 2002 and to start these negotiations no later than May 15, 2002. They also established the Technical Committee on Institutional Issues (TCI) with the mandate of making recommendations on the overall architecture of the FTAA agreement, in view of the preparation of the chapters on general and institutional aspects to be included in the second version of the draft. All this was endorsed several weeks later by the Leaders of the Americas in Quebec. Besides adopting the “democratic clause” already mentioned and calling for the drafting of a “democratic charter”, they agreed that the FTAA negotiations should be concluded no later than January 2005 and for the FTAA Treaty to be put in force no later than December 2005. They also restated that the agreement should be comprehensive, WTO-consistent and balanced. Closely linked to this

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latter concept, the Leaders stressed the importance of taking into account the differences in size and development levels of the participant economies in the agreement, and requested the Tripartite Committee to consider the technical assistance needs related to FTAA issues of the smaller economies. As for the procedure to reach the agreement, the Leaders confirmed that it should constitute a single undertaking, i.e. a single package where nothing is agreed until everything is agreed. In this regard, it is very pertinent to note that the Ministers had in Buenos Aires stated the right of any delegation to present proposals on any issue it deems relevant, which seems to pave the way for the inclusion in the bracketed draft of contentious issues such as labour and environmental standards. FTAA Prospects: some desirable outcomes As discussed earlier, the “real action” in the FTAA process is just starting. There are, in principle, various sorts of prospective exercises that could be applied in order to figure out the possible alternative scenarios ahead.52 But, for the purposes of this paper, it seems preferable to limit the reflections on the matter in a way which is closely linked to the issues analysed in the previous sections of the paper. This would mean examining the potential outcomes in the FTAA process from two specific angles. First, the desirable incremental contribution that FTAA should bring to the WH as a whole, on top of the important contributions already made by the existing PTAs during the 1990s. Second, the difficult interaction between the hemispheric free trade zone being built-up and the sub-regional PTAs adhering to a Common Market model in the WH (as previously discussed).

FTAA’s desirable value-added Given the undeniably substantive contribution made by the existing PTAs within the WH to the progress already achieved in the Americas during the 1990s, in terms of accelerated liberalization, convergence of rules and disciplines, and growth and diversification of trade patterns and investment attraction, what added value should be expected from the FTAA? There is no unique answer but many possible ones … What may be deemed as a desirable outcome varies depending on the relative levels of development of the participant economies, their bargaining capabilities in the negotiations, the

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technical skills and ideological inclinations of the relevant actors, and so forth. Taking into account the opinions of the business community and experts on the subject, the list of desirable outcomes from the FTAA are as follows:53 • On market access: simultaneous yet differentiated tariff reduction schedules according to relative development levels; consolidation of ATPA and CBTPA programmes, with enlarged product coverage; effective dismantling of non-WTO conforming NTMs and equitable treatment of the remaining according to their impact on trade, production and factors intensity; a simple and transparent rules of origin regime, with non-discretionary administrative procedures. • On investment, services and competition disciplines: to agree that the provisions on services should not be discriminatory towards non-member economies, similar to what has already been decided with regards to the provisions on investment; to reduce remaining divergence in the most relevant rules and disciplines (especially on investment regulation, all modes of service supply, enforcement of intellectual property rights and related technology development issues); cooperation in the development of competition policy laws and agencies across the hemisphere, and concrete steps towards the inclusion of a criteria to deal with trans-border effects in competition rules and their enforcement procedures. • On business facilitation: effective concerted measures to remove obstacles for a hemispheric-wide exploitation of business opportunities by the private sectors of all the participant economies. • On technical and economic cooperation: to guarantee a sustained commitment to trade and investment liberalization through effective efforts in human, physical and institutional capacitybuilding. • More generally: to provide for a decisive “lock-in” of market, corporate and public policy reforms, by raising the potential benefits of liberalization and economic integration, supported by a lessening of political costs and social imbalances through the other components of the Summitry Plan of Action for the Americas.

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FTAA and sub-regional PTAs Previously, it was explained that the tensions between the Common Market-type sub-regional PTAs and the projected hemispheric FTA subsided from 1994 onwards, when the US approach changed from the bilateral “hub-and spoke” to the “Western Hemispheric Round” (WHR) one. Although the lack of fast-track authority was a factor explaining such a change, credit should be given to the Clinton administration for adopting an approach such as the WHR as well as allowing the FTAA Ministers to agree that the FTAA can co-exist with “FTAA-Plus” subregional and bilateral PTAs of the WH.54 The option taken by most LAC countries under such scenario has been one in favour of the co-existence; i.e., to participate actively in the FTAA negotiations and, at the same time, to deepen their existing PTAs (some of the sub-regional Common Market-type included) in order render them “FTAA-Plus”, due to the positive role these are playing as tools for industrialization and diversification of trade and investment flows. A co-existence posing quite a number of difficult political and technical balancing acts, and which sustainability will be crucially tested during the last rounds of FTAA negotiations.55 In fact, tensions are already arising again as a consequence of recent events signalling the return of the “hub-and spoke” approach. In July 2000, Chile applied for MERCOSUR full membership and the immediate reception to this request was very warm, but MERCOSUR stopped considering it when Chile and the United States started to negotiate a bilateral FTA in December of that year.56 In April 2001, the Presidents of Colombia, Mexico and Venezuela convened to give a new impetus to the “Group of Three” agreement, a move that perhaps would increase doubts about the Andean Community’s capability of consolidating its still imperfect Customs Union. In this context, the possible options seem desirable: • That the US continues to give top priority to the “WHR” as the main approach for the building-up of FTAA. • If the US feels it necessary to complement the “WHR” negotiations with “hub-and-spoke” inroads, it does so (either bilaterally or, even better, together with its NAFTA partners) through FTA negotiations with each of the Common Market-type sub-regional agreements existing in the WH.

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• This form of proceeding would not only cause less trade and investment-diverting effects negative for LAC sub-regions than the bilateral “hub-and-spoke” approach, but it could also work in favour of the progressive networking of a pro-industrialization division of labour within the WH. • In the event that such a procedure may raise concern in Mexico about the ensuing potential losses of its NAFTA-status privileges to countries such as Argentina and Brazil, North American partners could always have the possibility of deepening their NAFTA agreement through many devices, including the incorporation of more Customs Union-type instruments and regulatory procedures.57

Conclusion A PTA such as FTAA will unquestionably have enormous repercussions on the world economy at large. On prospective member economies of the Americas, the effects will greatly depend on what the ongoing negotiations will finally produce in terms of value-added issues that are being negotiated. These effects will also greatly differ depending on what approach — “WHR” or “hub-and-spoke” — will dominate the process. To a large extent, the same applies about the possible effects of FTAA on non-member economies. Since, in this case, there is also the additional and fundamental question of the level of discrimination towards non-members, and given that the European Union and other major players in the global arena certainly have the means to defend their interests at home and worldwide, the multilateral trading system has the imperious task of quickly adopting or updating the preventive measures aimed at duly protecting the world welfare.58 In such a view, WTO should constructively overcome the vagueness nested in Article XXIV, particularly in order to improve the operational review process with the help of multilaterally agreed criteria having strong empirical foundations. There is also a need for better multilateral guidelines to broaden the common base among PTAs, so reduce the costs caused by the “spaghetti bowl” of discrepant arrangements in the WH and elsewhere in the world.59 The above obviously applies also to non-FTAA individual members of APEC. But for APEC as a whole, FTAA should not represent a problem.

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Open regionalism can co-exist with PTAs, e.g. APEC has no problems with the European Union so far. But the novelty, of course, is the partially juxtaposed memberships of FTAA and APEC. Given this, it would be desirable that: • FTAA should contain rules of origin that are less restrictive than NAFTA’s, as well as investments and services chapters that are the least discriminatory. • APEC could agree on principles about its members’ PTAs that keep them compatible with open regionalism.60 • In view of some APEC members recent interest on establishing PTAs with WH countries, APEC may effectively promote such trans-Pacific negotiations with LAC sub-regional agreements instead of bilateral ones. • APEC could actively encourage trans-Pacific initiatives of widescope membership, such as the recent EALAF (East Asia and Latin America Forum) and the ADB-IDB co-sponsored TBN (Trans-Pacific Business Association) and LAEBA (Latin America/ Caribbean and Asia/Pacific Economics & Business Association).

Notes The author expresses his gratitude to Carlos Kuriyama Shishido for his valuable assistance in the preparation of this paper’s tables, as well as to his colleagues Barbara Stallings, Robert S. Scollay and Mercedes Araoz for their helpful comments in the preliminary version. 1

2

3

The Inter-American Development Bank (IDB) publishes a periodical, Integration and Trade in the Americas, which contains background information and updated briefings on progress in these issues and other PTAs of WH countries (see, for instance, the December 2000 issue, part II, pp. 28–54). In addition, the IDB Institute for the Integration of Latin America and the Caribbean (INTAL) publishes a wide range of research reports, newsletters and reports on PTAs in the WH (see the IDB-INTAL website quoted in the References). For a recent review made at INTAL, see Taccone (2001). For a recent review of sub-regional PTAs in the WH aiming at becoming Customs Unions, see Salazar-Xirinachs and Wetter et al. (2001). The Treaty of Montevideo of 1980 transformed LAFTA (which was born in 1960) into LAIA, a semi-regional framework for integration composed by 11 member countries: Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador,

Preferential Trading Agreements in the W estern Hemisphere

4 5 6

7

8

9 10 11

12 13

14

15

16 17

141

Mexico, Paraguay, Peru, Uruguay and Venezuela. That is, among LAIA members there are all the five members of the Andean Community, all the four members of MERCOSUR and one of the NAFTA members. For a recent review of PS-PTAs in the WH, see Steinfatt (2001). For a complete analysis of NAFTA, see Hufbauer and Schott (1993). For a recent review of NAFTA-type FTA agreements in the WH, see Robert (2001a). LAIA (or ALADI, its acronym in Spanish) inherited from its predecessor (LAFTA) a huge number of mostly bilateral PS-PTAs. The LAIA not only tried to make these bilateral PS-PTAs to converge but it also stimulated the coverage of trade-related matters left aside in the old PS-PTAs. As a result, during the 1980s a first version of “new generation” agreements (named in Spanish Acuerdos de Complementacion Economica — ACEs) started to emerge, 13 of which were already signed in 1990. See ALADI (1990) p. 1. Then, during the 1990s emerged the second version of ACEs, FTA-oriented in tariff matters and included many of the relevant trade-related disciplines, which are those listed in Table 1. Devlin and Estevadeordal (2001), Table 1 p. 29. Salazar-Xirinachs (2001b), Table 1, p. 3. Steinfatt (2001), pp. 109–15. Salazar-Xirinachs (2001b), idem. See Salazar-Xirinachs and Wetter et al. (2001) for a summary on the origins and initial decades achievements of CACM (pp. 46–48), the Andean Community (pp. 56–57) and CARICOM (pp. 66–68). Moran (1970), pp. 20–22. For a detailed account of the progress achieved by the “Andean Group” during its first ten years, see a report issued in 1970 by its secretarial board, then named Junta del Acuerdo de Cartagena and today named Secretaria General de la Comunidad Andina, thus quoted in the references as Comunidad Andina — Secretaria General (1970). This has been recently complemented by Maldonado (1999). That mechanism allows each LAIA member to make foreign currency payments only for the difference between its imports from and exports to another LAIA member when the respective bilateral trade account is in deficit, and contemplates payment facilities when the deficit accumulates over the years. Argentina and Brazil signed between them 24 sectoral protocols during 1986– 90 and in their 1988 Treaty, they announced the decision of becoming a Common Market. See Magariños (2001), p. 2. Gonzalez Vigil (1994), pp. 217ss. Schott (1989), p. 47.

142 18

19

20 21

22 23 24 25 26 27 28 29

30

31 32 33

34

35

36

37

38

Fernando Gonzalez-Vigil

For those LAC countries which were judged by the US as not yet ready, the EAI envisaged a sort of preparatory stage through the signing of framework agreements establishing consultative fora and mechanisms in order to discuss trade and investment matters of mutual interest. By early 1992, the US had already signed 16 of those framework agreements with 31 countries in the LAC region. See United States (1992), p. 8. This official document offers an account of the progress in the implementation of all EAI components, from the US point of view. For an analysis of the EAI from a LAC perspective, see SELA (1991). Gonzalez Vigil, F and L. Abugattas and M. Cuba (1992), p. 130; see also Gonzalez Vigil (1994), pp. 246–49. Bouzas (1996), p. 69. For an analysis of the main events and the results of LAC countries integration efforts in the 1990s, see CEPAL (2001b), pp. 173–200. CEPAL (2001a), p. 32 and Table 2.1 Devlin and Ffrench-Davis (1998), pp. 9–11. Edwards (1998), pp. 9–10; see also Stallings (2001), p. 9. See, for instance, Serra et al. (1996). Devlin and Ffrench-Davis (1998), p. 14. Venables (1999), pp. 16–17. Ffrench-Davis (1980), pp. 41–48. For a conceptual discussion on how development objectives and free trade goals interact each other as basic ingredients of the economic and political rationale for regionalism, see Gonzalez Vigil (2000), pp. 5–7. For an illustrative contrasting of “new” with “old” regionalisms in the LAC region, see Devlin and Estevadeordal (2001), pp. 3–9; 19–20. Mackay and Robert and Plank-Brumback (2001), pp. 127–28. Devlin and Estevadeordal (2001), p. 11 and Figure 3. For a good comparative analysis of rules of origin in NAFTA, Group of Three and the Mexico-Costa Rica bilateral FTA, see Garay and Estevadeordal (1996), pp. 12–20 and Appendix. The following three paragraphs on Services trade are largely based on Stephenson (2001a) and (2001b). The following four paragraphs on Investment rules are largely based on Robert (2001b) and (2001c). Figures for the eighties are not shown in Table 2 but are based on the same data sources. For a useful comparative analysis of the original, Asia-Pacific version of open regionalism with the version implemented in the Latin American region, see Kuwayama (1999). Or “agreement-led growth in trade”, using the words of Devlin and FfrenchDavis (1998), p. 7.

Preferential Trading Agreements in the W estern Hemisphere 39

40 41

42

43 44

42

46 47 48 49

50

51

52

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In addition, it seems that the share of intra-industry trade in total intra-PTA trade, of manufactures especially, has also tended to increase. For evidence on the matter in the Andean Community, see Echavarria (1998). For similar findings, see Kuwayama (2001), pp. 1–6 and Table 1. Steinfatt and Contreras (2001), pp. 16–17, 22–24. For earlier evidence of the country concentration in the LAC region trade flows, see ALADI (1991). For data and case study evidence supporting the statements in this paragraph regarding the Andean Community countries, see Gonzalez Vigil (2001b), pp. 29–37 and Annexes; and regarding MERCOSUR countries, see Chudnovsky et al. (2001), pp. 5–22. See CEPAL (2001c), pp. 39–52, 57–86. Gilmore (2000), discusses in pp. 395–98 the evidence showing how NAFTA’s stinging rules of origin have diverted trade and investment away from third countries in favour of Mexico. See also Estevadeordal (1999). Yeats (1997) considers tariff preference margins in MERCOSUR as high as discussed in pp. 18ss. He arrives at the conclusion that much of the increase in its intra-exports has been in the products which have not been successfully exported to the third countries, such as automobiles. Nagarajan (1998) has a different view, and in pp. 16–24 shows that intra-MERCOSUR imports are dominated by products which embody standard or intermediate technology, whilst its imports from industrialized countries, which have also grown strongly, continue to be composed mostly of high technology products. At their turn, Estevadeordal and Goto and Saez (2000), with the help of a Krugman-type trade model based on an imperfect competition and product differentiation, conclude in p. 33 that MERCOSUR integration leads to trade creation and that the welfare of members and non-members increases. Feinberg (2000), p. 4. Salazar-Xirinachs (2001a), pp. 294–95. Robert (2001d), p. 12. This paragraph, plus the following two, are largely based on Salazar-Xirinachs (2001a), pp. 281–90. For another analysis on what it was achieved in the FTAA process up to the year 2000, see Bouzas and Svarzman (2001), pp. 2– 16. The basic information on the FTAA process can be obtained through the respective official web page: . The progress on business facilitation in the FTAA process is analysed by Thery (2001). This paragraph and the next one are largely based on Robert (2001d), pp. 11– 16. For example, Scollay (2000b) first advances in pp. 33–36 a qualitative exploration on the alternative scenarios of the possible regional arrangements

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configurations in the WH and Asia Pacific, and then together with Gilbert and Bora (2001) assesses quantitatively, using a computable general equilibrium (CGE) model, the potential impact of those possible configurations to participants and third economies. The WH private sector is organized through the Business Network for Hemispheric Integration in order to reach a consensus in the business sector on each one of the negotiation issues and to channel them to the FTAA Ministers Responsible for Trade. The results of this private sector involvement in the FTAA process, including the proposals articulated in each of the Americas Business Forum (ABF) that have taken place thus far back-to-back each of the FTAA Ministerial Meetings, can be consulted at the . Experts participate in such a permanent involvement, and so far there have been two Academic Colloquium of the Americas. The reflections and proposals presented at the second colloquium held in Buenos Aires (3–4 April 2001) just before the VI ABF (5–6 April) and the VI Ministerial Meeting (6–7 April), including those quoted in Gonzalez Vigil (2001a), can be consulted at the . As it follows from paragraph 5 (b) of the statement issued by the III FTAA Ministerial Meeting (Belo Horizonte, 16 May 1997). Da Motta Veiga (1997) explains (pp. 3–4, 7–9) how this and other results of that ministerial meeting chaired by Brazil were reached in a context of conflicting rhetoric and contention between the named country and the United States. Devlin and Estevadeordal and Garay (1999), pp. 27–36, elaborate skilfully on this matter and suggest some criteria for a smooth co-existence of the FTAA implementation with existing PTAs in the WH. See, for instance, Taccone and Nogueira (2000), pp. 82–83. According to Weston (1996), p. 92, there are already a number of activities (computers, computer parts and local area networks) where NAFTA would appear to operate as a Customs Union. For an earlier assessment considering these as good precedents, particularly when contrasted with NAFTA’s intricate rules of origin for the autos and textiles and apparel sectors, see Hufbauer and Schott (1993), p. 7. For a detailed review of the issues entailing possible complex interactions between the FTAA and WTO, see Granados (1999, pp. 12ss.). For a lucid discussion of main loopholes in Article XXIV that give a too wide room for almost any PTA to claim its “WTO-consistency”, see Scollay (2000a, pp. 3–7). Findlay (2000, pp. 21–25) coincides and extends the discussion to GATS (V) as well. See, for instance, the guiding principles proposed by Elek (2000, pp. 18–21).

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References ALADI (or Latin American Integration Association — LAIA). “De la Convergencia Prevista en el Articulo 3 del Tratado de Montevideo 1980”. ALADI/SEC/dt 244. November 30th. Montevideo: Secretaria General, 1990. . ALADI. “Los Ejes de Comercio en la Integración Regional”. ALADI/SEC/Estudio 68. November 21st. Montevideo: Secretaria General, 1991. ———. “Articulación de los Esquemas Subregionales y Bilaterales de Integración”. ALADI/SEC/Estudio 75/Rev.1. January 24th. Montevideo: Secretaria General, 1994. Bouzas, Roberto. “MERCOSUR’s Economic Agenda: Short- and Medium-term Policy Challenges”. In Integration & Trade 0 (1996): 55–79. Bouzas, Roberto and Nora Lustig, eds. “Liberalizacion Comercial e Integración Regional: de NAFTA a MERCOSUR”. Buenos Aires: FLACSO — Grupo Editor Latinoamericano, 1992. Bouzas, Roberto and Gustavo Svarzman. “The FTAA Process: What has it Achieved? and Where Does it Stand?” University of Miami. North-South Center Working Paper, March 2001. CEPAL. “Una Decada de Luces y Sombras: America Latina y el Caribe en los Años Noventa”. Bogota: Alfaomega S.A. , 2001a. CEPAL. “Panorama de la Inserción Internacional de America Latina y el Caribe 1999–2000”. Santiago, Chile: United Nations Economic Commission for Latin America and the Caribbean. , 2001b. CEPAL. “La Inversión Extranjera Directa en America Latina y el Caribe. 2000”. Santiago, Chile: United Nations ECLAC, 2001c. Comunidad Andina — Secretaria General. “Grupo Andino: Evaluación del Proceso de Integración 1969–1979”. Lima: Junta del Acuerdo de Cartagena, 1970. Chudnovsky, Daniel et al. “El Boom de Inversion Extranjera Directa en el MERCOSUR”. Red MERCOSUR. Buenos Aires: Siglo XXI de Argentina Editores, 2001. Da Motta Veiga, Pedro. “MERCOSUR and the Construction of the FTAA”. In Integration & Trade 3 (September–December 1997): 3–30. Buenos Aires: IDBINTAL. Devlin, Robert and Antoni Estevadeordal. “What’s New in the New Regionalism in the Americas?”. INTAL-ITD-STA, Working Paper 6. May 2001. Washington DC: Inter-American Development Bank. Devlin, Robert and Antoni Estevadeordal and Luis J. Garay. “The FTAA: Some Longer Term Issues”. INTAL-ITD Occasional Paper 5. August. Buenos Aires: IDB-INTAL, 1999. Devlin, Robert and Ricardo Ffrench-Davis. “Towards an Evaluation of Regional Integration in Latin America in the 1990s”. INTAL-ITD Working Paper 2. December 1998. Washington DC: Inter-American Development Bank.

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Echevarria, Jose. “Trade Flows in the Andean Countries: Unilateral Liberalization or Regional Preferences”. In Trade towards Open Regionalism. Washington DC: World Bank, 1998. Edwards, Sebastian. “The Andean Pact Reforms: How Much Progress? How Far to Go?”. In The Andean Community and the United States: Trade and Investment Relations in the 1990s, edited by Miguel Rodriguez Mendoza et al., pp. 9–43. Washington DC: Organization of American States, Inter-American Dialogue, Andean Development Corporation, 1998. Elek, Andrew. Sub-regional Trading Agreements among APEC Economies: Managing Diversity in the Asia Pacific. Working Draft. Australian National University. 2000. Estevadeordal, Antoni. “Negotiating Preferential Market Access: The Case of NAFTA”. INTAL-ITD-STA Working Paper 3. June 1999. Washington DC: InterAmerican Development Bank. Estevadeordal, Antoni and Junichi Goto and Raul Saez. “The New Regionalism in the Americas: The Case of MERCOSUR”. INTAL-ITD-STA Working Paper 5. April 2000. Washington DC: Inter-American Development Bank. Feinberg, Richard. “Comparing Regional Integration in Non-Identical Twins: APEC and the FTAA”. In Integration & Trade 10 (January–April 2000), pp. 3– 30. Buenos Aires: IDB-INTAL. Ffrench-Davis, Ricardo. “Distorsiones del Mercado y Teoría de las Uniones Aduaneras”. In Integración Latinoamericana 5 (1980). Buenos Aires: INTAL. Findlay, Christopher. “Old Issues in New Regionalism”. Paper presented at the 2000 APEC Economic Outlook Symposium. 24–25 July 2000, Manila. Garay, Luis Jorge and Antoni Estevadeordal. “Protection, Preferential Tariff Elimination and Rules of Origin in the Americas”. In Integration & Trade 0 (1996): 57–79. Gilbert, John and Robert Scollay and Bijit Bora. 2001. “Assessing the Implications for East Asia of New Regional Trading Developments in the Asia Pacific”. Paper presented at the World Bank Workshop on East Asia’s Future Economy. 10–11 June 2001, Bangkok and also at the PECC Trade Policy Forum’s Seminar on Regional Trading Arrangements: Stocktake and Next Steps. 12–13 June, Bangkok. Gilmore, David M. “Free Trade Area of the Americas: It is Desirable?”. In InterAmerican Law Review 31, no. 3 (2000): 383–417. Gonzalez Vigil, Fernando. “El Grupo Andino y la Convergencia Regional”. In ALADI (1994), pp. 201–65. ———. “Preferential Trading Agreements and Open Regionalism: Some Conceptual Notes and Policy Criteria”. Paper presented at the PECC Trade Policy Forum’s XII Annual Meeting. Brunei, 28–29 May 2000. .

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———. “Andean Community and FTAA”. Paper presented at the II Academic Colloquium of the Americas. Buenos Aires. 3–4 April 2001a. . ———. “Trade Policy and Investment Location: the Effects of Peru’s Tariff Structure in the 1990s”. In Integration & Trade 14 (May–August 2001b): 29–69. Buenos Aires: IDB-INTAL. Gonzalez-Vigil, Fernando, Luis Abugattas and Martha Cuba. “La Iniciativa para las Americas y el Grupo Andino”. In Bouzas and Lustig (1992), pp. 113– 33. Granados, Jaime. “El ALCA y la OMC: Especulaciones en torno a su interacción”. INTAL-ITD. Documento de Trabajo 4. August 1999. Buenos Aires: IDB-INTAL. Hufbauer, Gary C. and Jeffrey J. Schott. “NAFTA: an Assessment”. Washington DC: Institute for International Economics, 1993. IDB (Inter-American Development Bank). Integration and Trade in the Americas: Periodic Note. December. Washington DC: Department of Integration and Regional Programs, 2000. IDB-INTAL (Institute for the Integration of Latin America and the Caribbean). . Buenos Aires: Inter-American Development Bank. Kuwayama, Mikio. 1999. “Open Regionalism in Asia Pacific and Latin America: A Survey of the Litterature”. Serie Comercio Internacional, no. 4, December. United Nations E.00.II.G.20. Santiago, Chile: CEPAL. ———. “Search for a New Partnership in Trade and Investment between Latin America and Asia Pacific”. INTAL-ITD Occasional Paper 12. November. Buenos Aires: IDB-INTAL, 2001. Mackay, Donald R. and Maryse Robert and Rosine M. Plank-Brumback. “Trade in Goods and Agriculture”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 125–40. Washington DC: Organization of American States. Brookings Institution Press, 2001. Maldonado, Hector. “30 Años de Integración Andina: Balance y Perspectivas”. Lima: Comunidad Andina — Secretaria General, 1999. Magariños, Gustavo. “MERCOSUR: Una Union Economica Emergente”. In Las Americas sin Barreras, edited by Antoni Estevadeordal and Carolyn Robert, pp. 1–35. Washington DC: Inter-American Development Bank, 2001. Moran, Eduardo. “Las Razones de la integración”. In El Desarrollo y el Acuerdo de Cartagena, pp. 15–22. June. Lima. Instituto Nacional de Planificación, 1970. Nagarajan, Nigel. “On the Evidence for Trade Diversion in MERCOSUR”. In Integration & Trade 6 (September–December 1998), pp. 3–30. Office of the President of the United States, “Enterprise for the Americas Initiative — A Vision for Economic Growth in the Western Hemisphere”. February. Washington DC: Office of the President of the United States, 1992.

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Robert, Maryse. “Free Trade Agreements”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 87–107. Washington DC: Organization of American States. Brookings Institution Press, 2001a. ———. “Multilateral and Regional Investment Rules: What comes next?”. OAS Trade Unit Studies. SG/TU/TUS-8. March. Washington DC: Organization of American States, 2001b. ———. “Investment”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 186–206. Washington DC: Organization of American States. Brookings Institution Press, 2001c. ———. “The FTAA après Québec: State of Play, Next Steps and Remaining Challenges”. Paper presented at the PECC Trade Policy Forum’s Seminar on Regional Trading Arrangements: Stocktake and Next Steps. 12–13 June 2001d, Bangkok. . Salazar-Xirinachs, Jose M. “The FTAA Process: From Miami 1994 to Québec 2001”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 279–302. Washington DC: Organization of American States. Brookings Institution Press, 2001a. ———. “Implications of Proliferating Sub-Regional Trade Agreements: Lessons from the Latin American Experience”. Paper presented at the PECC Trade Policy Forum’s Seminar on Regional Trading Arrangements: Stocktake and Next Steps. 12–13 June 2001b, Bangkok. . Salazar-Xirinachs, Jose M. and Maryse Robert, eds. Toward Free Trade in the Americas. Washington DC: Organization of American States. Brookings Institution Press, 2001. Salazar-Xirinachs, Jose M., Theresa Wetter, Karsten Steinfatt and Daniela Ivascanu. “Customs Unions”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 45–86. Washington DC: Organization of American States. Brookings Institution Press, 2001. Schott, Jeffrey J. “More Free Trade Areas?”. Policy Analysis in International Economics 27. Washington DC: Institute for International Economics, 1989. Scollay, Robert. 2000a. “Thoughts on New Regional Agreements in the APEC Region”. Paper presented at the PECC Trade Policy Forum’s XII Annual Meeting. 28–29 May 2000a, Brunei. . Scollay, Robert S. “Complex Intersections: East Asian — Latin American Trade Linkages in the Context of Recent Multilateral, Regional and Sub-regional Developments”. In Integration & Trade 12 (September–December 2000b): 25–46. SELA — Secretaria Permanente. “La Iniciativa para las Americas en el Contexto de las Relaciones de America Latina y el Caribe con los Estados Unidos”. Capitulos del SELA 28 (January–March, 1991): 25–27. Caracas:

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Sistema Economico Latinoamericano [Latin American Economic System]. . Serra, Jose, et al. “Reflections on Regionalism”. Washington DC: Carnegie Endowment for International Peace, 1996. Stallings, Barbara. “Growth, Employment and Equity: The Impact of Economic Reforms in Latin America and the Caribbean”. Powerpoint text presented at the Workshop on Issues of Transition in Developing Economies. February 8th. Shanghai Academy of Social Sciences, 2001. Steinfatt, Karsten. “Preferential and Partial Scope Agreements”. In Towards Free Trade in the Americas, edited by Jose M. Salazar-Xirinachs and Maryse Robert, pp. 108–22. Washington DC: Organization of American States. Brookings Institution Press, 2001. Stephenson Sherry. “Deepening Disciplines for Trade in Services”. OAS Trade Unit Studies. SG/TU/TUS-11. March. Washington DC: Organization of American States, 2001a. ———. “Services”. In Towards Free Trade in the Americas, edited by Jose M. SalazarXirinachs and Maryse Robert, pp. 163–85. Washington DC: Organization of American States. Brookings Institution Press, 2001b. Taccone, Juan Jose. “RTA Developments in the Western Hemisphere”. Paper presented at the PECC Trade Policy Forum’s Seminar on Regional Trading Arrangements: Stocktake and Next Steps. 12–13 June 2001, Bangkok. . Taccone, Juan Jose and Uziel Nogueira. “Informe MERCOSUR: Periodo 1999– 2000”. Informe MERCOSUR no. 6.”Buenos Aires: Inter-American Development Bank, 2000. Thery, Jane. “Business Facilitation: Concrete Progress in the FTAA Process”. OAS Trade Unit Studies. SG/TU/TUS-12. March. Washington DC: Organization of American States, 2001. Venables, Anthony J. “Regional Integration Agreements: A Force for Convergence or Divergence?”. Policy Research Working Paper Series no. 2260. Washington DC: World Bank, 1999. Weston, Anne. “CUSFTA and NAFTA Viewed from a Spoke”. In Integration & Trade 0 (1996): 80–104. Buenos Aires: IDB-INTAL. Yeats, Alexander. “Does MERCOSUR’s Trade Performance Raise Concern about the Effects of Regional Trade Arrangements?”. Working Paper. February. Washington DC: World Bank, 1997.

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6 The Implications of China’s Accession to the WTO Deepak Bhattasali and Masahiro Kawai

Introduction The ability of China to raise per capita income by over 8 per cent a year over the last two decades places it in a very small group of countries experiencing rapid economic growth.1 Rising standards of living, including lifting nearly 250 million people out of poverty, have been made possible through a factor-accumulation-based strategy that drew on China’s immense labour resources, assisted by massive investments in physical capital and industrial infrastructure. Changes in incentives and organizations buttressed this strategy, and resulted in rising total factor productivity (TFP) averaging nearly 3 per cent per year. In the 1990s, growth had slowed, reflecting a combination of macroeconomic and external sector policies and intensified structural bottlenecks. The regional economic slowdown since the beginning of the Asian financial crisis had also an adverse effect on China. Visible urban unemployment (estimated to be about 9 per cent of the workforce), factory closures and massive excess capacities in industry, price deflation, and a real growth rate that dipped to 7.1 per cent in 1999 were some of these signs.

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China’s desire to join the World Trade Organization (WTO), despite fears that increased competition from abroad may cause further labour market stress, stems from the belief that the net gains in economic efficiency, employment and welfare would likely be positive in the medium and long term. Its negotiating stance on specific aspects of the accession protocols has reflected its desire to backload many of the projected adverse impacts on employment and income. Underlying these positions is a temporal view of how quickly robust and selfsustaining employment creation will follow from the massive structural changes taking place in the economy. In terms of economic management, the key issue is the authorities’ ability to maintain the momentum of growth with the fiscal stimulus programme until job creation accelerates, to provide social safety nets to alleviate labour dislocations, and to foster more balanced development in the Western Provinces. This paper examines the implications of China’s accession to the WTO for its economy, from structural, sectoral, and macro perspectives, and for its major trading partners and global competitors.

Four Types of Structural Transformation in China Four major types of structural transformation have been underway in the Chinese economy. Each of these has profound implications for resource allocation, the distribution of income, and the relative emphasis given currently to specific aspects of economic policy. Briefly, these are: • From a command economy to a market economy, a transformation that, de jure, started after the “opening” of China in 1978. It has been marked by the progressive deregulation of prices and resource allocation decisions. It has also been characterized by a shrinking role of the State in economic activity. The share of retail goods sold at prices fixed by the State fell from 97 per cent in 1978 to 5 per cent in 1999; the share of agricultural goods sold at fixed prices fell from 94 per cent to 23 per cent; and the share of capital and industrial goods sold at fixed prices fell from 100 per cent to 12 per cent. Further, the share of the public sector in total fixed investment fell from 82 per cent in 1980 to 53 per cent in 1999. Similarly, direct funding of investment from the

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government budget declined from 30 per cent to 6 per cent over the same period. • From an economy based mainly on agriculture to one based largely on manufacturing and services (see Appendix Table 1 for this trend). In 1980, agriculture accounted for 30 per cent of total output. It had declined to 18 per cent by 1999. The share of the workforce in agriculture fell over the same period from 69 per cent to 50 per cent. During the 1990s when the economy as a whole created 67 million new jobs, agriculture shed 31 million jobs, or roughly 3.4 million jobs each year. By contrast, services added 104 million jobs, or nearly 11.5 million jobs per year. • From an economy with high-fertility and low-longevity, to one with a low-fertility and high-longevity demographic profile. The natural growth rate of the population slowed from 1.2 per cent per year in 1980 to 0.9 per cent in 1999. Life expectancy rose from 67 years in 1980 to 70 years in 1998. The share of children (aged 14 years or below) in the total population had fallen from 35.5 per cent in 1980 to an estimated 24.9 per cent in 2000, while the share of the aged (aged 65 years or above) had risen from 4.7 per cent to an estimated 6.7 per cent over the same period.2 • From a relatively closed to a relatively open economy. While imports and exports used to be controlled by 10–16 state trading firms, over 200,000 direct importers and exporters now conduct external trade.3 Although non-tariff barriers (NTB) distorted China’s trade regime, they are now estimated to have fallen to a tariff-equivalent level of 9.3 per cent, covering 33 per cent of China’s imports. The average weighted tariff rate for the economy is now estimated to be 18 per cent; nearly three-quarters of imports come in at zero, or close-to-zero, tariffs. As a result, China’s trade (exports plus imports) as a share of GDP rose from 13 per cent in 1980 to 44 per cent in 1999. With onshore foreign currency deposits of US$128 billion, the second largest in the world after the United Kingdom, China’s economy is more open than generally believed. Any one of the above types of transformation could be expected to result in significant resource movements in an economy. These

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transformations were occurring simultaneously. Given the nature of these transitions and the size of its economy, it is relatively easy to see that the resource reallocations may be required as the country adjusts to a postWTO accession world. These allocations while important, can only be small by comparison.4 Equally, it is difficult to judge the net impact of many impending changes. This refers not just to obtaining parametric estimates of the effects of various factors, but also in judging the direction of change (or, in the language of the economists, the “signs” attached to the parameter values). With a general caution with regards to relying excessively on numerical estimates of the likely effect of WTO accession, this chapter examines what the likely effects are, striking a balance between the quantitative results from a global trade model and the qualitative assessment of specific sectors.

Effects of WTO Accession on the Chinese Economy In this section, the likely effects of WTO accession on the major sectors of the Chinese economy in terms of likely employment, output, and trade effects, and their broad implications for the economy as a whole and income distribution are examined. However, to set the discussion in context, the section begins with a brief description of the trade liberalization measures that China is likely to introduce as a result of joining the WTO. Main Features of Proposed Liberalization Measures Since China applied for membership in the General Agreement on Trade and Tariffs (GATT) in 1984, it has been engaged in negotiations to enter into the multilateral trading arrangements that now characterize the WTO. It is in the final phase of these negotiations, and most observers and analysts expect membership of the WTO to occur in the second half of 2001 (China joined the WTO in December 2001). Although the specific details regarding the agreements between China and its trading partners are still not fully documented, there is sufficient information in the public domain to construct a broad picture of the liberalization measures that will be adopted.5 Table 1 summarizes the major features of the China-US agreement reached in November 1999, which may be regarded as the core of the likely final agreement.6

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Agreements

Agriculture

Average tariffs will be reduced from 20 per cent to 17 per cent by January 2004. A tariff-rate quota (TRQ) system is established for bulk commodities, with quota quantities increasing over time, and subject to tarif fs between 1–3 per cent. Export subsidies on cotton and rice are eliminated. Foreign exporters are given the right to sell and distribute their products directly to consumers.

Manufacturing

Average tariffs reduced from 18.5 per cent in 1998 to 9.4 per cent by 2005, phased in linearly, with large cuts for automobiles, high tech products, wood, and paper . Quotas and non-tariff restrictions will be eliminated within 5 years (and most in 2002–03). Foreign firms are given full trading and distribution rights for imported goods.

Services

Telecommunications: All geographic restrictions on services phased out in 2–6 years. 49 per cent of foreign ownership is allowed in all services on accession. Then it will rise to 50 per cent in some sub-sectors in 2 years. Banking: Foreign banks will be allowed to conduct RMB business with Chinese enterprises after 2 years of accession, and retail business after 5 years. Non-bank firms are allowed to offer auto financing on accession. Insurance: Geographic and service restrictions will phased out over 3–5 years. 50 per cent foreign ownership in life insurance and 51 per cent ownership in non-life insurance are permitted on accession. Reinsurance is made fully open on accession. Securities Business: Foreign firms are allowed to hold minority stakes in securities funds, with shares rising from 33 per cent initially to 49 per cent after 3 years.

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TABLE 1 (continued ) Summary of Important Features of the China-US Agreement Sectors

Agreements

Distribution and Sales: Foreign firms with existing domestic investments are allowed to undertake wholesale business with a Chinese partner on accession. Foreign invested retail business is permitted in a limited number of major cities on accession, and all quantitative and geographic restrictions will be removed by January 2003. Foreign firms allowed the full access to import and export rights within 3 years after accession. Textiles and Clothing

Import quotas on China’ s textiles and clothing exports will be eliminated by end-2005, subject to anti-surge provisions through 2008.

Source: International Monetary Fund.

As Table 1 indicates, China has committed to a broad menu of market access measures, some of which become effective immediately upon accession. In many areas, the range of liberalization measures agreed surpasses efforts made in many developed and developing countries. Even commitments to the most general of WTO principles, such as unconditional most-favoured-nation (MFN) treatment, national treatment, and transparency will result in major changes in economic practices of China.7 China’s obligations to implement more specific measures such as reductions in tariff levels and time-bound phase-outs of tradedistorting practices (e.g. export subsidies and trading and distribution restrictions) will prompt further reform. Some of these measures may revolutionize the organization of business activities in China and the modes and intensity of government regulation. These include the requirements for transparency in the operation of state-owned enterprises (especially purchasing and sales), implementation of intellectual property regimes consistent with the Trade-Related Intellectual Property (TRIPS) agreement, customs valuation methods that are consistent with the Agreement on Customs Valuation, and judicial review of administrative decisions. The major liberalization measures include: • Full market access for foreign firms to distribute their products in China.

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• Tariff reductions immediately upon accession, with further phaseins over an eight-year period. For example, the average tariffs for all agricultural products will be reduced from 20 per cent in 1998 to 17 per cent by 2004, and the average tariffs on all manufactures will fall from 18.5 per cent in 1998 to 9.4 per cent by 2005. • Bindings of all tariffs and elimination of quantitative restrictions (quotas, licences and designated trading). A tariff-rate quota (TRQ) system will be established for bulk commodities (including wheat, cotton and rice), with quota quantities rising over time, and subject to tariffs between 1–3 per cent. Quotas and non-tariff barriers will be eliminated within 5 years (and most within 2–3 years) after accession. • More open services sectors, including finance (banking, nonbank firm financing, securities, and insurance), value-added telecommunications, distribution and sales, tourism, construction, professional and business services, and audio-visual services. • Immediate resolution of outstanding problems with sanitary and phyto-sanitary standards. Table 2 summarizes China’s likely weighted average tariff rates with and without WTO accession. Despite considerable difficulty in quantifying the degree of protection in agriculture, rates of pre-WTO protection are assumed to be sustained after accession, because the bindings are estimated to be above the previously applied protection rates. For industrial products, average tariffs on imported manufactures that are subject to tariffs drop from 24 per cent to 7 per cent. Rates of protection of beverages and tobacco, textiles and apparel products, and automobiles fall dramatically. Overall, China’s WTO offer lowers the average tariff protection on imports from 21 per cent to 8 per cent.8 On the export side, China will receive MFN treatment from many WTO members. The most important change will be the elimination of import quotas that fall under the WTO Agreement on Textiles and Clothing (previously known as the Multi-Fibre Agreement, MFA). This means that China will be allowed to expand its export of textiles and clothing without facing the importers’ quota restrictions, starting at the end-2005. 9 It is evident that “preparing” the Chinese economy for WTO accession involves a large number of reforms, not only in the way business is conducted but also in the legal and regulatory frameworks in which

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TABLE 2 Weighted Average Tariffs in China with and without WTO Accession Without WTO Accession (%)(a)

With WTO Accession (%)(a)

0.00 6.03 4.16 10.14 26.74 22.09

0.00 6.03 4.16 10.14 26.74 22.09

27.68 123.50 3.59 57.10 75.99 21.57 20.17 17.52 129.07 21.69 23.53

27.68 20.38 1.26 9.39 14.85 4.80 6.94 6.22 13.76 3.44 6.74

Agriculture total (b)

17.09

16.88

Manufactures total (c)

24.27

6.95

Total

21.41

7.85

Foodgrain(b) Feedgrain(b) Oilseeds(b) Meat and livestock(b) Dairy(b) Other agriculture(b) Other food Beverages and tobacco Extractive industries Textiles(c) Wearing apparel(c) Wood and paper (c) Petrochemicals(c) Metals(c) Automobiles(c) Electronics(c) Other manufactures(b)

Notes: (a) The tariff rates are the stated rates on imports that are subject to tariffs. As many imports enjoy duty exemptions currently and are expected to continue to do so with WTO accession, these stated rates overstate the actual rates. The rates without WTO are for the year 1995. (b) The degree of agricultural protection is assumed to be virtually unchanged with WTO accession. (c) The table highlights the large “offer” made by China on manufacturing protection. Source: Ianchovichina, Martin and Fukase (2000b).

they operate. Such preparatory measures will be most important in the services sector, which labours under considerable government restriction at present, and where the most important market segments are dominated by state monopolies. In addition, in sectors such as manufacturing and finance, rapid regulatory development is necessary as liberalization proceeds and competition in the domestic market intensifies.

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Effects on the Chinese Economy: Sectoral Analysis The assessment of the likely trends in the three major sectors — agriculture, manufacturing and services are provided below. The discussion highlights the main expected effects in the short term as well as in the medium to the long term. Table 3 provides a summary of quantitative information concerning the medium-term impact of China’s WTO accession on the values of output and wage bills in various disaggregated sectors of the economy. It shows the baseline values for 1995 and 2005 without WTO accession as well as the projected values for 2005 with WTO accession. The table draws on the results obtained by Ianchovichina and Martin (2001), who applied the Global Trade Analysis Project (GTAP) model of global trade to an aggregated version of Version 4 GTAP database.10 This database combines detailed bilateral trade, transportation and protection data, accounting for international linkages between China and other economies and the 1995 input–output data accounting for inter-sectoral linkages within each economy. In addition to such quantitative information, some qualitative information is also provided and assessed in this section.

Agriculture With half of the national labour force and nearly one-fifth of national output currently, the degree to which agriculture will be affected by accession is of great importance. However, it is not an easy task to assess the impact on agriculture because of the lack of complete information and clarity concerning agricultural protection. In accordance with its schedule of commitments, China will lower tariffs partially on agricultural products upon accession, and phase in further reductions within five years. At the end of this period, it will lower its overall average tariff by more than half, and several non-tariff barriers will be eliminated. However, it will continue to maintain tariff-rate quotas (TRQs) for several key agricultural products. China will continue to use a state trading system to restrict external trade in grains (wheat, maize and rice), soybean oil, and cotton. Therefore, the effect on actual protection levels is difficult to estimate. Table 3 assumes that the same level of protection is maintained in agriculture in the medium term following WTO accession. As with the other sectors, WTO-related liberalization will bring both obstacles and opportunities for agriculture. In the short run, the

52,334 53,071 169,254 142,729 63,301 91,689 418,545 303,917 74,335 87,195 563,073 165,072 484,723 326,756 180,283 151,668

34,773 29,370 104,543 83,176 40,319 45,034 203,375 128,942 25,668 35,957 243,018

81,236 229,835 131,809 88,115 81,983

Other food Beverages and tobacco Extractive industries Textiles Wearing apparel Wood and paper Petrochemicals Metals Automobiles Electronics Other manufactures

Utilities Trade and transport Construction Business and finance Government services

2005

163,447 492,767 328,205 180,724 152,406

52,786 33,423 167,477 156,370 146,560 87,320 403,902 291,668 24,693 96,760 548,006

91,436 13,804 5,311 130,832 6,712 111,984

w/ WTO

7 323 – 409 276

26 6 46 107 260 64 165 108 4 180 977

0 0 2 9 0 7

1995

7 325 – 517 431

23 6 76 113 266 82 190 141 6 249 1,417

0 0 2 14 0 10

w/o WTO

2005

Wage Bills Skilled Labour

7 327 – 515 431

23 4 74 123 609 78 182 135 2 274 1,369

0 0 2 14 0 10

w/ WTO

19 1,422 – 594 180

122 42 960 654 1,887 384 879 607 22 879 5,310

18 43 196 719 5 920

1995

13 905 – 531 199

80 32 1,487 492 1,368 347 715 560 24 860 5,452

22 46 216 1,017 7 1,182

w/o WTO

2005

13 909 – 529 199

80 20 1,461 535 3,130 328 684 534 7 946 5,267

22 46 216 1,059 7 1,157

w/ WTO

Wage Bills Unskilled Labour

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO means the case of WTO accession. Source: Background data in Ianchovichina and Martin (2001).

Foodgrain Feedgrain Oilseeds Meat and livestock Dairy Other agriculture

92,575 14,022 5,315 126,285 6,366 114,373

w/o WTO 63,277 10,878 4,014 72,163 3,640 74,656

1995

Value of Output

TABLE 3 China’s Output Values and Wage Bills due to WTO Accession: 1995–2005 (Millions of US$ at 1995 Prices)

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maintenance of a TRQ system will likely mitigate the liberalization pressure, and the persistence of international barriers to China’s agriculture will prevent the full exploitation of benefits. In comparison to the case of no WTO accession, Table 3 indicates that WTO accession has a positive impact on meat and livestock while it has a negative impact on other agriculture. The net aggregate impact on the agricultural sector as a whole, while varying across provinces, will be slightly positive. Over the longer term, increased liberalization in China will accelerate the shift of agriculture away from areas of comparative disadvantage towards its comparative advantage. There is likely to be a more pronounced decline in the production of land-intensive sectors, such as grains and cotton, and an increase in the production of more labourintensive agricultural sectors, such as livestock, fruit, flowers, and vegetables. Liberalization of global agricultural barriers should augment this trend, as it provides China with increased access to other countries’ markets in return for its remarkably large concessions. Actual trade and output patterns, however, are affected by many more factors than just trade liberalization. Therefore, the degree to which farmers experience a change in income due to WTO entry will depend on many factors. For example, farming in China is increasingly a parttime occupation. To the extent farmers have access to off-farm employment, which varies by province, they will be able to supplement farm incomes in varying degrees. Further, the international community has committed to liberalize textiles and apparel, which will benefit Chinese farmers in these sectors. These additional employment opportunities will increase farmers’ income, thereby mitigating the negative impact of WTO entry on some inefficient sub-sectors within agriculture. There is a need to take a comprehensive view of WTO accession effects. Some quantitative estimation of economy-wide effects has yielded indicative results on the magnitude and direction of change. One concern is that the incomplete information base and occasional crude assumptions on which such modelling exercises were conducted creates the potential for a wide margin of errors in terms of the quantitative estimates of the accession impact.11 Nonetheless, the models suggest that the use of TRQ could provide transitional protection to farmers, as the quotas are likely to fill quickly (after which tariffs at high levels come into play).12

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For specific products, the likely outcomes are as follows: • Wheat — Per capita wheat consumption in China is as high as in many developed countries. It is likely, therefore, that the growth of wheat consumption will be modest. The production levels have fallen in recent years, given a sharp drop in prices. China now has net import levels of 7–8 million tonnes per year. Changes in domestic consumption patterns suggest the possible substitution of homegrown wheat with imports, so the production can be expected to fall and imports expand. • Maize — Domestic prices for maize have also fallen, but are still above international prices. High cost maize production has been sustained by active government procurement policies, motivated by food security considerations. Lately, domestic production has fallen back from the record levels achieved in 1998, but China is still a net exporter of maize. This may not last, however, as large procurements have taken their toll on government finance. It is likely that production may decline further. As four-fifths of maize is used as feed in the livestock industry, which continues to experience strong domestic and regional growth, imports are projected to rise. Again, the TRQ is expected to bind quickly, offering some transitional protection to production of this crop. • Rice — Domestic prices for rice are relatively low compared to those in international markets, and have been falling. The quota under the TRQ established for rice is fairly large, and surpasses by far the historic levels of rice imports in China. As such, it is unlikely that the TRQ for rice will bind. Nevertheless, given China’s low prices, WTO accession is unlikely to have a negative effect on farmers. In fact, with increased trade liberalization globally, China could expand its exports of rice, resulting in higher returns for rice producers. • Soybeans — There is no TRQ for soybeans, and the domestic price is close to border prices. Although there is little direct import competition for soybeans, there will be competitive pressure from the maize sector after accession. Maize, protected by TRQ, is the primary crop that competes with soybeans for resources. As maize imports exceed the TRQ, their prices could soar to about 165 per cent of the import price, while soybeans prices are likely to remain at international levels.

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In sum, the short-run effect of WTO entry on agriculture is likely to be small. The observed and projected declines in crop production will not have a visibly adverse effect on agriculture, because farm incomes could well raise once the TRQ bind.13 Over the long run, as China further liberalizes its market and the quota size increases, trade patterns increasingly should mirror China’s comparative advantage. China has a low ratio of capital stock and of arable land relative to labour. As China has liberalized its economy over the past several years, its external trade patterns have increasingly followed its comparative advantage. Even while the share of agriculture in China’s total trade fell from above 20 per cent two decades ago to below 8 per cent in 1999, traded agricultural products increasingly consisted of labour-intensive exports and landintensive imports. For example, horticultural and animal products, which are labour intensive, had steadily risen in their share of exports from about 45 per cent to 78 per cent over this period. Over time as a member of the WTO, the share of land-intensive commodities in China’s imports will likely rise. An important, and possibly beneficial, long-run effect will be the inability of the government to maintain prices higher than international levels through the national procurement system. For example, if China produces more grain than is needed to meet domestic demand, it must either export the surplus or add to its stocks. Under the accession protocols, China has committed not to use export subsidies. Maintaining high stocks even at current levels is too costly for the public exchequer, which accounts for a procurement level that is well below the benchmark targets established since 1996. In this way, domestic prices must be reduced and converge to world market levels. If the grain trade is in balance, domestic prices cannot deviate significantly from border prices without an increase in imports, which when added to domestic supply would put downward pressure on prices. Thus, in the long run, an environment is being created whereby China’s agriculture will develop along lines of its comparative advantage. This is welfare enhancing, and China will enjoy a significant resource use advantage over other developed and developing countries that have chosen to protect their increasingly inefficient agricultural sectors. Concerning the long run impact on China’s post-WTO agriculture, the studies as cited in endnote 11 suggest that, after approximately five years following accession, the profitability of grain production, especially

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wheat and maize, will decline. This decline will likely reduce grain output, the incomes of farmers in grain production, and employment. Over a ten-year projection horizon, there will be a dramatic increase in grain imports, with rice being the exception, given its competitiveness in international markets.

Manufacturing Given several key characteristics of China’s manufacturing sector, WTO accession would likely cause greater impact in this sector than in agriculture. Tariff rates on manufacturing imports that are subject to tariffs without duty exemptions will fall sharply from an average of 24 per cent in 1995 to 7 per cent within five years of accession (see Table 2). Further, tariffs on information and communications technology (ICT) products (for example, computers, semi-conductors) will be eliminated, compared to an average tariff of about 13 per cent today. Auto tariffs will be cut from 80–100 per cent today to 25 per cent by 2006. Auto parts tariffs will come down to an average of 10 per cent. Such changes can be expected to have a significant effect on foreign direct investment, especially when it is seen in the light of the proposed liberalization of the services sector. As pointed out by Naughton (2000), manufacturing trade is characterized by a dualistic market structure, that is, a liberal export processing regime and a protected trade regime. The incentive-based export-processing regime, which covers goods produced entirely for export and are often dominated by foreign invested enterprises, accounted for 48 per cent of exports and 53 per cent of imports in 1999. Imports of intermediate inputs and capital goods are duty free. However, its domestic value added is typically below 20 per cent of export value. The trade regime for other products, which covers products traded mainly by state-owned enterprises and collectives, remains quite restrictive with high tariffs and non-tariff barriers, including restrictions on trading rights and distribution. A range of companies with trading rights manages such trade, and it is where most of China’s trade liberalization measures have been concentrated in recent years. Also this is a segment of the trading regime that will bear the brunt of the post-accession liberalization of tariff and non-tariff barriers. However, the rationale for continuing with the existing export processing regime will also be eroded with the general reduction of such barriers in China.

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There is a distinct difference in ability between medium-sized and large firms, when they are benchmarked to international standards. The former have typically operated in more competitive domestic markets, are fast-growing, have aggressively entered foreign markets, and most importantly, have evolved flexible cost structures that permit them to compete.14 On the other hand, the larger firms are far behind their global competitors, and the gap has been widening.15 Thus, despite their size, “legacy positions”, and the WTO transitional rules, they may expect wrenching competition in the medium to long term.16 Since 1993, Chinese manufacturing has entered a period of severe retrenchment and restructuring, reflecting the effects of a policy-induced slowdown in the macroeconomy, high levels of domestic and foreign competition as trade liberalization accelerated, and the slowdown in the regional and world economy at the time of the Asian financial crisis. Large excess capacity exists in manufacturing but, due to the structure of the labour market, excess labour is still carried on the books of many firms. Profitability is low in most segments, including textiles, automobiles, beverages and tobacco, which are given high levels of protection. Except for a few sectors with solid market leaders, entry into the WTO can be expected to accelerate the process of consolidation in these industries. In view of the above, further trade liberalization in the context of WTO entry will adversely affect profitability in several manufacturing sub-sectors and firms in the short to medium term, and will affect employment quite severely in others as well over a longer period. At the outset, some of the capital-intensive industrial sector such as automobiles, petrochemicals and metals will suffer, with additional labour unemployment in these industries ranging as high as 12 per cent of their existing workforce. A second tier of adverse effects is expected in the energy, processed food and pharmaceutical sectors, where a surge of competition from well-positioned foreign firms is expected. Foreign firms’ market shares would likely increase most rapidly in this segment of the manufacturing sector. In contrast, the electronics sub-sector is expected to gain as a result of China’s WTO accession. A significant boost to the Chinese economy is expected to come from the phase-out of the WTO Agreement on Textiles and Clothing (the previous MFA) by 2005. As China is the world’s largest textile producer and exporter, the potential gains are enormous. The growth of textiles

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and apparel exports has been slowed by the fact that, due to its exclusion from the Uruguay Round Agreement on Textiles and Clothing, it cannot benefit from quota growth on the importers’ side as much as other manufacturing countries. According to Table 3, China’s wearing apparel output and wage bills rose by about 130 per cent. The textiles sub-sector also expanded.

Services By far the most dramatic changes in China’s employment, consumption and production structure are expected to come from the projected boom in the services sector following WTO accession. Although many services have grown rapidly since the government officially initiated promotional policies in 1992, there is large variability in the quality and cost of services. More significantly, measured services are estimated to be about 33 per cent of GDP, well below China’s income comparators, although somewhat to be expected because of the lagged development of consumer services in socialist economies. In addition, there are large gaps in the provision of basic producer services.17 A fundamental reason for the under-development of China’s services sector is economic: a highly restrictive policy regime for services delivery that does not allow it to respond effectively to the growing demand for services. As most services are tightly managed and controlled by the government, the dominant services providers are able to operate with great monopoly power (for example, banking, insurance, telecommunications, passenger air transport, and railways). In other areas such as housing, health care, urban transport, and education, there is a strong emphasis on social welfare dimensions. This often results in high policy-induced barriers to entry and price regulation that seldom promote resource use efficiency, product innovation or quality improvements, and often undermines desirable social welfare outcomes (for example, in the areas of banking, insurance or health care). In addition, low rates of urbanization, labour market skills and mobility, the development of Hong Kong as a major provider of services to Mainland China firms (mostly internationally benchmarked for quality) are also factors in the slow growth of services. The result has been inadequate and poor quality services accompanied by ever-rising prices. China has promised far-reaching liberalization measures in the services sector as has been seen in Table 1, and these are expected to

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have a notable effect. A substantial liberalization of the financial sector is expected, with foreign banks allowed to conduct renminbi (RMB) businesses with Chinese firms and, at a later stage, with retail customers. Restrictions on foreign participation in the securities business, auto financing by non-bank firms, and the fast growing insurance business will also be substantially reduced. With the foreign market shares in these sectors extremely small currently (e.g., in mid-1999, foreign banks accounted for 1.6 per cent of bank assets), such developments represent potentially enormous changes. In the initial stages, foreign banks are likely to focus on servicing the RMB needs of foreign firms and a few domestic blue chip enterprises. The scope of their businesses will be limited, however, due to the lack of a deposit base, retail networks, and the under-developed interbank market. The main risk of domestic banks is that their best borrowers can migrate to foreign banks, thus worsening the overall quality of their assets. Foreign institutions’ entry into financial services will undoubtedly require major reforms on the part of domestic institutions and regulatory frameworks. In the telecommunications sector, all segments will be progressively liberalized, including value-added and paging services, mobile voice and data services domestic and international services and, to a lesser degree, Internet and satellite services. By far, the most significant liberalization measures are those that will affect transport, domestic trade and logistics management, as China allows foreign entry into distribution. All restrictions on distribution services for most products will be removed within three years after accession. The nature of services (for example, intensive customer interface, labour intensity, high domestic content) implies that the growth of this sector has direct and favourable effects on employment creation in the broader domestic economy. With improved labour mobility in the Chinese economy, both the efficiency and welfare gains are expected to be large. This may explain why almost all the credible quantitative models of the post-WTO economy suggest that the wages of unskilled workers in China will grow between 60 and 90 per cent faster than those of skilled workers, despite large-scale retrenchment in manufacturing and decline in agricultural employment. Elements of the coming services revolution not captured in current analyses, however, include the level effect that liberalization and foreign entry

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can be expected to have on the entire cost structure of manufacturing and consumption activity in China, and the growth effect that the highquality services content, especially knowledge, embodied in consumer and producer goods (as well as in other services) may bring about in the economy.

The role of foreign direct investment One additional economy-wide effect is worth highlighting. There is at present a lively and interesting debate on the effect that WTO accession will have on the volume of and environment for foreign direct investment (FDI) in China. Specifically, the question is whether the investment regime becomes rules-based, as opposed to the widely perceived “relationships-based” regime that exists. Undoubtedly, entry into the WTO will require the amendment of laws, regulations and practices to align them with a number of international investment related rules — the General Agreement on Trade in Services (GATS), the agreement on Trade-Related Investment Measures (TRIMS) and the agreement on Trade-Related Intellectual Properties (TRIPS). However, as noted by several observers, there are significant gaps in the WTO investment rules.18 Therefore, our assessment of the situation would suggest that, although FDI can be expected to increase sharply following entry in the WTO, this may be due mainly to increases in market opportunities. It is unlikely, therefore, that there will be a fundamental shift to a rules-based investment policy regime, not because of China’s unwillingness but the limited effect that the WTO has on investment policies anywhere. Macroeconomic and Social Impact Not surprisingly, trade liberalization initially is expected to have a negative, though modest, impact on China’s aggregate output.19 GDP growth will be about 0.25 percentage point lower than the baseline a year after WTO accession, but thereafter exceed the baseline forecast by increasing amounts. Initially, the negative impact of trade liberalization on output will be offset partly by the expansionary effect of greater foreign direct investment and larger exports. After 3 years, however, GDP growth will be boosted by higher total factor productivity (TFP) growth as corporate restructuring and state-owned enterprise (SOE) reform begin to bear fruit, and later by an increasing boost from the

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textile and clothing sector as textiles and apparel exports are expected to rise. Together with the initial, modest fall in output, labour market pressures can increase in the short run, especially in the capital-intensive manufacturing sector and, to a lesser extent, in the agricultural subsectors. The released workforce needs to be re-employed in other sectors. Rural farmers on marginal land could be seriously affected, resulting in greater poverty. In urban areas, given the already existing labour market pressures, the scope for re-employment can be limited in the manufacturing sector until textiles, apparel, and other emerging sectors begin to be active. Most of the manufacturing sector labour force to be released will have to be re-employed in the expanding services sector, which will mitigate the unemployment pressure. To the extent that labour dislocations emerge at least in the initial stage, therefore, WTO accession may exacerbate unequal income distribution. The export intensive coastal provinces will gain, while the inland provinces — which contain the bulk of grain production and capital-intensive SOEs — may not gain much or lose. Rural–urban income disparities may widen. This requires further efforts to strengthen the social safety net and to foster regional development in the inland provinces. Three broad conclusions that are relevant for policy can be drawn from the macroeconomic and social impact: • WTO accession is unlikely to lead to significant pressures on GDP growth, aggregate employment, or the external accounts in the short run. • If developments are markedly unfavourable — for instance, if FDI does not increase much or if labour dislocations are serious — GDP growth will be marginally lower (about 0.5 percentage point lower in 1 to 3 years after WTO accession), while the overall balance of payments will still remain in significant surplus. • In the initial period before the beneficial effects of higher TFP growth and textile and clothing export growth are experienced, there is a possibility of rising labour market dislocations, mainly from the capital-intensive manufacturing sector as well as the grain producing agricultural sector.

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Quantitative Effects on the Global Markets China’s WTO accession is expected to have significant impact on the competitive position of China and the rest of the world in the global markets. It is expected to have impact in certain highly affected sectors and on their incomes. This section provides detailed quantitative estimates from a global market point of view by taking into account the likely effect of China’s liberalization measures and the quid pro quo changes expected of other countries. Sectoral Impact in China: Quantitative Assessments Table 4 summarizes the implications of the baseline growth scenario and the WTO liberalization scenario for China’s share of world output, export and import markets at sector levels. It draws heavily on the results obtained by Ianchovichina, Martin and Fukase (2000b), who used the GTAP model of global trade (see endnote 10 for more information on the GTAP model). The table demonstrates the rapid growth in China’s share of world output, exports and imports even in the absence of WTO accession.20 Without accession, China’s total share of world output is projected to rise from 3.4 to 5.3 per cent over the decade, its share of exports from 3.7 to 4.8 per cent, and its share of imports from 3.4 to 5.3 per cent. While the accession offer has almost no impact on China’s share of world output, it has a large positive impact on the share of world trade. With implementation of the accession, China’s share of world export markets rises to 6.8 per cent, and to 6.6 per cent of world import markets. At the sectoral level, the overall impact of China’s WTO accession on agriculture is limited. China’s agricultural exports face a more restrictive international trading environment than do its manufactures.21 Clearly, with reciprocal arrangements and better rules for world trade in agriculture, such restrictions can be expected to decline in size. In these circumstances, given China’s large cost advantage in the production of fruit, flowers, and vegetables, its exports may be expected to make major inroads into regional markets.22 The most important impact of WTO accession on China’s share in world output is observed in beverages and tobacco (negative), wearing apparel (positive) and automobiles (negative). China’s share in world output for beverages and tobacco declines sharply due to the fall in

3.2 7.0 12.3 13.9 8.8 3.7 7.6 9.0 3.8 4.5 10.4 3.9 3.7 6.2 1.3 2.4

2.3 4.9 8.1 10.8 7.0 2.4 5.0 5.5 1.9 2.6 6.4 2.7 2.6 3.3 0.9 1.6 3.4

Other food Beverages and tobacco Extractive industries Textiles Wearing apparel Wood and paper Petrochemicals Metals Automobiles Electronics Other manufactures

Utilities Trade and transport Construction Business and finance Government services

Total

5.1

3.8 3.7 6.1 1.3 2.3

3.2 4.4 11.9 14.2 20.1 3.4 7.1 8.4 1.1 4.8 9.8

19.4 10.4 6.3 12.1 1.4 15.4

w/ WTO

3.7

5.8 1.7 0.0 1.9 1.0

2.6 2.4 1.7 8.4 19.6 2.2 2.6 3.4 0.1 5.0 5.5

0.3 0.7 4.1 3.5 0.1 2.3

4.8

6.7 2.8 0.0 2.5 0.6

1.2 1.0 0.1 8.8 18.5 2.6 3.1 5.5 0.7 7.8 8.1

0.1 0.1 0.8 0.5 0.0 0.4

w/o WTO

6.8

7.5 3.1 0.0 2.7 0.7

1.3 1.0 0.1 10.6 47.1 3.0 3.4 6.5 2.2 9.8 9.9

0.1 0.1 0.7 0.5 0.0 0.4

w/ WTO

3.4

1.2 2.0 1.8 1.5 0.7

3.1 0.9 1.6 13.4 1.0 2.6 4.0 4.2 2.0 3.6 4.2

6.5 3.2 1.2 2.0 0.2 2.7

1995

5.3

1.7 2.4 2.8 2.0 1.3

6.4 1.3 9.1 18.0 1.1 3.9 5.8 5.8 1.8 5.3 5.9

16.4 9.2 3.9 8.9 0.6 9.6

w/o WTO

2005

6.6

1.5 2.2 2.7 1.8 1.2

6.2 16.2 8.5 25.5 3.7 4.6 6.3 6.6 4.8 5.7 7.5

16.0 9.1 4.0 9.6 0.6 9.8

w/ WTO

China’s Imports as a Share of World Imports (%)

Note: (a) The expression w/o WTO means the case of no WTO accession and w/WTO is the case of WTO accession. (b) The model assumes the presence of concessional imports in the form of duty exemptions. Source: Ianchovichina, Martin and Fukase (2000b).

5.3

19.6 10.6 6.2 11.6 1.3 15.7

14.3 8.3 5.1 6.7 0.8 10.6

Foodgrain Feedgrain Oilseeds Meat and livestock Dairy Other agriculture

w/o WTO

2005

1995

1995 2005

China’s Exports as a Share of World Exports (%)

China’s Output as a Share of World Output (%)

TABLE 4 Global Impact of China’s WTO Accession on Major Sectors in China 170 Deepak Bhattasali and Masahiro Kawai

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protection of these products, with the resulting rise in imports. China’s share in world output for apparels rises dramatically because of the lifting of the burdens imposed by the quota restrictions on China’s exports and by China’s high cost structure in the industry. China’s share in world output for automobiles declines sharply, because the industry is currently very inefficient due to the excessive entry into the sector in the presence of the protection.23 Not surprisingly, China’s shares of world export markets for apparel, textiles, electronics, and other manufacturers rise dramatically due to WTO accession. There is scope for high-tech sectors to grow, as reflected in the expansion of the electronics sector. On the import side, China becomes a much bigger market for its trading partners. Interestingly, China’s import shares in the world market for textiles, apparel, automobiles, other manufactures are expected to rise significantly. WTO liberalization clearly expands opportunities for intra-industry trade in many manufacturing sectors, particularly in textiles, automobiles, electronics, and other manufactures. In these sectors, even though the output shares may not rise significantly, both export and import shares rise, implying that greater import demand may be export-driven. It is important to see the fact that greater intra-industry trade benefits not only China but also its trading partners. Sectoral Impact on Japan, North America, the EU, and Developing Economies Attempts are made to quantify the sectoral impacts of China’s WTO accession on major developed and developing countries or regions. Tables 5a and 5b show China’s real imports, measured at the 1995 prices, due to WTO accession over the period 1995–2005, both by source and sector. The estimates suggest that China’s entry into the WTO will provide the greatest benefits to exporters in the Asian newly industrialized economies (NIEs) — such as Hong Kong SAR, Korea, Singapore, and Taiwan Province of China (POC) — , Japan and Western Europe. The benefits accruing to ASEAN exporters are not as large as those to Asian NIEs exporters. The imports with the largest increases are other manufactures, textiles, petrochemicals, metals, wearing apparel, and beverages and tobacco from the Asian NIEs, automobiles from Western Europe (members of the European Union and the EFTA), other manufactures, electronics, and textiles from Japan, and beverages and tobacco from North America (the United States and Canada). Note that

28,638

0 113 3 712 61

959 5,202 1,416 0 145 688 3,423 1,198 –259 1,350 3,491

2,972 2,191 364 1,436 55 3,118

w/ WTO

28,571

0 1,005 254 2,669 428

379 11 156 652 25 553 2,883 1,384 1,897 2,614 12,944

27,978

0 359 253 1,738 435

550 13 1,445 461 25 555 2,339 1,007 532 2,828 13,094

874 593 5 558 135 178

w/o WTO 855 592 6 636 139 186

w/ WTO

50,182

0 301 233 1,461 372

516 1,454 2,159 1,060 140 1,477 2,150 1,311 23,478 1,195 10,462

2005

Western Europe

310 225 2 98 36 48

1995

33,301

0 107 0 279 3

128 4 32 3,223 78 375 4,388 4,427 1,215 3,715 15,282

0 0 0 33 2 10

1995

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO is the case of WTO accession. Source: Background data in Ianchovichina and Martin (2001).

27,651

0 131 3 805 74

0 357 2 809 111

Utilities Trade & transport Construction Business & finance Government services

19,019

1,010 58 1,352 390 14 1,194 4,328 647 91 2,186 5,435

544 29 141 471 11 1,009 3,560 924 290 1,871 5,592

Other food Beverages & tobacco Extractive industries Textiles Wearing apparel Wood & paper Petrochemicals Metals Automobiles Electronics Other manufactures

Total

3,044 2,218 353 1,260 53 3,005

w/o WTO

2005

North America

1,276 827 109 238 17 829

1995

Foodgrain Feedgrain Oilseeds Meat & livestock Dairy Other agriculture

Sectors

Import source 2005

22,824

0 31 0 208 1

166 4 283 1,265 13 309 2,855 3,046 181 2,956 11,331

0 0 0 141 6 26

w/o WTO

Japan

TABLE 5a China’s Real Imports from Developed Regions due to WTO Accession: 1995–2005 (Millions of US Dollars at 1995 Prices)

49,212

0 22 0 164 1

147 242 754 7,766 684 787 3,520 2,872 –1,027 8,644 24,444

0 0 0 158 6 26

w/ WTO

172 Deepak Bhattasali and Masahiro Kawai

155,491

62 4,401 32 139 38

322 6,056 737 35,735 7,010 4,668 24,889 12,812 –224 5,575 52,247

41 0 2 498 11 439

w/ WTO

7,510

0 88 10 135 12

1,175 4 1,198 489 6 1,400 695 244 8 133 572

368 0 0 138 2 832

1995

17,667

0 44 15 113 32

1,708 3 7,942 368 7 1,595 621 226 3 149 648 0 38 14 98 29

1,588 22 6,805 1,304 34 2,254 786 318 –8 348 2,140

794 1 1 804 8 2,695

w/ WTO

20,074

2005

828 1 1 717 7 2,638

w/o WTO

Southeast Asia

15,386

3 323 99 347 294

1,432 1 2,990 846 21 259 3,118 3,050 295 38 1,105

33 42 34 223 2 833

1995 2005

38,505

1 180 98 349 840

2,240 2 22,019 940 49 294 2,749 2,467 94 40 1,530

83 103 104 1,116 6 3,200

w/o WTO

36,432

1 169 93 318 793

2,168 11 20,647 626 377 225 975 1,493 –54 42 3,573

85 102 108 1,298 6 3,376

w/ WTO

Other Developing Regions

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO is the case of WTO accession. Source: Background data in Ianchovichina and Martin (2001).

Total 59,433

92 6,109 40 222 61

95 8,897 40 351 79

Utilities Trade & transport Construction Business & finance Government services

58,433

389 213 476 11,282 485 1,750 11,314 5,254 86 3,685 16,930

Foodgrain Feedgrain Oilseeds Meat & livestock Dairy Other agriculture

244 151 107 11,181 895 1,831 10,445 4,335 265 3,316 15,979

2005

Other food Beverages & tobacco Extractive industries Textiles Wearing apparel Wood & paper Petrochemicals Metals Automobiles Electronics Other manufactures

w/o WTO 48 0 3 498 12 482

1995

Asian NIEs

13 0 1 88 4 115

Sectors

Import source

TABLE 5b China’s Real Imports from Developing Regions due to WTO Accession: 1995–2005 (Millions of US Dollars at 1995 Prices)

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Deepak Bhattasali and Masahiro Kawai

the benefits to the United States and Western Europe are concentrated in a specific sector in each case, i.e., beverages and tobacco and automobiles, respectively, while the benefits to Japan and other East Asian economies are spread across various sectors. According to Table 5b, the aggregated impact on exporters in other developing countries is negative, though there are variations in impact across source countries. Though it is not shown in the table, South Asia is a large beneficiary with increasing exports of other manufactured products. In essence, while the industrialized countries benefit from China’s WTO accession by expanding exports to China, not all developing economies gain. Those that gain are the neighbouring economies capable of exploiting the trade opportunities with China through intra-industry trade in manufacturing including textiles and wearing apparel. The impacts of China’s WTO entry on the global shares of output and trade of developed countries (Japan, North America, and the European Union) at sectoral levels are summarized in Appendix Tables 2–4. It turns out that China’s WTO accession has a negligible impact on the total output and trade shares of Japan and North America in the global market, while it has a small negative impact on the EU’s total trade share. Japan’s shares in the global output and export markets for textiles and electronics rise modestly relative to the baseline scenario of no WTO accession, while its output and export shares of automobiles decline. There is very little impact on Japan’s import share at sectoral levels, except for agriculture that is expected to experience some modest increase. The reason for the negligible impact is that China’s WTO accession is unlikely to generate large-scale intra-industry trade in manufacturing for Japan, thus limiting its imports of manufactured products. As can be seen in Appendix Table 3, China’s WTO accession has differential impacts on several sectors in North America. It has a direct positive impact on beverages and tobacco by expanding the output and export shares and reducing the import share. It has a negative impact on textiles and apparel by reducing the output and export shares and raising the import shares for apparel. It turns out that China’s WTO accession leads to a contraction in EU’s textiles and apparel sector and other manufactures as their shares in the global output, export and import markets reduced (Appendix Table 4). EU will not enjoy trade expansion in these sectors. However,

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the automobiles sector will receive a boost, by stimulating the output and export shares and cutting the import share. The impact on other developing countries, particularly China’s neighbours in Asia, is mixed (the estimation results are not reported). Taiwan POC is one of the economies that will benefit most from China’s WTO accession. It will see a rise in the shares in the global output, export, and import markets for textiles and petrochemicals, with the consequent expansion of intra-industry trade in these sectors.24 Similarly, other Asian NIEs also see an expansion of its intra-industry trade in manufacturing with China. On the other hands, countries in Southeast Asia and South Asia will see a relatively large decline in the output and export shares in apparel. These sectors are the ones most adversely affected by China’s WTO accession. Impact on Incomes of China and the Rest of the World Table 6 demonstrates income changes that are expected to take place between 1995 and 2005, due to China’s WTO accession.25 The table demonstrates that the baseline changes in China’s income over the decade are substantial 27.4 per cent and that China will gain an additional 0.2 per cent, beyond the baseline changes, due to WTO accession because the fall in its protection and the removal of the trade partners’ barriers on its textile and apparel products improve the country’s competitiveness and efficiency in resource utilization. Naturally, the largest percentage gain accrues to China among the economies in the world in terms of the net impact of WTO accession. North America, Western Europe, and Japan also benefit from China’s WTO accession as they can increase the efficiency of resource use due to more liberal trade with China. The Asian NIEs, including Taiwan POC, benefit significantly because of their expanded exports of textiles and other manufacturing products to China and their engagement in intraindustry trade in manufacturing with China. Interesting is the observation that the income gain for Japan is much smaller than that for North America, Western Europe and the Asian NIEs. The reason is that the impact on Japanese income, including consumer benefits due to greater imports, is limited, as Japan is not expected to deepen intra-industry trade in key manufacturing products with China, or with the neighbouring Asian NIEs, as a result of China’s entry into the WTO. If Japan wishes to realize greater gains in income,

Countries/Regions

28,319,624

848,233 319,542 792,466 255,850

1,360,294 700,697 659,597

36,071,751

1,126,061 429,908 971,226 387,640

1,766,251 891,545 874,706

689,394 519,507 169,887

7,399,992 2,029,513 457,624 861,972 249,702 460,216

27,381,493 10,537,421 10,477,846 5,819,510 546,717

1,290,265

Income w/o WTO (Baseline) 2005 B

36,127,833

1,125,701 429,985 970,981 387,364

1,766,308 891,514 874,794

56,082

360 77 –245 –276

57 –31 88

–3,963 –3,190 –773

7,752 12,462 5,191 7,819 –171 –377

7,407,744 2,041,975 462,815 869,791 249,531 459,839 685,431 516,317 169,114

19,708 9,456 7,115 2,921 216

28,622

Net Income Changes w/ WTO C–B

27,401,201 10,546,877 10,484,961 5,822,431 546,933

1,318,887

Income w/ WTO (Accession) 2005 C

Source: Background data in Ianchovichina, Martin and Fukase (2000b).

Total

Middle East & N. Africa Sub-Saharan Africa Eastern Europe and FSU Rest of the W orld

Latin America Brazil Other Latin America

440,769 331,447 109,322

5,464,721 1,447,568 280,853 624,308 199,799 342,609

Developing Economies East Asia Taiwan POC Other Asian NIEs Indonesia Other Southeast Asia

South Asia India Other South Asia

22,141,335 7,976,177 8,649,828 5,095,149 420,182

713,567

Developed Countries North America Western Europe Japan Australia & New Zealand

China

Income in US$ Mill. 1995 A

27.4

32.8 34.5 22.6 51.5

29.8 27.2 32.6

56.4 56.7 55.4

35.4 40.2 62.9 38.1 25.0 34.3

23.7 32.1 21.1 14.2 30.1

80.8

Impact of Baseline (%) (B–A)/A

0.20

–0.04 0.02 –0.03 –0.11

0.00 –0.00 0.01

–0.90 –0.96 –0.71

0.14 0.86 1.85 1.25 –0.09 –0.11

0.09 –0.12 0.08 0.06 0.05

4.01

Net Impact of WTO: from 1995 (%) (C–B)/A

TABLE 6 Net Impact of China’s WTO Accession on Income Levels of China and Other Countries/Regions, 1995–2005

176 Deepak Bhattasali and Masahiro Kawai

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it needs to invest more in China and expand the basis for intra-firm trade. Other developing economies, mostly those in South and Southeast Asia, such as India and Indonesia, may lose in competition with China in third markets primarily due to the removal of quotas on Chinese textile and apparel products. Essentially these economies will experience a substantial reduction in the textiles or apparel sector, leading to a net income loss at least in the short to medium term.

Conclusion This chapter has examined some of the issues associated with China’s accession to the WTO. It has focused on likely developments in agriculture, manufacturing, and services, as well as those in the aggregate economy. In the short to medium term, the changes that will take place from WTO accession are significant in themselves, but modest in comparison to the long-term resource reallocations that are taking place due to the ongoing socio-economic transformation in China. On the trade side, the impact of China’s WTO accession will depend on the agreements made with its trading partners, the interaction between tariff reductions and the elimination of quantitative barriers, the extent of other remaining trade barriers including local protection, and the magnitude of foreign direct investment. WTO accession will also have important implications for structural reforms that are underway in China. In broad terms, accession will add urgency to the further acceleration of reforms in the state-owned enterprise and commercial bank sectors, spurring the development in the legal and regulatory framework necessary for a market economy. There are several expected effects. First, at the initial stage, trade liberalization is likely to increase competitive pressures in some agricultural sub-sectors and major capital-intensive manufacturing sectors. Since these sectors account for relatively small proportions of exports and imports, the negative impact on economic growth will be limited. Though agriculture employs half of labour force, the impact on the sector’s employment will be small. As Chinese farmers begin to produce along the lines of their comparative advantage, agriculture becomes more efficient. Unlike most other developed and developing countries, the Chinese economy will derive major gains from avoiding

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the resource misallocation involved in subsidizing increasingly inefficient agricultural sub-sectors. In addition, diversification into high value-added agricultural products can also help labour-intensive exports. Second, while manufacturing is also likely to develop along the lines of comparative advantage, this process is likely to be slower due to the coexistence of a variety of adverse factors — sluggish, giant state-owned enterprises, monopolies, and excessive and inappropriate industrial capacities — and more disruptive with regard to employment. In the short run, automobiles, machinery, petrochemicals and certain other capital-intensive sectors will be forced to adjust, with a large negative impact on employment. On the other hand, the elimination of the textiles and clothing quotas overseas, beginning in 2005, will result in a substantial increase in textiles and apparel exports. With textiles and clothing already accounting for 4.25 per cent of GDP, and 22 per cent of exports, the impact on growth and exports will be non-negligible. Third, the employment and income gains in services will be significant, partly in response to rising demands for consumer services from the increasingly affluent urban populations, and partly from the reduction of the state’s role in core sectors such as housing, health, education and personal services. But the main thrust of growth in the economy is expected to come from the expansion and deepening of producer services, chiefly distribution, logistics and financial services. There will be a considerable increase in foreign direct investment, concentrated in finance (banking, insurance, and securities), telecommunications, and retail. Once foreign direct investment in the distribution sector has been completed, there will likely be a further surge in imports since the requirement that foreign firms use Chinese distributors has been a major constraint on imports. Finally, as the effects of increased competition feed through into efficiency gains, higher total factor productivity (TFP) growth is expected. How fast TFP rises will depend on the speed with which supporting reforms in the SOE and state-owned commercial bank sectors will be undertaken, private sector development and on the magnitude of FDI inflows into the various sectors of the economy. WTO accession is clearly a net gain to the Chinese economy in the medium to the long run. Depending with China’s share of world trade expected to double. In the short run, however, the net macroeconomic effect on employment and output may be mildly adverse, which will

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be broadly manageable. It seems unlikely that GDP growth will fall sharply, or that there will be a major deterioration in the balance of payments. There could be some labour dislocations in certain sectors and a widening of income disparities that will require further efforts to strengthen the social safety net and to foster more balanced regional development. In the medium term, China’s growth rates are expected to be higher due to greater efficiency in resource usage and higher TFP growth.

Notes 1

2

3 4

5

6 7

This chapter was prepared for presentation to the APEC Roundtable and APIAN Workshop “APEC at the Dawn of the 21st Century,” organized by the Institute of Southeast Asian Studies, Singapore, 8–9 June 2001. It is a slightly revised version of the paper presented to the DIJ-FRI International Conference, “Japan and China — Cooperation, Competition and Conflict”, sponsored by the German Institute for Japanese Studies (DIJ) and the Fujitsu Research Institute (FRI) and held in Tokyo on 18–19 January 2001. The authors are thankful to Elena Ianchovichina and Will Martin for discussions and support, to Hanns G. Hilpert and other DIJ-FRI conference participants for stimulating comments, and to David Bisbee for editorial assistance. The findings, interpretations, and conclusions expressed in this paper are those of the authors and do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent. The last census was completed in November 2000, but its results have not been made available. The figures for 2000 are estimates based on medium variant projections. Ianchovichina, Martin and Fukase (2000b). In conventional national output calculations, China’s gross national product (GNP) in 1999 was estimated at US$980 billion, the seventh largest in the world. In purchasing power parity terms, it was ranked second, with an estimated US$4.1 trillion, half that of the United States, but a third larger than Japan’s. For details see Martin (1999), United States Government (2000), and Addonizio and Bhattasali (2000). China also reached an agreement with the European Union in May 2000. In accordance with these general principles, for example, China will have to publish promptly all trade regulations and tariff rates, using price-based measures such as tariffs, rather than quotas, licenses and designated trading, to restrict imports.

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9

10

11

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It is well established that imports of intermediate inputs and capital goods are exempted from duty if they are used for export processing or for other export-related activities. As a result, the actual tariff collected is much smaller than what the stated tariff rates imply. The pre-WTO tariff rates summarized in Table 2 are the stated rates on imports that do not benefit from duty exemptions and, hence, overstate the actual rates of protection. When the quantitative impact of China’s WTO accession is accessed in Section IV, the authors explicitly consider duty exemptions in the GTAP model. This impact will be significant, given the fact that China was excluded from the Uruguay Round Agreement on Textiles and Clothing. Most quotas for China’s exports of textiles and clothing will be phased out over five years, and special textile safeguards introduced under the agreement will be phased out over eight years. See Rosen (1999) and United States Senate (2000). The GTAP model (Hertel 1997) is used widely for trade policy analysis. It is a standard global general equilibrium model that assumes perfectly competitive markets and constant returns to scale technology. A representative household that allocates disposal income between consumption and savings according to a Cobb Douglas utility function governs each country’s final demand. Land, labour, capital and natural resources in a country are fixed and fully employed, though they are mobile (except for natural resources) across sectors within a country. The returns to these factors of production accrue to the households (i.e., factor owners) in the country in which they are employed. Product differentiation among imports from different countries and between imports and domestic goods allows for two-way trade in each product category, depending on the ease of substitution between products from different countries. The GTAP model is solved in order to determine the changes in output and trade flows as a result of the proposed trade policy changes. The model maintains all of the restrictions imposed by static economic theory: global savings equal global investment and are allocated across countries in order to equate expected rates of return (without affecting capital stock); changes in consumer demand add up to changes in total spending; each country’s total exports equal total imports of these goods by other countries, less shipping costs; and each country’s income consists of consumption, investment, government spending, and net exports. Although there is nothing technically wrong with the models applied so far to the quantification of WTO effects, none of them are based on information regarding the actual commitments made by China. Several rely on heroic assumptions subsequently disproved by new data. See Wang (1997), People’s Republic of China (1998), Rosen (1999), Huang and Chen (1999), Ianchovichina, Martin and Fukase (2000a, b), and Ianchovichina and Martin (2001) for some of the more useful estimates.

The Implications of China’ s Accession to the WT O 12

13

14

15

16

17

18

19 20

181

This is another reason that Table 2 assumes the same degree of agricultural protection with or without WTO accession. This assessment is in contrast with that of Zhai and Li (2000), who estimated that about 13 million workers would be released in rural areas over the next five years, mainly producing wheat (5.4 million), cotton (5.0 million), and rice (2.5 million). However, these figures appear to be exaggerated because their computation does not take into account: the protective nature of the TRQ bind; the low price of rice in the domestic market; the ease with which farmers shift their product mix away from those negatively affected by WTO accession towards those positively affected (such as non-grain, non-cotton crops, livestock, fruit, flowers, and vegetables); and the availability of offfarm income-earning opportunities. Some examples of such firms are TV manufacturers TCL and Konka, automotive manufacturers Qingling and Brilliance China, and Legend, China’s leading manufacturer of PCs. See Nolan (2000) and McKinsey & Company (2000) for comments on the state of readiness of Chinese firms. Such firms dominate the electrical equipment, oil and petrochemicals, aerospace, metallurgical, chemical and pharmaceutical industries. There are, however, serious measurement problems. Many producer services are wrongly attributed to manufacturing sector value added. Although this is a common problem for national account statistics all over the world, it is especially troublesome in China. Firms in this country have traditionally performed a range of in-house functions that in more developed or marketoriented economies will be delivered by specialized services sector enterprises (for example, sales, marketing, logistics management). In manufacturing, there are no transparency commitments required for policies currently in place related to investment, nor are there any principles of non-discriminatory treatment or protection from expropriation without compensation. In services, the agreed performance requirements for the goodsproducing sectors with respect to minimum standards of treatment, nondiscriminatory treatment, transfer of funds or transparency may not apply. National treatment of foreign firms is only substantive in the GATS. This projection is based on the International Monetary Fund (IMF). Changes in consumption patterns and costs in the world drive this result, which is noted by Wang (1997) and People’s Republic of China (1998). One important property of the baseline scenario is the rapid growth of China’s output shares in the global market for almost all agricultural products. This is based on the assumptions of high rates of population growth (0.83 per cent per year), strong income growth (7.4 per cent per year), and high income elasticities of demand for agricultural commodities and food.

182 21

22

23

24

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As pointed out by Martin (1999), on average China’s agricultural goods face restrictions that approximate a tariff of 32 per cent in regional markets, compared to about 8 per cent for its manufactured exports. In this connection, it is useful to note the behaviour of foreign investors in agro-industrial fields, mainly from the region and chiefly from Japan, who have flooded into the coastal provinces of China since early in 2000. This inefficiency will be eliminated by the removal of protection and the resulting increase in the size/scale of automobile firms. Once this takes place, China’s automobiles sector will be able to cope with foreign competition and expand output and exports. Unfortunately, the GTAP model does not capture greater efficiency due to scale economies. If Taiwanese firms choose to relocate their production sites to China, however, they may not benefit in terms of output and export expansion as much at least in the short to medium term. Because of its comparative static nature, the current GTAP model does not capture the impact of additional FDI flows that may be induced by trade policy changes. Strictly speaking, the estimates are welfare changes expressed in million US dollars at the 1995 prices. The estimates are derived from the GTAP model that incorporates duty exemptions (Ianchovichina, Martin and Fukase, 2000a, 2000b).

References Addonizio, Elizabeth and Deepak Bhattasali. “The Impact of WTO Entry on China’s Agricultural Sector”. Beijing: World Bank Resident Mission in Beijing, World Bank, Mimeograph, June 2000. Frazier, Mark W. “Coming to Terms with the ‘WTO Effect’ on US-China Trade and China’s Economic Growth”. National Bureau of Asian Research. Mimeograph, September 1999. Hertel, Thomas W. Global Trade Analysis: Modelling and Applications. Cambridge: Cambridge University Press, 1997. Huang, Jikun and Chunlai Chen. “Effects of Trade Liberalisation on Agriculture in China: Commodity Aspects”. CGPRT Centre Working Paper no. 43, Bogor. Ianchovichina, Elena and William Martin. “Trade Liberalisation in China’s Accession to WTO.” Washington, D.C.: World Bank Mimeograph, June, 2001. Ianchovichina, Elena, William Martin and Emiko Fukase. “Comparative Study of Trade Liberalisation Regimes: The Case of China’s Accession to the WTO”. Paper presented to the Third Annual Conference on Global Economic Analysis, Monash University, Melbourne, June 27–30, 2000a. ———. “Assessing the Implications of Merchandise Trade Liberalisation in China’s Accession to WTO”. Paper presented to the Roundtable on China’s

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Accession to the WTO, sponsored by the Chinese Economic Society and the World Bank, Shanghai, July 8, 2000b. Martin, William. “WTO Accession and China’s Agricultural Trade Policies”. Washington, D.C.: World Bank. Mimeograph, 14 June 1999. Martin, William, Betina Dimaranan and Thomas W. Hertel. “Trade Policy, Structural Change and China’s Trade Growth”. World Bank, Washington, D.C.: Mimeograph, November 14, 1999. McKinsey & Company. China in the WTO: What Will Really Change — A Perspective for CEOs. January 2000. Naughton, Barry. “China’s Trade Regime on the Eve of WTO Accession: Achievements, Limitations and Implications for the US”. Mimeograph, June 2000. Nolan, Peter Hugh. “China and the WTO: The Challenge for China’s Large-scale Industry”. Paper for the Conference 2000, 21st Century Forum of the CPPCC 14–16 June 2000, Beijing. People’s Republic of China. The Global and Domestic Impact of China Joining the World Trade Organization. Development Research Center of the State Council, December 1998. Rosen, Daniel H. “China and the World Trade Organization: An Economic Balance Sheet”. International Economic Policy Briefs, no. 99–6 (June 1999). Washington, D.C.: Institute for International Economics, United States Government. “Summary of US-China Bilateral WTO Agreement”. China Trade Relations Working Group (2 February, 2000), Washington, D.C.: White House. United States Senate. “The US Economy and China’s Admission to the WTO”. Joint Economic Committee (May 2000), Washington, D.C. Wang Zhi. “The Impact of China and Taiwan Joining the World Trade Organization on US and World Agricultural Trade: A Computable General Equilibrium Analysis.” Technical Bulletin, no. 1858 (May 1997). Washington D.C.: Commercial Agriculture Division, Economic Research Service, US Department of Agriculture, Zhai Fan and Shantong Li. “The Implications of Accession to WTO on China’s Economy”. Paper presented to the Third Annual Conference on Global Economic Analysis, Monash University, Melbourne, 27–30 June 2000.

429.0 423.6 291.2 67.1 65.3 9.9 13.6 8.1 33.6 5.4

Labour Force (end-year; in millions)(c) Employed(d) Agriculture(a) Manufacturing(b) Other Construction Trade Transport and Communications Finance, public administration & others Unemployed(e) — (100.0) ( 68.7) ( 15.8) ( 15.4) ( 2.3) ( 3.2) ( 1.9) ( 7.9) —

(100.0) ( 30.1) ( 44.2) ( 25.7) ( 4.3) ( 4.7) ( 4.5) ( 12.1) 644.8 639.1 384.3 97.1 157.7 24.2 28.4 15.7 89.4 5.7

1,854.8 501.7 685.8 667.3 85.9 142.0 114.8 324.6 — (100.0) ( 60.1) ( 15.2) ( 24.7) ( 3.8) ( 4.4) ( 2.5) ( 14.0) —

(100.0) ( 27.0) ( 37.0) ( 36.0) ( 4.6) ( 7.7) ( 6.2) ( 17.5)

1990

719.8 705.9 353.6 90.6 261.7 34.1 ( 4.4) 20.2 159.8 14.0

8,191.9 1,445.7 3,497.5 3,247.9 544.3 684.2 446.0 1,573.4

— (100.0) ( 50.1) ( 12.8) ( 37.1) ( 4.8) ( 6.7) ( 2.9) ( 22.6) —

(100.0) ( 17.7) ( 42.7) ( 39.6) ( 6.6) ( 8.4) ( 5.4) ( 19.2)

1999

Notes: (a) Agriculture includes farming, forestry, husbandry, sideline production, and fishing. Labour force employed in agriculture refers to those in the primary industry. (b) Manufacturing includes mining, manufacturing, electricity, gas and water. (c) Labour force refers to people within the working age range 16–50 years for men and 16–45 years for women excluding military personnel, prisoners, and the disabled, and excludes unemployed rural labourers. (d) Employed labour force refers to social labour force that generates income including total staff and workers, employees in urban private enterprises, urban individual labourers, rural labourers and other social labourers. (e) Unemployed refers to unemployed labour force in urban areas only. Source: National Bureau of Statistics, China Statistical Yearbook.

451.8 135.9 199.7 116.2 19.6 21.4 20.5 54.7

Gross Domestic Product (GDP) (in billions of Yuan, at current prices) Agriculture(a) Manufacturing(b) Other Construction Trade Transport and Communications Finance, public administration & others

1980

APPENDIX TABLE 1 Gross Domestic Product and Labour Force and Employment by Sector, 1980–99 184 Deepak Bhattasali and Masahiro Kawai

22.0 20.3 6.4 10.9 14.7 17.4 17.0 18.0 13.3 28.5 17.1 11.5 17.9 21.4 18.3 8.4

23.7 22.2 7.7 12.8 16.7 19.2 19.1 20.2 14.9 31.4 19.0

12.8 20.1 24.0 19.9 9.3

18.1

Other food Beverages and tobacco Extractive industries Textiles Wearing apparel Wood and paper Petrochemicals Metals Automobiles Electronics Other manufactures

Utilities Trade and transport Construction Business and finance Government services

Total

16.3

11.5 18.0 21.5 18.4 8.5

22.0 20.6 6.4 11.5 14.5 17.5 17.1 18.0 13.1 28.8 17.2

19.4 0.8 0.3 7.5 8.1 9.9

8.6

0.0 7.4 0.0 5.2 0.4

0.8 0.9 0.4 5.6 0.4 1.5 6.4 7.8 17.7 14.2 15.3

0.1 0.0 0.0 0.3 0.0 0.3

8.3

0.0 6.9 0.0 5.4 0.3

0.9 4.3 0.5 5.2 0.2 1.5 6.1 7.7 16.4 12.8 14.6

0.1 0.0 0.0 0.3 0.0 0.3

w/o WTO

2005

8.2

0.0 6.8 0.0 5.4 0.3

0.9 4.0 0.6 7.2 0.4 1.7 6.1 7.5 14.2 13.4 14.3

0.1 0.0 0.0 0.4 0.0 0.3

w/ WTO

7.7

0.0 16.2 0.2 8.2 0.5

12.8 7.0 17.8 3.7 11.3 7.1 4.6 5.3 2.8 5.7 4.5

19.6 45.3 16.6 17.6 9.7 8.4

1995

7.1

0.0 16.1 0.2 8.1 0.5

11.8 6.0 14.3 3.2 11.1 6.7 4.3 5.0 2.9 5.7 4.3

16.0 39.5 15.1 16.9 10.1 7.5

w/o WTO

2005

7.1

0.0 16.3 0.2 8.2 0.5

11.9 5.2 14.4 3.1 11.2 6.7 4.3 5.0 2.9 5.9 4.3

16.2 39.6 15.1 16.7 10.2 7.6

w/ WTO

Japan’s Imports as a Share of World Imports (%)

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO means the case of WTO accession. Source: Background data in Ianchovichina, Martin and Fukase (2000b).

16.3

19.3 0.8 0.3 7.5 8.1 9.8

22.9 0.9 0.3 8.4 8.5 11.7

Foodgrain Feedgrain Oilseeds Meat and livestock Dairy Other agriculture

w/ WTO

1995

2005

1995 w/o WTO

Japan’s Exports as a Share of World Exports (%)

Japan’s Output as a Share of World Output (%)

APPENDIX TABLE 2 Impact of China’s WTO Accession on Major Sectors in Japan

The Implications of China’ s Accession to the WT O 185

20.2 20.0 21.1 15.5 15.5 29.7 21.1 20.7 30.7 26.8 24.2 28.8 29.2 26.8 29.8 30.1

20.1 19.2 21.1 16.9 20.9 28.3 20.4 20.2 28.6 25.0 24.2

28.9 28.1 24.8 28.3 29.4

25.5

Other food Beverages & tobacco Extractive industries Textiles Wearing apparel Wood and paper Petrochemicals Metals Automobiles Electronics Other manufacturess

Utilities Trade & transport Construction Business & finance Government services

Total

2005

26.3

28.9 29.2 26.8 29.8 30.1

20.3 20.8 21.2 14.4 12.2 29.8 21.1 20.9 31.4 26.8 24.2

4.8 43.5 23.3 21.9 21.0 10.5

w/ WTO

17.7

12.6 17.6 0.9 27.0 19.7

12.2 14.4 10.9 7.5 6.5 25.6 14.9 12.5 24.2 19.8 18.5

40.0 59.8 58.4 18.2 3.6 14.7

1995

17.9

12.7 16.7 1.0 29.6 14.7

13.7 15.4 11.2 7.0 4.4 26.8 16.6 11.7 26.5 20.1 17.8

43.1 63.0 61.6 19.6 3.9 16.8

w/o WTO

2005

17.5

12.6 17.0 1.0 29.8 14.8

13.7 19.5 11.1 5.6 3.2 26.3 16.3 11.6 25.6 19.8 17.2

42.7 62.9 61.5 20.1 4.0 16.9

w/ WTO

North America’s Exports as a Share of World Exports (%)

18.7

12.6 14.6 2.0 20.3 13.2

11.1 13.4 18.9 9.0 26.3 19.4 14.3 15.7 30.8 27.1 21.2

2.3 3.8 8.4 7.6 4.6 14.3

1995

19.5

12.7 15.3 2.2 19.9 14.7

10.5 10.4 17.7 8.4 34.3 19.8 14.0 16.8 32.7 28.0 22.3

2.1 3.6 8.3 7.1 4.8 13.3

w/o WTO

2005

19.2

12.6 15.2 2.2 19.7 14.7

10.5 8.8 17.8 7.8 35.1 19.6 13.9 16.5 31.3 27.7 21.9

2.2 3.6 8.4 7.0 4.8 13.3

w/ WTO

North America’s Imports as a Share of World Imports (%)

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO means the case of WTO accession. Source: Background data in Ianchovichina, Martin and Fukase (2000b).

26.3

4.8 43.3 22.9 22.0 20.9 10.5

4.5 44.1 22.6 23.1 20.6 11.1

w/o WTO

Foodgrain Feedgrain Oilseeds Meat & livestock Dairy Other agriculture

1995

North America’s Output as a Share of World Output (%)

APPENDIX TABLE 3 Impact of China’s WTO Accession on Major Sectors in North America (United States and Canada)

186 Deepak Bhattasali and Masahiro Kawai

24.9 28.4 14.6 19.6 20.3 30.1 28.1 29.3 39.1 19.8 30.1 31.7 27.7 25.7 38.3 38.6

26.3 29.5 15.7 22.1 23.3 31.6 30.0 31.9 41.8 21.0 32.2

33.1 29.2 27.7 39.3 40.6

32.0

Other food Beverages & tobacco Extractive industries Textiles Wearing apparel Wood & paper Petrochemicals Metals Automobiles Electronics Other manufactures

Utilities Trade & transport Construction Business & finance Government services

Total

2005

30.3

31.7 27.7 25.7 38.2 38.6

24.9 28.9 14.6 18.7 17.6 30.1 28.1 29.5 41.5 19.7 30.0

4.5 12.8 5.6 26.4 38.1 13.6

w/ WTO

42.5

71.9 37.9 61.9 51.9 47.5

43.2 69.7 18.7 40.5 27.1 49.5 53.9 46.2 52.0 30.1 41.3

24.6 27.0 10.2 47.8 80.2 28.6

1995

39.5

69.3 35.3 60.7 47.9 40.9

40.9 68.5 18.8 35.4 17.8 46.5 49.9 42.1 49.5 28.2 38.9

23.5 24.8 10.1 45.1 80.0 26.0

w/o WTO

2005

38.5

68.8 35.4 60.6 47.7 40.5

40.8 60.0 18.8 29.7 11.7 45.9 49.0 41.1 51.6 27.4 37.3

23.3 24.9 10.1 44.6 80.0 25.8

w/ WTO

39.9

73.2 37.9 33.0 46.9 53.3

41.2 39.8 34.1 33.7 44.3 47.8 44.4 43.5 42.4 37.6 34.0

18.8 14.4 46.7 47.6 57.6 47.5

1995

36.6

72.0 35.9 31.8 45.5 50.8

38.1 42.0 29.4 29.0 37.4 44.5 41.1 40.4 39.9 34.6 30.7

15.6 12.8 43.0 41.0 53.1 41.2

w/o WTO

Note: The expression w/o WTO means the case of no WTO accession and w/ WTO means the case of WTO accession. Source: Background data in Ianchovichina, Martin and Fukase (2000b).

30.2

4.5 12.8 5.6 26.6 38.1 13.6

4.9 13.8 6.6 30.1 40.9 16.0

w/o WTO

Foodgrain Feedgrain Oilseeds Meat & livestock Dairy Other agriculture

1995 2005

35.9

71.6 36.0 31.8 45.4 50.8

38.2 35.5 29.5 26.2 35.1 44.0 40.7 39.8 38.6 34.3 30.1

15.5 12.8 43.0 40.4 53.0 41.0

w/ WTO

European Union’s Output as a European Union’s Exports as a European Union’s Imports as a Share of World Output (%) Share of World Exports (%) Share of World Imports (%)

APPENDIX TABLE 4 Impact of China’s WTO Accession on Major Sectors in European Union

The Implications of China’ s Accession to the WT O 187

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7 International Financial Flows and Regional Financial Safeguards in East Asia Ramkishen S. Rajan

Introduction There exists a rich literature detailing the various channels through which a devaluation might be contractionary (see Bird and Rajan 2001a and Rajan and Shen 2002 and references cited within).1 An important channel that was not paid sufficient attention to in this literature is the so-called “balance-sheet effect” due to sizeable unhedged exposures to short-term foreign currency denominated debt (Aghion et al. 2000; and Krugman 1999a, 1999b).2 The rise in corporate bankruptcies due to an escalation in domestic currency liabilities inevitably lead to large-scale domestic “credit rationing”, as decapitalized banks, burdened by large nonperforming loans (NPLs), curtail their lending.3 In a recent review of the International Monetary Fund’s (IMF) response to the East Asian crisis, Fund economists acknowledged the importance of this balance-sheet channel:

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It was … not foreseen at the outset that these economies would adjust in a dysfunctional way of reduced external financing — largely through a collapse of private domestic demand rather than a boom in exports. This adjustment reflected in large part the harsh balance-sheet effects of the currency depreciations that occurred, given the unhedged foreign currency exposures of banks and corporations (Boorman et al. 2000, p. 6).

Thus, while real exchange rate depreciation may boost the exportables sector (“competitiveness channel”), it could simultaneously contract domestic demand by lowering the net value of leveraged, bank constrained firms (“balance sheet channel”). The resultant impact of a real devaluation on aggregate demand therefore depends on the relative magnitudes of the two effects. Krugman (1999b) has noted that the procompetitive effects of a devaluation might dominate for “small” variations in the exchange rate, resulting in a devaluation being expansionary; the balance sheets effects may dominate for “large” devaluations, resulting in an income contraction. The conundrum is that even a small devaluation in developing countries may act as a trigger leading to sharp capital outflows and outright economic collapse after the initial devaluation. As Calvo (1996) has noted: if there is a “bad” equilibrium lurking in the background, a devaluation — especially, an unscheduled devaluation — could coordinate expectations and help push the economy to the “bad” equilibrium (p. 219).

In other words, if devaluation damages confidence it can result in additional capital outflows. This in turn can cause a further decline in the currency’s value that is anticipated, leading to a vicious spiral of crisis-induced devaluation, illiquidity and insolvency of financial institutions and corporates, and an outright economic collapse eventually. Dornbusch (2001) refers to this as a “new-style” crisis. As he states: A new-style crisis involves doubt about credit worthiness of the balance sheet of a significant part of the economy — private or public — and the exchange rate … when there is a question about one, the implied capital flight makes it immediately a question about both … the central part of the new-style crisis is the focus on balance sheets and capital flight … Because new-style crises involve the national balance sheet they involve a far more dramatic impact on economic activity than mere current account disturbances … (p. 2).

Models emphasizing the importance of post-devaluation capital reversals can be differentiated according to the type of capital flows that

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they focus on, viz. bank flows versus portfolio flows (Figure 1). These new-style crisis models provide the analytical basis for a detailed examination of the capital account transactions of the five crisis-hit East Asian economies (henceforth referred to as the Asia-5 economies). The remainder of the chapter is organized as follows. The next section provides an overview of trends and patterns in international capital flows to the Asia-5 economies and the larger East Asian region during the bust period and eventual recovery period that followed (1997 to 2000). Section 3 discusses the rationale for, and progress towards, the recent regional initiatives to buttress the international liquidity positions of participating East Asian member countries via a network of swap

FIGURE 1

Fundamentals based

Crisis Induced Devaluation

Contractionary

Expansionary

Current Account

Flow

Liquidity based

Self-fulfilling based

Capital Account

Stock (balance sheet effects)

Solvency based

Source: Author

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arrangements (i.e. the “Chiang Mai Initiative”). The final section offers a summary and some concluding remarks.

Dynamics of Capital Flows in East Asia in the Late 1990s There are a number of comprehensive discussions of the East Asian crisis.4 It is suffices to note that the region-wide contagion in East Asia may be broadly divided into four sub-periods. The devaluation of the Thai baht was the first period (July 1997). The second period was when the contagion spread to the other Southeast Asian countries (Indonesia, Malaysia and the Philippines specifically) between July and mid-October 1997. The third period was when the crisis engulfed the larger East Asian region (Hong Kong, Singapore, South Korea and Taiwan) following the pre-emptive devaluation of the New Taiwan dollar in October 1997. TABLE 1 Cumulative Output Losses of 1990s Crises (per cent of “potential” output) Cumulative Four-year Output Lossa Tequila Crisis Argentina Mexico

15 30

East Asan Crisis Indonesia Korea Malaysia Thailand

82 27 39 57

Notes: a “Calculated as the sum of the output gap over a four year period, starting with the crisis year. The output gap is defined as the percentage difference between the actual and the hypothetical (or ‘potential’) level of real GDP for each country. Graphically, the cumulative output loss would thus be represented by the area between the ‘potential’ and actual output paths, starting from the crisis year and expressed as a percentage of “potential” real GDP. It follows that accumulated losses will be positive, and possibly large, even in cases where output is back to ‘potential’ at the end of the four-year period. In the counterfactual scenario, it is assumed that ‘potential’ GDP grows at 4 per cent per annum and that actual and ‘potential’ output coincided within the two-year period preceding the crisis. ‘Actual’ GDP during 1999–2002 refers to IMF projections” (IMF 1999).

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Once the South Korean won was devalued in November 1997, this then reverberated back to Southeast Asia and eventually developing countries in general. This was the fourth period (Berg 1999). The crisis did intensify in mid-1998, but this was due to a pronounced liquidity crunch in emerging markets as a whole following the Russian debt moratorium (discussed later in this section). Crisis Scenario It is important to keep in mind that the crisis was principally due to reversals of capital flows from the banking sector. Indeed, balance of payments data from the IMF reveal that the Asia-5 economies saw a sharp reversal in net private capital flows of almost $96 billion between 1996 and 1998 (Table 2). This reversal was due largely to the “other net investment” category which primarily consists of short-term bank lending. The entire US$60 billion of inflows on average into the Asia-5 economies of this category in 1995 and 1996 were lost within the next two years, as international banks became unwilling to roll over existing short-term debts to the region, let alone extend new ones. More insights might be obtained by considering quarterly BIS data on banking flows. International bank lending to the crisis countries remained buoyant at almost US$50 billion in the first half of 1997, but swung to –US$40 billion in the third quarter of 1997, and then averaged close to –US$100 billion for the three consecutive quarters that followed (BIS 1999).5 The sudden reversal in bank lending from the region is often portrayed as strong evidence of a bank panic model (Chang and Velasco 1998, 1999).6 A less noticed but important aspect of the sharp contraction of private market financing was the decline in portfolio flows in 1997– 98 following the initial bank panic, as investors too tried to scale down their regional financial exposures (“flight to quality”).7 There was a turnaround in net portfolio investment of almost US$34 billion between 1996 and 1998 (from US$26 billion in 1996 to –US$8 billion in 1998). In contrast to bank and portfolio flows, FDI flows have remained very stable during the crisis period, averaging about US$10 billion.8 The East Asian crisis appeared to be abating by early 1998 in all the regional economies except Indonesia (where the rupiah remained extremely weak in light of economic policy slippages and civil unrest). However, market turbulence re-emerged and intensified following the devaluation and unilateral domestic debt default by Russia followed by

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38.3 39.3 2.6 –3.5 –3.8 –26.2

Other Emerging Asian Economies Private Capital Flows Direct Investment Portfolio Investment Other Investment Official Flows Reservesa

Notes: a Minus sign denotes a rise and vice versa. Source: IMF (2001).

53.9 8.8 18.8 26.3 0.7 –18.5

Asia-5 Economies Private Capital Flows Direct investment Portfolio Investment Other Investment Flows Reservesa

1995

52.6 44.4 3.9 4.3 –7.6 –43.1

67.4 9.8 25.5 32.0 –6.1 –5.6

1996

22.3 45.3 –0.1 –23.0 –8.3 –46.8

–15.6 9.8 8.4 –33.8 15.7 39.5

1997

–12.5 49.6 –7.2 –54.8 –1.1 –16.9

–28.2 10.3 –8.2 –30.4 19.5 –47.0

1998

–0.6 41.1 –8.9 –32.8 –0.1 –20.9

2.9 13.112.8 –23.0 –6.7 –38.8 –19.2

1999

4.6 38.4 –8.0 –25.8 –8.1 –16.4

–22.4 9.1 13.20 –44.6 5.0 –30.6

Proj 2000

TABLE 2 Net Capital Flows to Emerging East Asian Economies, 1992–2001 (billions of US dollars)

13.0 38.9 –0.2 –25.8 –4.2 –30.8

10.6 9.0 3.3 –1.7 –2.1

Proj 2001

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the near-collapse of the US hedge fund, Long Term Capital Management (LTCM). Depreciation of the Japanese yen vis-à-vis the US dollar, which in turn caused concerns about the recovery prospects of the other Asian economies, exacerbated the circumstances in the Asia-5 economies. This is reflected in a pointed rise in emerging secondary market spreads in all major East Asian borrowers in August and September of 1998 following the Russian debacle — a combination of a contraction in liquidity and a reassessment of credit risk among all emerging markets as creditors and investors fled en masse from emerging economies (ADB 2000 and IMF 1999). Stabilization and Recovery Marked as this downturn was, it proved to be temporary, as the easing of official interest rates in the US and other industrial countries, as well as an agreement on an IMF rescue package for Brazil, worked in tandem to generate a broad-based recovery in emerging markets in general by the fourth quarter of 1998. While the devaluation of the Brazilian real in early 1999 threatened to derail the recovery in East Asia yet again, in actuality it did not. There was very limited negative fallout from the Brazilian crisis.9 Korea, Malaysia and Thailand were all upgraded by ratings agencies immediately in the first half of 1999 (IMF 1999). While capital flows have varied significantly across the Asia-5 economies, in aggregate, net private capital outflows, which totalled over US$40 billion in 1997 and 1998, slowed down to half that in 1999 and 2000. The growth performance in the regional economies broadly mirrored the dynamics of capital flows (Figure 2). Having contracted markedly in 1998 due mainly to drops in capital investment and private consumption, the regional economies bounced back in 1999 and consolidated their respective positions in 2000. The economic revival essentially began in early 1999 as monetary and fiscal policies remained highly accommodative (Boorman et al. 2000).

Bank Flows Closer examination of IMF data on recent capital flows to the Asia-5 economies reveals some important points. First, bank-related outflows have continued unabated (i.e. the “other net investment” component). The sustained bank outflows from the regional occurred despite a renewed willingness of lenders to maintain — if not slightly increase —

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International Financial Flows and Regional Financial Safeguards FIGURE 2 Quarterly Real GDP Growth Rates of Asia-5 Economies, Q4-1996-Q3: 2000 (Percentage, y-o-y) 15 10 Indonesia

5

Rep of Korea

0

Malaysia

-5

Philippines -10 Thaliand -15

99

Q 3 99 Q 4 00 Q 1 00 Q 2 00 Q 3

1

2 Q

99

4

Q 99

3

Q 98

2

Q 98

1

Q

98

4

Q 98

3

Q

97

2

Q 97

1

Q

97

Q

Q 96

97

4

-20

Source: ADB-ARIC (2001).

exposures to the region because of repayments of external liabilities to commercial banks. These repayments were largely concentrated in Thailand and Indonesia (IIF 2001). It is important to note that a central difference between the outflows in 1997–98 and 2000 was that the former was largely unanticipated and thus highly disruptive. In the latter, the loan repayments had been anticipated and scheduled. According to the IIF (2001), net repayments by all Asian economies to banks totalled almost US$100 billion in 1998 and 1999. Additional insight might be obtained from the BIS data on nationality of creditor banks (Rajan and Siregar 2002). While all major creditor banks between December 1997 and June 1998 reduced their stocks of outstanding loans to the region, this trend continued between June 1998 and June 1999 only in the cases of Japanese and UK banks, as most of the repayments by Asian borrowers were focused on these two creditors. In contrast, outstanding loans by US, French and German banks stabilized.

Equity Flows What about equity investments? Portfolio equity investment flows stabilized and turned positive (US$7 to $8 billion in aggregate in 1999– 2000). FDI flows remained positive mainly due to sharply depreciated

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asset values and exchange rates and relaxation of foreign ownership rules which spurred merger and acquisitions (M&As) activities in Korea. However, Asia-5 economies’ share of FDI to the whole of the developing East Asian region has been on a declining trend, particularly so in the case of Southeast Asian-4 (Tables 3 and 4). The decline appears to be a reflection of growing concerns by international investors about the commitment by some of the economies to structural reforms, along with heightened political uncertainties in a number of these countries (ARIC 2001). While it is certainly revealing that FDI has not been stimulated in the regional economies despite large currency depreciations and reductions in domestic asset values, Indonesia was the only country where the actual stock of FDI continued being eroded with net outflows since 1998. Two way Granger-causality between direct investment and GDP for Indonesia using quarterly data from second quarter of 1986 to the fourth quarter of 1999 is instructive. The causality test reveals only one direction causality to be significant, viz. movements in direct investment Granger-cause currency variations in GDP growth (with a two period lag). In other words, the collapse of direct investment in Indonesia, both domestic and foreign, may have contributed significantly to a worsening of the country’s growth (Rajan and Siregar 2001).

TABLE 3 FDI Flows to East Asia, 1985–99 (billions of US dollars) 1985–89 World Developing Economies East Asia China Hong Kong Singapore Taiwan Asia-5 Indonesia Korea Malaysia Philippines Thailand

128.5 22.3 10.3 2.5 1.6 2.4 0.8 3.0 0.4 0.7 0.8 0.4 0.7

1990–94 1995 1996 1997 200.5 61.1 34.5 16.1 4.5 5.2 1.2 9.4 1.7 0.8 4.2 0.8 1.9

1998 1999

328.9 377.5 473.1 680.1 865.5 106.2 145.0 178.8 179.5 207.6 63.4 81.3 82.1 75.8 83.5 35.8 40.2 44.2 43.8 40.4 3.3 10.5 11.4 14.8 23.1 7.2 9.0 8.1 5.5 7.0 1.6 1.9 2.2 0.2 2.9 13.9 19.7 19.2 16.7 17.4 4.3 4.7 4.7 –0.4 –3.2 1.8 3.1 3.1 5.2 10.3 4.2 6.5 6.5 2.7 3.5 1.5 1.2 1.2 1.8 0.7 2.1 3.7 3.7 7.4 6.1

Source: ADB-ARIC (2001).

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International Financial Flows and Regional Financial Safeguards TABLE 4 Country Composition of FDI Inflows to East Asia, 1985–99 (percentage) 1990–94

1995

1996

1997

1998

1999

100.0 44.2 12.4 14.2 3.2 26.2 4.7 2.3 11.5 2.3 5.4

100.0 58.0 5.3 11.7 2.5 22.4 7.0 2.9 6.8 2.4 3.3

100.0 49.4 12.9 11.1 2.3 24.2 7.6 2.8 9.0 1.8 3.0

100.0 51.9 13.4 9.5 2.6 22.4 5.5 5.5 7.6 1.4 4.3

100.0 54.1 18.3 6.8 0.2 20.5 –0.5 6.4 6.4 2.2 9.1

100.0 44.5 25.4 7.7 3.2 19.2 –3.5 11.3 3.9 0.8 6.7

East Asia China Hong Kong Singapore Taiwan Asia-5 Indonesia Korea Malaysia Philippines Thailand

Source: ADB-ARIC (2001).

Reserve Accumulation and Exchange Rate Policies Large-scale reserve holdings accumulated by the East Asian economies in the 1990s somewhat cushioned the exchange rate depreciations in 1997–98. Also of importance is the fact that the regional economies began re-accumulating international reserve holdings following the sharp declines in 1997, implying that the current account surpluses exceeded the total capital outflows (Figure 3). FIGURE 3 Index of Gross International Reserves Less Gold in Asia-5 Economies (June 1997 = 100), Q1: 1997-Q4: 2000 300 250 Indonesia Korea Malaysia Philippines Thailand

200 150 100

00Q3 00Q4

00Q2

99Q4

00Q1

99Q2

99Q3

98Q4

99Q1

98Q2

98Q3

97Q4

98Q1

97Q2 97Q3

0

97Q1

50

Source: ADB-ARIC website.

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Ramkishen S. Rajan FIGURE 4 Bilateral US Dollar Exchange Rates of the Asia-5 Economies (Jan 1997 = 100), 1991–2001 Figure 4 Bilateral Exchange Rates Relative to US Dollar (Jan-97 = 100), 1991-2001

250

600

500 200

400

150

300

100

200

50 100

0

0

Rep of Korea

Malaysia

Philippines

Thailand

Indonesia

Source: ARIC website,

Another reason for the reserve accumulation is the “fear of floating” that seems to characterize developing countries (Calvo and Reinhart 2000a, b; Hausmann et al. 2000). To be sure, there has been a generalized move towards greater exchange rate flexibility during the post-crisis period (Figure 4). However, while the Malaysian capital controls have allowed for the simultaneous maintenance of monetary autonomy and a fixed regime, the other countries have depended on a combination of activist interest rate policy and foreign currency market intervention to ensure relative exchange rate stability. Consequently, they have

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experienced sharp gyrations in monetary variables and international reserves. Some countries like Thailand have also taken steps to curb currency speculation. The replenishment and accumulation of international reserves, on the one hand, as well as the lengthening of the average maturity profile of external indebtedness of the regional economies (Table 5), on the other, has significantly improved the external positions of the regional economies. As a result, their vulnerability to the destabilizing effects of volatile and easily reversible capital flows appears to have eased.10 The issue of safeguarding against financial vulnerability is the focus of the next section.

TABLE 5 External Debt of the Asia-5 Economies, 1995–99 (percentage of GDP)

Indonesiaa Malaysia Philippines Thailand Korea

1995

1996

1997

1998

1999

2000

56.3 37.6 54.9 49.1 26.0

53.4 38.4 55.0 49.8 31.6

63.9 43.8 61.6 62.0 33.4

149.4 58.8 81.7 76.9 46.9

95.5 53.4 75.7 61.4 33.4

93.8 49.3 78.9 51.7 26.5

5.9 7.6 11.3 11.4 9.3

5.7 6.4 7.5 6.8 7.7

of which: Short-term Debt Indonesiaa Malaysia Philippines Thailand Korea

8.7 7.2 8.3 24.5 14.6

7.5 9.9 12.0 20.7 17.9

27.5 11.1 14.0 13.3 23.1

76.4 11.7 15.6 21.0 9.7

Notes: a The data for Indonesia exclude trade credits. Source: IMF (2000).

Regional Financial Safeguards Sustenance and hastening of growth in the medium and longer terms hinge on the extent to which the regional economies persevere with structural reforms in general, and the pace of financial and corporate restructuring in particular.

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Financial sector restructuring has been an essential element of the IMF structural adjustment programs for resolving the crisis in the East Asian economies (Lane et al. 1999; Lindgren et al. 1999).11 Slow progress towards corporate debt restructuring is the single biggest obstacle towards rapid improvements of banks’ balance sheet positions and, consequently, domestic credit availability, particularly to small and medium-sized enterprises (SMEs).12 Table 6 summarizes the progress with corporate restructuring in the four of the five crisis-hit economies. It suffices to note here that, by and large, corporate restructuring has lagged behind financial sector restructuring, with Korea again making the most headway (having introduced measures to strengthen corporate governance), and Indonesia lagging the rest (also see Rajan and Bird 2002). While much remains to be done at a domestic level to restructure the economies, the financial crisis of 1997–98 and the perceived inadequacies of the IMF’s response to it has motivated a sub-group of East Asian economies to take some small but important steps towards enhancing regional financial stability and protect themselves against externally induced shocks and liquidity crises. The establishment of the Manila Framework group (MFG), the ASEAN Surveillance Process (ASP), which is managed by the ASEAN Surveillance Coordinating Unit (ASCU), as well as the formation of the Regional Economic Monitoring Mechanism (REMU) of the ADB, are all steps in the right direction. These initiatives have been discussed in some detail by Chang and Rajan (2001) and Manzano (2001) and will not be repeated here. While these initiatives towards enhanced regional surveillance are important in their own right, they do not in and of themselves reduce a country’s susceptibility to capital account crises, which requires access to international credit lines (Bussiere and Mulder 1999 and World Bank 2000). Contingent Credit Lines: Why Regional? There are two main liquidity enhancement measures, viz. holding adequate reserves to cover short-term debt and the creation of contingent credit lines. As noted previously, the East Asian economies have been rapidly accumulating international reserves since the crisis. In addition, a policy of reserve accumulation involves high fiscal costs as the country effectively swaps high-yielding domestic assets for lower yielding foreign

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Yes Yes

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8 4

88 78

12 ..

52 34

53 27 10 32

19 8

48 27

92 83 46 40

8 7

30 22

Notes: .. Not available a In Thailand, penalties for non-compliance were introduced in August 1999 for creditors who had signed intercreditor agreements Source: Claessens et al. (2000)

Number of restructured cases Percentage of restructured debt in total debt

Number of registered cases Number of cases started

In-court restructurings

234 157 22 13

430 167 22

No Yes

Yes

Thailand

Number of registered cases Number of cases started Number of restructured cases Percentage of restructured debt in total debt

Yes No

No No

Yes

Rep. of Korea

825

Yes

Malaysia

No

Indonesia

Out-of-court restructurings

All or the majority of financial institutions signed on to accord Formal process of arbitration exists, with deadlines Provision of penalties for non-compliance

Out-of-court procedures

TABLE 6 Progress with Corporate Restructuring, Third Quarter 1999

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ones.13 Accordingly, contingent credit lines are viewed as being of importance in providing additional international liquidity to deal with sudden capital flow reversals. Countries can negotiate such lines of credit unilaterally with foreign banks and private financial institutions. Indonesia, Argentina, Mexico and South Africa are recent examples of countries that have arranged such private lines of credit with international banks. However, there are a number of problems and limitations of obtaining such credit lines unilaterally and on a private basis rather than regionally or multilaterally via official channels. First, there may be high opportunity costs involved insofar as the individual countries have to commit certain assets/revenue streams as collateral. Second, calling upon these lines of credit when needed may lead to a hike in the country’s international risk premium. Third, while negotiating lines of credit with a country, the financial institutions may undermine the effectiveness of these commitments and their effective exposures to that country through other channels (through various corporate risk management techniques). Fourth, and related to this, if the credit lines are called upon by one country, the international financial institutions may be forced to reduce their exposures in other emerging economies, either to cover losses or in order to reduce portfolio risks and improve the liquidity position (“flight to safety” effects). While it need not always be, this negative externality or spillover tends often to be regional rather than global (see Chang and Rajan 2001 and references cited within). For instance, in a recent study using a sample of 20 countries covering the periods of the 1982 Mexican debt crisis, the 1994–95 Tequila crisis and the 1997–98 Asian crisis, De Gregario and Valdes (1999) found contagion to be directly dependent on geographical horizon. Using a panel of annual data for 19 developing countries for the period 1977–93, Krueger et al. (2000) concluded that a currency crisis in a regional economy raises the probability of a speculative attack on the domestic currency by about 8.5 per cent points. All of this provides rationale for developing regionally based contingent credit facilities to buttress reserve holdings of individual countries so as to prevent a sudden credit contraction due to a liquidity crisis. Against this background it is important to note that selected East Asian economies have recently agreed to create a network of bilateral currency swaps and repurchase agreements as a “firewall” against future financial crises. This has since come to be termed the Chiang

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Mai Initiative (CMI) following an agreement in Chiang Mai, Thailand on 6 May 2000. The Chiang Mai Initiative (CMI) Broadly, the CMI is aimed at providing countries under pressure with short-term hard currency liquidity to bolster reserves through bilateral swaps (the hard currencies are mainly in US dollars, but also in Yen and Euro). The CMI extends and expands upon the little known ASEAN Swap Arrangement (ASA) to encompass all ASEAN countries as well as China, Japan and Korea (i.e. ASEAN Plus Three or APT). The ASA was established in 1977 to provide short-term swap facilities to members facing temporary liquidity or balance of payments problems. There were initially only five ASEAN signatories (Indonesia, Malaysia, Philippines, Singapore and Thailand), and the facility stood at US$200 million. At the Fourth ASEAN Finance Ministers Meeting in Brunei Darussalam (24–25 March 2000), the Ministers agreed to expand the ASA to include the remaining ASEAN members, Brunei Darussalam, Cambodia, Lao PDR, Myanmar and Vietnam. In keeping with this expansion, the ASA was enlarged to US$ 1 billion effective 17 November 2000. There also exist a series of repurchase agreements (repos) that allow ASEAN members with collateral like US Treasury bills to swap them for hard currencies and then repurchase them at a later time. The ASA is to be made available for two years and is renewable upon mutual agreement of the members. Each member is allowed to draw a maximum of twice its committed amount from the facility for a period of up to six months with the possibility of a further extension which is not to exceed six months. This buttressing of the ASA is the first step envisaged by the CMI which aims to eventually create a broad and comprehensive network of swaps among the APT economies. Unlike repos, the CMI envisages that hard currency lines of credit can be made available to members without strict linkages to repos (Rowley 2001). Beyond this beefing up and expansion of the ASA among Southeast Asian countries, the three ASEAN Dialogue partners, China, Japan and Korea, have simultaneously been in discussions to establish bilateral swap arrangement (BSA) and repos among themselves (Wheatley 2000). Japan has recently signed BSAs totalling US$6 billion with Malaysia, Thailand and Korea, and is planning others with China and the Philippines. BSAs among other members of

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the APT are expected in the near future (Rowley 2001). While the maximum amount of withdrawal under each of the BSA will be determined by negotiations between the two countries concerned, in the spirit of regional partnership, there is to be full coordination and consultation among all members when deciding on disbursements. While the basic principal of the CMI is clear, the conditions that will apply to the disbursements and speed at which they can be activated remain sketchy. Based on available accounts and reports, 10 per cent of the funds will be available automatically, while the rest are subject to IMF approval and conditionality. Other critical details of the new swap arrangements, such as the type of collateral that may be required for hard currency loans (if any), the number of withdrawals that can be made, and the like, are somewhat unclear. As part of the CMI, there is an agreement by member countries to exchange information on crossborder capital flows. Progress on this front too is unclear. Insofar as “the devil lies in the details”, a proper evaluation of the CMI cannot be undertaken at this stage. Nevertheless, the creation of the CMI is notable, not least because it involves real financial commitments by APT members to one another. The CMI appears to have been well received, even by the IMF and the US administration. The IMF Managing Director, Horst Kohler (2001), expressed support for the AMF and other regional initiatives as long as they are complementary and not competitive to the IMF approach. China too has expressed open support for the CMI and has become and active participant in it (Goad 2000 and Rowley 2000, 2001). Support by these entities is significant, not least because their opposition stifled the initial proposals for fortified monetary regionalism via an Asian monetary facility. In fact, a successful introduction of a network of regional swap arrangements in East Asia (possibly enlarged to encompass most of Asia as defined by the ADB over time) has been viewed by some observers as an important step towards the eventual creation of a full-fledged regional monetary facility (Luce 2001 and Rowley 2001). Bird and Rajan (2000) and Chang and Rajan (2001) have detailed the rationale for the creation of an Asian monetary facility at a general level, and we will not go over well-travelled terrain. It bears noting that regional monetary facilities can complement the IMF in similar ways that regional development banks (such as the ADB) complement the World Bank’s operations.15 The ADB (1999) suggests that:

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(The) AMF could play a potentially important role as a complement to the IMF in providing funds to crisis-affected countries and developing an early warning system. The implementation of such regional institutions as the AMF as part of the newly emerging financial architecture will help both to enhance the efficiency of global financial markets and to minimize systematic risk (p. 44).

Summary and Conclusion To conclude, the Asia-5 economies experienced a speedy adjustment from the 1997–98 crisis, i.e. the recessions, though severe, have proven to be short-lived. While this is frequently taken as a sign of the region’s oft-repeated economic “strengths” (such as their high saving rates), in actuality, such a post-crisis “V-shaped” recovery is not unique to East Asia, typifying financial crises experiences in general (Eichengreen and Rose 2001; also see Hutchison 2001). Rather, of concern is that the rapid recoveries in capital flows and economic activity in Asia-5 economies may retard their commitment to push ahead with necessary structural reforms so essential to ensure that growth is sustained. Some important inroads have certainly been made with respect to bank recapitalization and rehabilitation, though lingering financial strains in the corporate and banking sector plague these economies. Concerted efforts are needed to ensure that reform fatigue does not creep in, particularly when some of the longer-term reforms to upgrade domestic financial and corporate systems and comply with international best standards are outstanding. The inevitable lethargy and limited progress at reforming the international financial architecture,16 on the one hand, and the recent financial crises in Argentina, Turkey and elsewhere, on the other, emphasize the need for East Asia (and the larger Asian region) to take steps towards developing self-help mechanisms to complement their domestic reforms and restructuring efforts, and as a means of providing momentum for genuine reforms at the international level. The enhancement of liquidity support via the accumulation of reserves, activation of private credit lines, and the establishment of a system of interregional swap arrangements as part of the CMI, are important financial safeguards against sharp liquidity crises in the short and medium terms. Over the longer-tem, these initiatives are small but practical steps in furthering more broad-ranging monetary cooperation in the region.

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Notes 1

2

3

4

5

6

7

This paper was completed in December 2001. Comments of an earlier version by seminar participants in Hong Kong Institute for Monetary Research (HKIMR) and ISEAS, particularly by Donald Donovan and Pradumna Rana, are gratefully acknowledged, as is research assistance by Regan Engelhardt as well as editorial assistance by Denis Hew. The usual disclaimer applies. Over fifty per cent of long-term external debt in developing countries (for which data are available) is held in US dollars, with the remainder being held primarily in euros and yen. This inability by developing countries to borrow externally in their local currency has come to be referred to as the “original sin” hypothesis, a term attributed to Hausmann (1999) and Hausmann et al. (2000). For a discussion of the implications of this original sin hypothesis on exchange rate policy in Southeast Asia, see Rajan (2002) and references cited within. We do not enter here into the controversial debate of defining what is meant by a “credit crunch” and how it is most appropriately measured, only recognizing that credit growth reflects both the demand for and supply of credit (see Lane et al. 1999, Lindgren et al. 1999 and Furman and Stiglitz 1998). For detailed accounts of the East Asian crisis, see Berg (1999), Corsetti et al. (1999), Radelet and Sachs (1998), Rajan (1999a) and World Bank (1998). Interestingly, the data also reveal that while Japanese and US banks reduced their exposures in Asia-5 between June and December 1997, the European banks were still expanding their lending to the region in these few months (Rajan and Siregar 2001). Of course, these ex post swings in bank flows are only necessary and not sufficient evidence in support of a bank panic model. Accordingly, at least in the case of Thailand, Rajan (2001a) has provided data on the foreign asset and liability positions in order to determine its ex ante vulnerability to an external shock (such as a devaluation) and then discusses the movements in capital withdrawals from the country following the shock. This is consistent with the Calvo-Mendoza capital crisis model which rationalizes an equity-based boom and bust cycle of capital flows (Calvo and Mendoza 1996, 2000). This model is a simple one period mean-variance model of optimal portfolio diversification/allocation. It shows that the marginal gain from gathering information about any single country falls as portfolios get increasingly diversified internationally. Thus, just a rumour or some other adverse event — such as a devaluation — may suffice to generate large-scale reallocation of funds away from one destination to another, making small open economies susceptible to sharp boom and bust cycles (also see Rajan and Siregar 2001).

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9

10

11

12

13

14

15

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Possible interactions between the various types of capital flows will not be discussed here (see Bird and Rajan 2002; Rajan and Siregar 2002 and references cited within). For an early discussion of the Brazilian crisis, see Rajan (1999b). The other significant negative shock during this period was the collapse of one of China’s largest investment and trust corporations (ITICs), the Guangdong ITIC (GITIC) in October 1998. The extent of short-term indebtedness has been found to be a robust predictor of financial crises (Dadush et al. 2000, Rodrik and Velasco 1999 and World Bank 2000). According to Dadush et al., on the basis of data for 33 developing countries, the elasticity of short-term debt with GDP growth is 0.9 when there is a positive shock to output and –1.8 when there is a negative shock. This extreme reversibility of short-term debt in the event of negative shock exposes borrowers to liquidity runs and systemic crises. We do not enter into the debate of the appropriateness of the IMF conditionality per se. While Malaysia did not enter into an IMF agreement, it did embark on “shadow” IMF structural adjustments. SMEs have been especially hard hit by the credit crunch, particularly since many are in the nontradables sector. For instance, in Malaysia, three-quarters of the NPLs are to firms in the nontradable sector. In Thailand, small firms and households account for half of the NPLs (ADB 2000 and World Bank 2000). There is the additional question of what the appropriate size of reserve holdings is (Bird and Rajan 2003). The generally accepted rule of thumb that a country needs to hold reserves equivalent to short-term debt cover (i.e. debt that actually falls due over the year) is true only in the case where a country is running a current account balance and there are no other liabilities that are easily reversible. The optimal level of reserves depends on a number of factors such as degree of export diversification, size and variability of the current account imbalance, type of exchange rate regime, etc. (Bussiere and Mulder 1999). A related issue pertains to the appropriate or optimal currency composition of reserves (Eichengreen and Mathieson 2000). Of course, the flip side of this would be that the ADB and other regional development banks are largely redundant and ought themselves to be shut down, leaving only international institutions like the World Bank, IMF and BIS as part of the new financial architecture (Dornbusch 1999). Eichengreen and James (2001) have suggested that one reason why international financial reforms are not occurring at a faster pace is because the recent financial crises do not appear to have threatened the global trading system.

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Chang, R. and A. Velasco. “The Asian Liquidity Crisis”, Working Paper no. 6796, Cambridge, Mass.: NBER, 1998. ———. “Liquidity Crises in Emerging Markets: Theory and Policy”. In NBER Macroeconomics Annual 1999, edited by B. Bernanke and J. Rotemberg. Cambridge, MA: MIT Press, 1999. Claessens, S., S. Djankov and D. Klingbiel. “East Asia Restructuring — Halfway There?”. Financial Sector Discussion Paper no. 3, Washington D.C.: World Bank, 2000. Corsetti, G., P. Pesenti and N. Roubini. “What Caused the Asian Currency and Financial Crisis? Part I: Macroeconomic Overview”. Japan and The World Economy 11 (1999): 305–73. Dadush, U., D. Dasgaupta and D. Ratha. “The Role of Short-term Debt in Recent Crises”, Finance and Development 37 (2000). De Gregario, J. and R. Valdes. “Crisis Transmission: Evidence from the Debt, Tequila, and Asian Flu Crises”. Mimeo, October 1999. Dornbusch, R. “What Future for International Financial Institutions”. mimeo, May 1999. ———. “A Primer on Emerging Market Crises”. Mimeo, January 2001. Eichengreen, B. and H. James. “Monetary and Financial Reform in Two Eras of Globalization (and In Between)”. Mimeo, April 2001. Eichengreen, B. and D. Mathieson. “The Currency Composition of Foreign Exchange Reserves: Retrospect and Prospect”. Mimeo, January 2000. Eichengreen, B. and A. Rose. “To Defend or Not to Defend? That is the Question”. Mimeo, February 2001. Furman, J. and J. Stiglitz. “Economic Crises: Evidence and Insights from East Asia”. Brookings Papers on Economic Activity 2 (1998): 1–114. Goad, P. “Asian Monetary Fund Reborn”. Far Eastern Economic Review, May 18 2000, p. 54. Hausmann, R. “Currencies: Should there be Five or One Hundred and Five”. Foreign Policy 116 (1999): 65–79. Hausmann, R., U. Panizza and E. Stein. “Why do Countries Float the Way they Float?”. Working Paper no. 418. Washington, DC: Inter-American Development Bank, 2000. Hutchison, M. “A Curse Worse Than the Disease? Currency Crises and the Output Costs of IMF-supported Stabilization Programs”. Mimeo, May 2001. Institute of International Finance (IIF). “Capital Flows to Emerging Market Economies”. May 2001. IMF. World Economic Outlook 1999. Washington, DC: IMF, 1999. ———. World Economic Outlook 2000. Washington, DC: IMF, 2000. ———. World Economic Outlook 2001. Washington, DC: IMF, 2001.

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Kohler, H. “New Challenges for Exchange Rate Policy”. Paper presented at the Asia-Europe Meeting of Finance Ministers, Kobe, Japan, 13 January 2001. Krueger, M., P. Osakwe and J. Page. “Fundamentals, Contagion and Currency Crises: An Empirical Analysis”. Development Policy Review. 18 (2000): 257–74. Krugman, P. “Balance Sheets, The Transfer Problem, and Financial Crisis”. In International Finance and Financial Crises, Essays in Honor of Robert P. Flood, edited by P. Isard, A. Razin and A. Rose. Kluwer: Dordrecht, 1999a. ———. “Analytical Afterthoughts on the Asian Crisis”. Mimeo, September, 1999b. Lane, T., A. Ghosh, J. Hamann, S. Phillips, M. Schultze-Ghattas and T. Tsikata. “IMF-Supported Programs in Indonesia, Korea, and Thailand: A Preliminary Assessment”, Occasional Paper 178, Cambridge, Mass.: IMF, 1999. Lindgren, C.T. Balino, C. Enoch, A. Gulde, M. Quintyn and L. Teo. Financial Sector Crisis and Restructuring: Lessons from Asia, Washington, DC: IMF, 1999. Luce, E. “East Asian Seeks its Own Voice”. Financial Times, 14 May 2001. Manzano, G. “Is there Any Value-added in the ASEAN Surveillance Process?”. ASEAN Economic Bulletin 18 (2001): 90–102. Radelet, S. and J. Sachs. “The East Asian Financial Crisis: Diagnosis, Remedies, Prospects”, Brookings Papers on Economic Activity 1 (1998): 1–74. Rajan, R. “Economic Collapse in Southeast Asia”. Lowe Institute Policy Study, Lowe Institute of Political Economy, Claremont, California, 1999a. ———. “Have the Markets Gone Crazy? The Brazilian and other Currency Crises of the 1990s”. The Lowe Institute Policy Brief, Claremont: California, 1999b. ———. “(Ir)relevance of Currency Crises Theory to the Devaluation and Collapse of the Thai Baht”. Princeton Studies in International Economics no. 88, International Economics Section, Princeton University, 2001c. ———. “Exchange Rate Policy Options for Southeast Asia Revisited: Is There a Case for Currency Baskets?”. World Economy 25 (2002): 137–63. Rajan, R. and G. Bird. “Still the Weakest Link: The Domestic Financial System and Post-Crisis Recovery in East Asia”. Development Policy Review 19 (2002): 355–66. Rajan, R. and C.H. Shen. “Are Crisis-Induced Devaluations Contractionary?”. CIES Discussion Paper no. 0135, Adelaide: University of Adelaide, 2001. Rajan, R. and R. Siregar. “Private Capital Flows in East Asia: Boom, Bust and Beyond”. In Financial Markets and Policies in East Asia, edited by G. de Brouwer. London: Routledge, 2002. Rodrik, D. and A. Velasco. “Short-Term Capital Flows”, Working Paper no. 7364, Cambridge, Mass.: NBER, 1999.

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Rowley, A. “IMF Policy Shift May Revive AMF Idea”. Business Times, (Singapore), 20 October 2000. ———. “ASEAN + 3 Group Boosts Currency Defences”. Business Times, (Singapore), 11 May 2001. Wheatley, A. “Closer Asian Monetary Ties may Become Reality”. Bangkok Post, 10 August 2000. World Bank. Global Development Finance 1998. New York: Oxford University Press, 1998. ———. Global Development Finance 2000. New York: Oxford University Press, 2000.

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8 Trade and Foreign Direct Investment in East Asia Masahiro Kawai and Shujiro Urata

Introduction One notable and common characteristic of the emerging East Asian economies in recent years has been the increase in their international economic transactions such as international trade and foreign direct investment (FDI).1 In the pre-crisis, “miracle” period, the share of foreign trade in gross domestic product (GDP) was significantly higher for emerging market economies in East Asia than for emerging economies in other parts of the world. In particular, between 1980 and 1997, their share of foreign trade in GDP rose at significantly greater rates. Since the mid-1980s, East Asian economies have experienced new developments in international growth activities. Specifically, emerging East Asia experienced a rapid expansion of FDI and FDI-induced trade as part of the international business of the multinational corporations. Indeed, between 1980 and 1999, world FDI grew at an annual average rate of 16 per cent, significantly higher than the corresponding rate of 6 per cent for world trade. Since FDI has tended to be complementary

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to, rather than a substitute for, trade, large inflows of FDI to emerging East Asia further increased the region’s engagement in international economic transactions. This paper examines the changing pattern and structure of foreign trade and FDI in East Asia over the last two decades with a focus on the 1990s. It attempts to examine the interaction between foreign trade and FDI, which is a defining characteristic of developments in the region.2 The analysis shows the increase in intra-regional interdependence in foreign trade and FDI, reflecting the creation of an FDI-trade nexus in East Asia. There is no doubt that the simultaneous expansion of trade and FDI has contributed to economic development and growth in the region. Noteworthy in East Asia is the formation of regional production networks by multinational corporations, an underlying determinant of the FDI-trade nexus. These networks have promoted the specialization of production in East Asia, based on comparative advantage within the same industry, created intra-industry trade, and thus improved efficiency. Although strong intra-regional economic interdependence spread the unfavourable impacts of the financial crisis throughout the region in 1997–98, the networks also helped the region’s economic recovery from the crisis. Indeed, further expansion of trade and FDI is not only desirable but also necessary to promote sustained recovery and growth in the region.

Overview of Trade and Investment in East Asia Expansion of Foreign Trade and Foreign Direct Investment in East Asia Foreign trade and foreign direct investment (FDI) of the East Asian economies expanded rapidly, beginning in the mid-1980s (Tables 1–4, Figures 1–2) until the outbreak of the East Asian financial crisis. Between 1985 and 1997, East Asian exports expanded steadily to register an almost fivefold increase, before declining in 1998 as a result of the crisis. The rate of expansion was particularly high from 1986 to 1988, when the annual rate of growth exceeded 20 per cent. In the 1990s, there were fluctuations in the annual rates of growth, with a peak at 22 per cent in 1995 followed by a decline, resulting in negative growth in 1998. The patterns of export growth for the 1985–99 period were similar for all developing economies in East Asia, with few exceptions. Compared with

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1980 1,832,508 1,246,665 220,781 751,159 130,435 585,843 64,854 149,141 76,262 19,720 17,439 19,377 19,726 52,162 21,909 12,960 5,787 6,501 0 5,004 18,139 2,577 13,558 65,677 189,392 103,220 1981 1,914,798 1,224,647 233,739 693,129 151,500 682,732 77,197 163,409 86,492 21,816 21,271 20,970 22,436 52,937 23,810 11,773 5,721 7,027 141 4,465 21,476 2,504 12,254 105,764 213,170 110,938 1982 1,774,888 1,162,017 212,274 668,105 138,443 605,849 65,118 160,475 85,600 20,893 21,827 20,787 22,092 50,711 22,329 12,043 5,020 6,935 179 4,206 21,865 2,298 12,722 97,836 169,765 99,933 1983 1,729,561 1,146,445 200,527 651,844 146,971 576,306 64,008 168,275 93,338 21,949 24,459 21,832 25,098 50,550 21,146 14,128 4,932 6,368 205 3,771 22,096 2,291 12,997 97,541 134,762 98,722 1984 1,836,746 1,222,083 217,889 669,373 169,748 608,232 66,333 194,203 112,078 28,314 29,259 24,070 30,435 54,950 21,881 16,563 5,343 7,414 250 3,499 24,824 2,351 13,430 103,357 123,476 107,433 1985 1,874,505 1,265,929 213,146 708,197 177,189 591,587 65,700 193,636 113,966 30,182 30,289 22,812 30,683 49,692 18,596 15,408 4,614 7,123 693 3,258 27,329 2,648 13,628 109,697 109,642 99,283 1986 2,043,465 1,472,701 217,292 869,510 210,718 554,827 54,505 212,094 132,518 35,438 34,792 22,501 39,787 45,348 14,809 13,977 4,807 8,864 789 2,103 31,367 2,862 14,895 109,181 81,738 82,413 1987 2,416,116 1,730,460 252,884 1,045,819 231,332 665,517 62,246 276,356 178,079 48,473 47,301 28,696 53,609 55,370 17,170 17,934 5,696 11,564 854 2,152 39,464 3,443 17,892 120,376 96,129 92,519

1988 2,763,261 1,980,473 319,413 1,163,633 264,961 758,514 64,324 341,891 223,669 63,182 60,679 39,318 60,490 66,373 19,376 21,096 7,034 15,910 1,038 1,918 47,663 4,186 20,896 128,450 96,734 106,218

TABLE 1 Exports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1989 2,985,652 2,123,906 363,812 1,238,972 274,597 836,995 68,113 381,025 243,951 73,114 60,496 44,769 65,573 79,600 21,936 25,049 7,754 20,175 2,472 2,213 52,914 4,560 23,747 129,196 118,935 115,980

214 Masahiro Kawai and Shujiro Urata

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1990 3,381,690 2,443,279 393,106 1,488,365 287,678 936,131 82,275 427,869 269,222 82,144 67,812 52,753 66,513 91,612 25,675 29,420 8,194 23,072 2,525 2,727 62,760 4,275 27,363 119,201 151,466 127,956 1991 3,492,358 2,497,097 421,755 1,486,477 314,892 993,508 81,422 489,200 306,335 98,579 72,372 59,191 76,192 106,555 29,178 34,405 8,840 28,811 2,189 3,132 71,966 4,345 28,544 119,285 133,604 141,452 1992 3,745,492 2,646,759 447,310 1,572,100 339,899 1,096,724 81,622 556,859 341,693 119,512 77,335 63,437 81,410 124,761 33,967 40,709 9,829 32,473 2,918 4,866 85,620 4,786 31,605 135,990 140,121 150,526 1993 3,720,719 2,558,229 465,870 1,441,089 362,602 1,160,463 76,701 617,769 379,781 134,996 85,808 74,041 84,937 140,369 36,823 47,128 11,271 37,158 2,985 5,004 91,693 5,927 33,919 138,835 132,479 160,760 1994 4,248,810 2,888,102 512,404 1,653,377 395,226 1,358,468 79,939 732,012 438,340 151,379 96,389 96,911 93,661 166,637 40,054 58,749 13,433 45,583 4,054 4,764 120,865 6,170 37,893 180,536 139,087 189,000 1995 5,070,827 3,425,924 583,451 2,018,290 443,047 1,642,558 90,089 889,611 529,143 173,556 125,588 118,187 111,813 204,417 45,428 73,724 17,371 57,201 5,450 5,243 148,955 7,096 46,008 230,451 158,630 227,770 1996 5,288,518 3,513,701 622,949 2,074,721 411,302 1,771,956 102,315 928,344 552,640 180,530 130,993 125,125 115,992 217,087 49,873 78,214 20,543 55,743 7,258 5,455 151,165 7,452 49,612 247,014 187,771 256,901 1997 5,509,592 3,618,197 687,581 2,093,980 421,067 1,888,846 105,384 991,078 570,930 187,870 136,354 125,326 121,380 230,229 53,439 78,909 25,227 57,560 9,185 5,909 182,916 7,002 50,794 263,489 194,057 284,044

1998 5,393,882 3,620,838 680,406 2,153,397 387,955 1,770,776 93,456 937,232 526,955 173,693 132,703 109,886 110,674 220,139 48,843 73,470 29,496 54,489 9,220 4,620 183,744 6,394 54,235 258,453 146,975 280,424

TABLE 1 (continued ) Exports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1999 5,663,310 3,750,884 690,689 2,208,491 419,207 1,910,192 105,405 1,010,704 553,671 173,793 143,647 114,730 121,501 255,046 57,193 84,550 35,474 61,797 10,474 5,559 194,931 7,056 57,306 255,579 175,154 306,043

Trade and Foreign Direct Investment in East Asia 215

Countries/Regions WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1980 100.0 68.0 12.0 41.0 7.1 32.0 3.5 8.1 4.2 1.1 1.0 1.1 1.1 2.8 1.2 0.7 0.3 0.4 0.0 0.3 1.0 0.1 0.7 3.6 10.3 5.6 1981 100.0 64.0 12.2 36.2 7.9 35.7 4.0 8.5 4.5 1.1 1.1 1.1 1.2 2.8 1.2 0.6 0.3 0.4 0.0 0.2 1.1 0.1 0.6 5.5 11.1 5.8 1982 100.0 65.5 12.0 37.6 7.8 34.1 3.7 9.0 4.8 1.2 1.2 1.2 1.2 2.9 1.3 0.7 0.3 0.4 0.0 0.2 1.2 0.1 0.7 5.5 9.6 5.6 1983 100.0 66.3 11.6 37.7 8.5 33.3 3.7 9.7 5.4 1.3 1.4 1.3 1.5 2.9 1.2 0.8 0.3 0.4 0.0 0.2 1.3 0.1 0.8 5.6 7.8 5.7 1984 100.0 66.5 11.9 36.4 9.2 33.1 3.6 10.6 6.1 1.5 1.6 1.3 1.7 3.0 1.2 0.9 0.3 0.4 0.0 0.2 1.4 0.1 0.7 5.6 6.7 5.8 1985 100.0 67.5 11.4 37.8 9.5 31.6 3.5 10.3 6.1 1.6 1.6 1.2 1.6 2.7 1.0 0.8 0.2 0.4 0.0 0.2 1.5 0.1 0.7 5.9 5.8 5.3 1986 100.0 72.1 10.6 42.6 10.3 27.2 2.7 10.4 6.5 1.7 1.7 1.1 1.9 2.2 0.7 0.7 0.2 0.4 0.0 0.1 1.5 0.1 0.7 5.3 4.0 4.0 1987 100.0 71.6 10.5 43.3 9.6 27.5 2.6 11.4 7.4 2.0 2.0 1.2 2.2 2.3 0.7 0.7 0.2 0.5 0.0 0.1 1.6 0.1 0.7 5.0 4.0 3.8

1988 100.0 71.7 11.6 42.1 9.6 27.4 2.3 12.4 8.1 2.3 2.2 1.4 2.2 2.4 0.7 0.8 0.3 0.6 0.0 0.1 1.7 0.2 0.8 4.6 3.5 3.8

TABLE 1 (continued ) Exports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1989 100.0 71.1 12.2 41.5 9.2 28.0 2.3 12.8 8.2 2.4 2.0 1.5 2.2 2.7 0.7 0.8 0.3 0.7 0.1 0.1 1.8 0.2 0.8 4.3 4.0 3.9

216 Masahiro Kawai and Shujiro Urata

1990 100.0 72.3 11.6 44.0 8.5 27.7 2.4 12.7 8.0 2.4 2.0 1.6 2.0 2.7 0.8 0.9 0.2 0.7 0.1 0.1 1.9 0.1 0.8 3.5 4.5 3.8

Source: International Monetary Fund, IFS CD-ROM.

Countries/Regions WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1991 100.0 71.5 12.1 42.6 9.0 28.4 2.3 14.0 8.8 2.8 2.1 1.7 2.2 3.1 0.8 1.0 0.3 0.8 0.1 0.1 2.1 0.1 0.8 3.4 3.8 4.1 1992 100.0 70.7 11.9 42.0 9.1 29.3 2.2 14.9 9.1 3.2 2.1 1.7 2.2 3.3 0.9 1.1 0.3 0.9 0.1 0.1 2.3 0.1 0.8 3.6 3.7 4.0 1993 100.0 68.8 12.5 38.7 9.7 31.2 2.1 16.6 10.2 3.6 2.3 2.0 2.3 3.8 1.0 1.3 0.3 1.0 0.1 0.1 2.5 0.2 0.9 3.7 3.6 4.3 1994 100.0 68.0 12.1 38.9 9.3 32.0 1.9 17.2 10.3 3.6 2.3 2.3 2.2 3.9 0.9 1.4 0.3 1.1 0.1 0.1 2.8 0.1 0.9 4.2 3.3 4.4 1995 100.0 67.6 11.5 39.8 8.7 32.4 1.8 17.5 10.4 3.4 2.5 2.3 2.2 4.0 0.9 1.5 0.3 1.1 0.1 0.1 2.9 0.1 0.9 4.5 3.1 4.5 1996 100.0 66.4 11.8 39.2 7.8 33.5 1.9 17.6 10.4 3.4 2.5 2.4 2.2 4.1 0.9 1.5 0.4 1.1 0.1 0.1 2.9 0.1 0.9 4.7 3.6 4.9 1997 100.0 65.7 12.5 38.0 7.6 34.3 1.9 18.0 10.4 3.4 2.5 2.3 2.2 4.2 1.0 1.4 0.5 1.0 0.2 0.1 3.3 0.1 0.9 4.8 3.5 5.2

1998 100.0 67.1 12.6 39.9 7.2 32.8 1.7 17.4 9.8 3.2 2.5 2.0 2.1 4.1 0.9 1.4 0.5 1.0 0.2 0.1 3.4 0.1 1.0 4.8 2.7 5.2

TABLE 1 (continued ) Exports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1999 100.0 66.2 12.2 39.0 7.4 33.7 1.9 17.8 9.8 3.1 2.5 2.0 2.1 4.5 1.0 1.5 0.6 1.1 0.2 0.1 3.4 0.1 1.0 4.5 3.1 5.4

Trade and Foreign Direct Investment in East Asia 217

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1980 1,918,724 1,391,412 256,959 843,944 141,284 527,313 60,991 151,058 88,148 22,399 22,063 24,013 19,673 40,525 10,837 10,821 8,295 9,213 0 1,359 19,505 2,880 25,306 86,544 92,466 110,948 1981 2,001,190 1,319,292 273,351 749,057 142,868 672,526 87,697 170,304 99,633 24,768 26,154 27,571 21,140 45,410 13,269 11,581 8,477 9,954 566 1,562 21,631 3,631 25,535 132,487 135,796 120,708 1982 1,864,091 1,241,142 254,881 714,947 131,566 615,495 74,329 164,893 94,783 23,444 24,250 28,176 18,912 47,763 16,859 12,409 8,262 8,531 435 1,267 18,920 3,426 25,907 114,184 139,273 96,909 1983 1,808,526 1,220,996 269,880 684,930 126,520 579,691 64,617 172,633 98,693 24,005 26,196 28,158 20,334 49,216 16,351 13,241 7,863 10,283 408 1,070 21,313 3,412 23,987 111,663 131,417 75,374 1984 1,921,174 1,330,180 341,170 693,197 136,142 582,782 60,285 185,075 109,852 28,558 30,628 28,667 21,999 46,089 13,880 14,057 6,262 10,415 525 950 25,953 3,181 26,239 114,620 119,276 77,286 1985 1,975,924 1,382,239 361,620 724,609 130,516 575,778 55,620 193,031 107,119 29,701 31,058 26,237 20,123 39,999 10,275 12,301 5,351 9,259 1,842 970 42,480 3,433 27,340 127,186 97,599 75,003 1986 2,147,393 1,554,426 387,075 853,387 127,660 575,106 55,270 203,133 116,766 35,360 31,733 25,513 24,160 39,113 10,724 10,828 5,211 9,165 2,155 1,029 43,247 4,007 25,791 128,092 87,909 74,911 1987 2,510,182 1,833,171 424,068 1,046,883 150,907 655,002 59,232 253,419 156,705 48,463 41,026 32,626 34,590 48,944 12,850 12,701 6,937 12,998 2,455 1,002 43,222 4,547 28,693 137,949 89,868 85,841

1988 2,875,450 2,076,146 459,775 1,182,568 187,483 772,283 65,260 332,669 209,163 63,900 51,812 43,869 49,582 62,889 13,489 16,567 8,662 20,301 2,757 1,113 55,352 5,265 32,122 148,731 99,191 94,311

TABLE 2 Imports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1989 3,110,750 2,244,157 493,324 1,275,367 209,635 839,858 70,899 378,878 233,604 72,149 60,210 49,694 51,552 79,868 16,470 22,589 11,171 25,373 3,032 1,233 59,140 6,265 33,114 153,925 101,029 102,014

218 Masahiro Kawai and Shujiro Urata

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1990 3,517,259 2,573,676 517,020 1,538,964 235,307 939,301 83,618 434,210 271,594 82,482 74,405 60,954 53,753 102,289 22,005 29,170 12,993 33,407 2,842 1,872 53,809 6,517 38,875 153,386 113,071 116,141 1991 3,635,510 2,598,478 509,300 1,576,355 236,633 1,033,167 80,183 500,848 311,599 100,274 81,771 66,261 63,293 118,424 25,928 36,749 12,945 37,925 2,483 2,395 63,875 6,950 35,530 140,901 126,750 148,954 1992 3,893,471 2,709,094 552,593 1,639,031 232,852 1,181,465 92,841 569,886 350,803 123,430 82,951 72,175 72,248 129,954 27,280 39,927 14,562 40,686 3,027 4,471 81,871 7,258 40,850 156,128 144,622 177,139 1993 3,794,909 2,529,006 602,976 1,394,886 241,630 1,262,815 86,638 646,007 387,691 138,596 86,630 85,378 77,087 147,319 28,328 45,616 17,638 46,065 3,924 5,748 103,622 7,376 39,990 158,136 134,996 197,049 1994 4,319,076 2,881,995 689,338 1,588,226 274,181 1,433,943 90,955 756,905 453,649 161,771 102,530 102,642 86,706 180,247 31,985 59,555 22,535 54,394 5,826 5,952 115,705 7,305 44,654 185,831 126,497 229,101 1995 5,137,927 3,392,151 770,972 1,914,173 336,027 1,741,525 107,838 931,932 556,160 192,764 135,352 124,394 103,649 235,746 40,629 77,620 28,282 73,692 8,155 7,368 132,163 7,863 58,690 249,563 140,576 252,926 1996 5,381,225 3,507,402 817,818 1,956,314 349,597 1,868,822 108,298 975,595 582,227 198,551 150,662 131,329 101,686 245,950 42,902 78,441 31,756 73,336 11,143 8,371 138,949 8,469 62,626 280,227 153,659 288,417 1997 5,583,844 3,622,188 898,661 1,974,269 338,646 1,957,744 106,450 992,767 600,580 208,623 144,923 132,591 114,443 241,637 41,680 79,047 39,131 62,804 11,592 7,383 142,163 8,388 65,814 309,303 151,507 331,904

1998 5,519,315 3,705,704 944,644 2,062,914 281,243 1,809,469 110,138 811,248 484,325 184,602 93,370 101,606 104,747 179,099 27,337 58,319 31,393 43,108 12,545 6,398 140,385 7,438 67,916 308,822 156,857 354,487

TABLE 2 (continued ) Imports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1999 5,810,326 3,940,580 1,048,435 2,143,856 310,733 1,865,191 109,246 892,132 521,150 179,650 119,740 111,071 110,689 197,636 28,950 65,491 31,368 53,207 13,213 5,407 165,718 7,628 72,735 280,455 160,026 350,597

Trade and Foreign Direct Investment in East Asia 219

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1980 100.0 72.5 13.4 44.0 7.4 27.5 3.2 7.9 4.6 1.2 1.1 1.3 1.0 2.1 0.6 0.6 0.4 0.5 0.0 0.1 1.0 0.2 1.3 4.5 4.8 5.8 1981 100.0 65.9 13.7 37.4 7.1 33.6 4.4 8.5 5.0 1.2 1.3 1.4 1.1 2.3 0.7 0.6 0.4 0.5 0.0 0.1 1.1 0.2 1.3 6.6 6.8 6.0 1982 100.0 66.6 13.7 38.4 7.1 33.0 4.0 8.8 5.1 1.3 1.3 1.5 1.0 2.6 0.9 0.7 0.4 0.5 0.0 0.1 1.0 0.2 1.4 6.1 7.5 5.2 1983 100.0 67.5 14.9 37.9 7.0 32.1 3.6 9.5 5.5 1.3 1.4 1.6 1.1 2.7 0.9 0.7 0.4 0.6 0.0 0.1 1.2 0.2 1.3 6.2 7.3 4.2 1984 100.0 69.2 17.8 36.1 7.1 30.3 3.1 9.6 5.7 1.5 1.6 1.5 1.1 2.4 0.7 0.7 0.3 0.5 0.0 0.0 1.4 0.2 1.4 6.0 6.2 4.0 1985 100.0 70.0 18.3 36.7 6.6 29.1 2.8 9.8 5.4 1.5 1.6 1.3 1.0 2.0 0.5 0.6 0.3 0.5 0.1 0.0 2.1 0.2 1.4 6.4 4.9 3.8 1986 100.0 72.4 18.0 39.7 5.9 26.8 2.6 9.5 5.4 1.6 1.5 1.2 1.1 1.8 0.5 0.5 0.2 0.4 0.1 0.0 2.0 0.2 1.2 6.0 4.1 3.5 1987 100.0 73.0 16.9 41.7 6.0 26.1 2.4 10.1 6.2 1.9 1.6 1.3 1.4 1.9 0.5 0.5 0.3 0.5 0.1 0.0 1.7 0.2 1.1 5.5 3.6 3.4

1988 100.0 72.2 16.0 41.1 6.5 26.9 2.3 11.6 7.3 2.2 1.8 1.5 1.7 2.2 0.5 0.6 0.3 0.7 0.1 0.0 1.9 0.2 1.1 5.2 3.4 3.3

TABLE 2 (continued ) Imports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1989 100.0 72.1 15.9 41.0 6.7 27.0 2.3 12.2 7.5 2.3 1.9 1.6 1.7 2.6 0.5 0.7 0.4 0.8 0.1 0.0 1.9 0.2 1.1 4.9 3.2 3.3

220 Masahiro Kawai and Shujiro Urata

1990 100.0 73.2 14.7 43.8 6.7 26.7 2.4 12.3 7.7 2.3 2.1 1.7 1.5 2.9 0.6 0.8 0.4 0.9 0.1 0.1 1.5 0.2 1.1 4.4 3.2 3.3

Source: International Monetary Fund, IFS CD-ROM.

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1991 100.0 71.5 14.0 43.4 6.5 28.4 2.2 13.8 8.6 2.8 2.2 1.8 1.7 3.3 0.7 1.0 0.4 1.0 0.1 0.1 1.8 0.2 1.0 3.9 3.5 4.1 1992 100.0 69.6 14.2 42.1 6.0 30.3 2.4 14.6 9.0 3.2 2.1 1.9 1.9 3.3 0.7 1.0 0.4 1.0 0.1 0.1 2.1 0.2 1.0 4.0 3.7 4.5 1993 100.0 66.6 15.9 36.8 6.4 33.3 2.3 17.0 10.2 3.7 2.3 2.2 2.0 3.9 0.7 1.2 0.5 1.2 0.1 0.2 2.7 0.2 1.1 4.2 3.6 5.2 1994 100.0 66.7 16.0 36.8 6.3 33.2 2.1 17.5 10.5 3.7 2.4 2.4 2.0 4.2 0.7 1.4 0.5 1.3 0.1 0.1 2.7 0.2 1.0 4.3 2.9 5.3 1995 100.0 66.0 15.0 37.3 6.5 33.9 2.1 18.1 10.8 3.8 2.6 2.4 2.0 4.6 0.8 1.5 0.6 1.4 0.2 0.1 2.6 0.2 1.1 4.9 2.7 4.9 1996 100.0 65.2 15.2 36.4 6.5 34.7 2.0 18.1 10.8 3.7 2.8 2.4 1.9 4.6 0.8 1.5 0.6 1.4 0.2 0.2 2.6 0.2 1.2 5.2 2.9 5.4 1997 100.0 64.9 16.1 35.4 6.1 35.1 1.9 17.8 10.8 3.7 2.6 2.4 2.0 4.3 0.7 1.4 0.7 1.1 0.2 0.1 2.5 0.2 1.2 5.5 2.7 5.9

1998 100.0 67.1 17.1 37.4 5.1 32.8 2.0 14.7 8.8 3.3 1.7 1.8 1.9 3.2 0.5 1.1 0.6 0.8 0.2 0.1 2.5 0.1 1.2 5.6 2.8 6.4

TABLE 2 (continued ) Imports of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1999 100.0 67.8 18.0 36.9 5.3 32.1 1.9 15.4 9.0 3.1 2.1 1.9 1.9 3.4 0.5 1.1 0.5 0.9 0.2 0.1 2.9 0.1 1.3 4.8 2.8 6.0

Trade and Foreign Direct Investment in East Asia 221

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan Province of China ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1980 3,751,232 2,638,077 477,740 1,595,103 271,719 1,113,155 125,845 300,199 164,410 42,119 39,502 39,399 43,390 92,686 32,747 23,782 14,082 15,714 0 6,362 37,644 5,458 38,864 152,221 281,858 214,168 1981 3,915,988 2,543,939 507,089 1,442,186 294,368 1,355,258 164,894 333,712 186,124 46,583 47,424 43,576 48,541 98,347 37,080 23,354 14,198 16,981 707 6,027 43,106 6,135 37,789 238,251 348,966 231,645 1982 3,638,979 2,403,159 467,156 1,383,052 270,009 1,221,344 139,447 325,368 180,383 44,337 46,077 41,005 48,964 98,475 39,188 24,452 13,282 15,466 614 5,473 40,785 5,725 38,629 212,020 309,038 196,842 1983 3,538,087 2,367,441 470,407 1,336,775 273,490 1,155,997 128,626 340,908 192,031 45,954 50,655 45,432 49,990 99,766 37,498 27,368 12,795 16,651 613 4,841 43,408 5,703 36,983 209,204 266,180 174,096 1984 3,757,920 2,552,263 559,059 1,362,571 305,891 1,191,014 126,618 379,278 221,930 56,871 59,887 52,434 52,737 101,039 35,761 30,620 11,605 17,829 775 4,449 50,777 5,532 39,669 217,977 242,752 184,719 1985 3,850,429 2,648,168 574,767 1,432,805 307,705 1,167,365 121,320 386,667 221,085 59,883 61,347 50,806 49,049 89,691 28,871 27,709 9,965 16,382 2,535 4,228 69,809 6,081 40,968 236,883 207,241 174,285 1986 4,190,858 3,027,127 604,367 1,722,897 338,378 1,129,933 109,775 415,227 249,283 70,798 66,525 63,947 48,013 84,461 25,533 24,805 10,018 18,030 2,944 3,131 74,614 6,869 40,686 237,273 169,648 157,324

1987 4,926,298 3,563,631 676,953 2,092,702 382,239 1,320,519 121,478 529,775 334,784 96,936 88,327 88,199 61,322 104,315 30,020 30,636 12,633 24,562 3,309 3,155 82,686 7,990 46,585 258,325 185,997 178,360

TABLE 3 Total Trade (Exports + Imports) of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1988 5,638,711 4,056,619 779,188 2,346,201 452,444 1,530,797 129,584 674,560 432,833 127,083 112,491 110,072 83,187 129,262 32,865 37,663 15,696 36,211 3,795 3,032 103,015 9,451 53,017 277,182 195,925 200,529

1989 6,096,402 4,368,063 857,136 2,514,339 484,232 1,676,854 139,012 759,902 477,556 145,263 120,705 117,125 94,462 159,468 38,406 47,638 18,925 45,548 5,504 3,446 112,054 10,825 56,861 283,121 219,964 217,993

222 Masahiro Kawai and Shujiro Urata

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan Province of China ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1990 6,898,949 5,016,955 910,126 3,027,329 522,985 1,875,432 165,894 862,079 540,815 164,626 142,217 120,266 113,707 193,902 47,680 58,590 21,186 56,479 5,367 4,599 116,569 10,792 66,237 272,587 264,537 244,098 1991 7,127,868 5,095,575 931,055 3,062,832 551,525 2,026,675 161,605 990,048 617,934 198,853 154,143 139,485 125,452 224,979 55,106 71,154 21,784 66,736 4,672 5,527 135,841 11,295 64,074 260,186 260,355 290,406 1992 7,638,963 5,355,853 999,903 3,211,131 572,751 2,278,189 174,463 1,126,745 692,496 242,942 160,285 153,657 135,612 254,714 61,247 80,636 24,391 73,159 5,945 9,337 167,491 12,044 72,455 292,117 284,742 327,665 1993 7,515,628 5,087,235 1,068,846 2,835,975 604,232 2,423,278 163,339 1,263,776 767,472 273,591 172,438 162,024 159,418 287,687 65,151 92,744 28,909 83,222 6,909 10,752 195,315 13,302 73,909 296,972 267,474 357,809 1994 8,567,886 5,770,097 1,201,743 3,241,603 669,407 2,792,411 170,894 1,488,917 891,989 313,150 198,919 180,367 199,553 346,884 72,039 118,304 35,968 99,977 9,880 10,716 236,570 13,475 82,547 366,367 265,584 418,101 1995 10,208,754 6,818,075 1,354,423 3,932,463 779,074 3,384,083 197,927 1,821,544 1,085,303 366,321 260,940 215,462 242,581 440,163 86,056 151,344 45,653 130,892 13,606 12,611 281,118 14,959 104,697 480,013 299,206 480,696 1996 10,669,743 7,021,103 1,440,767 4,031,035 760,899 3,640,778 210,612 1,903,938 1,134,867 379,081 281,655 217,677 256,454 463,036 92,775 156,656 52,299 129,079 18,401 13,826 290,114 15,921 112,238 527,241 341,430 545,317 1997 11,093,436 7,240,385 1,586,242 4,068,249 759,712 3,846,590 211,834 1,983,845 1,171,510 396,493 281,277 235,822 257,917 471,866 95,119 157,955 64,359 120,363 20,777 13,292 325,080 15,389 116,608 572,792 345,564 615,948

TABLE 3 (continued ) Total Trade (Exports + Imports) of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1998 10,913,197 7,326,542 1,625,050 4,216,311 669,199 3,580,245 203,594 1,748,480 1,011,280 358,295 226,073 215,420 211,492 399,238 76,180 131,789 60,889 97,597 21,765 11,018 324,129 13,832 122,151 567,275 303,832 634,912

1999 11,473,636 7,691,464 1,739,124 4,352,347 729,940 3,775,383 214,651 1,902,836 1,074,821 353,443 263,387 232,191 225,801 452,682 86,142 150,042 66,842 115,003 23,687 10,966 360,649 14,685 130,041 536,034 335,181 656,640

Trade and Foreign Direct Investment in East Asia 223

(b) Percentage

Country Name WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

1980 100.0 70.3 12.7 42.5 7.2 29.7 3.4 8.0 4.4 1.1 1.1 1.1 1.2 2.5 0.9 0.6 0.4 0.4 0.0 0.2 1.0 0.1 1.0 4.1 7.5 5.7 1981 100.0 65.0 12.9 36.8 7.5 34.6 4.2 8.5 4.8 1.2 1.2 1.1 1.2 2.5 0.9 0.6 0.4 0.4 0.0 0.2 1.1 0.2 1.0 6.1 8.9 5.9 1982 100.0 66.0 12.8 38.0 7.4 33.6 3.8 8.9 5.0 1.2 1.3 1.1 1.3 2.7 1.1 0.7 0.4 0.4 0.0 0.2 1.1 0.2 1.1 5.8 8.5 5.4 1983 100.0 66.9 13.3 37.8 7.7 32.7 3.6 9.6 5.4 1.3 1.4 1.3 1.4 2.8 1.1 0.8 0.4 0.5 0.0 0.1 1.2 0.2 1.0 5.9 7.5 4.9 1984 100.0 67.9 14.9 36.3 8.1 31.7 3.4 10.1 5.9 1.5 1.6 1.4 1.4 2.7 1.0 0.8 0.3 0.5 0.0 0.1 1.4 0.1 1.1 5.8 6.5 4.9 1985 100.0 68.8 14.9 37.2 8.0 30.3 3.2 10.0 5.7 1.6 1.6 1.3 1.3 2.3 0.7 0.7 0.3 0.4 0.1 0.1 1.8 0.2 1.1 6.2 5.4 4.5 1986 100.0 72.2 14.4 41.1 8.1 27.0 2.6 9.9 5.9 1.7 1.6 1.5 1.1 2.0 0.6 0.6 0.2 0.4 0.1 0.1 1.8 0.2 1.0 5.7 4.0 3.8 1987 100.0 72.3 13.7 42.5 7.8 26.8 2.5 10.8 6.8 2.0 1.8 1.8 1.2 2.1 0.6 0.6 0.3 0.5 0.1 0.1 1.7 0.2 0.9 5.2 3.8 3.6

TABLE 3 (continued ) Total Trade (Exports + Imports) of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1988 100.0 71.9 13.8 41.6 8.0 27.1 2.3 12.0 7.7 2.3 2.0 2.0 1.5 2.3 0.6 0.7 0.3 0.6 0.1 0.1 1.8 0.2 0.9 4.9 3.5 3.6

1989 100.0 71.6 14.1 41.2 7.9 27.5 2.3 12.5 7.8 2.4 2.0 1.9 1.5 2.6 0.6 0.8 0.3 0.7 0.1 0.1 1.8 0.2 0.9 4.6 3.6 3.6

224 Masahiro Kawai and Shujiro Urata

(b) Percentage 1990 100.0 72.7 13.2 43.9 7.6 27.2 2.4 12.5 7.8 2.4 2.1 1.7 1.6 2.8 0.7 0.8 0.3 0.8 0.1 0.1 1.7 0.2 1.0 4.0 3.8 3.5

Source: International Monetary Fund, IFS CD-ROM.

Country Name WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore Taiwan ASEAN-9 Indonesia Malaysia Philippines Thailand Vietnam Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

1991 100.0 71.5 13.1 43.0 7.7 28.4 2.3 13.9 8.7 2.8 2.2 2.0 1.8 3.2 0.8 1.0 0.3 0.9 0.1 0.1 1.9 0.2 0.9 3.7 3.7 4.1 1992 100.0 70.1 13.1 42.0 7.5 29.8 2.3 14.7 9.1 3.2 2.1 2.0 1.8 3.3 0.8 1.1 0.3 1.0 0.1 0.1 2.2 0.2 0.9 3.8 3.7 4.3 1993 100.0 67.7 14.2 37.7 8.0 32.2 2.2 16.8 10.2 3.6 2.3 2.2 2.1 3.8 0.9 1.2 0.4 1.1 0.1 0.1 2.6 0.2 1.0 4.0 3.6 4.8 1994 100.0 67.3 14.0 37.8 7.8 32.6 2.0 17.4 10.4 3.7 2.3 2.1 2.3 4.0 0.8 1.4 0.4 1.2 0.1 0.1 2.8 0.2 1.0 4.3 3.1 4.9 1995 100.0 66.8 13.3 38.5 7.6 33.1 1.9 17.8 10.6 3.6 2.6 2.1 2.4 4.3 0.8 1.5 0.4 1.3 0.1 0.1 2.8 0.1 1.0 4.7 2.9 4.7 1996 100.0 65.8 13.5 37.8 7.1 34.1 2.0 17.8 10.6 3.6 2.6 2.0 2.4 4.3 0.9 1.5 0.5 1.2 0.2 0.1 2.7 0.1 1.1 4.9 3.2 5.1 1997 100.0 65.3 14.3 36.7 6.8 34.7 1.9 17.9 10.6 3.6 2.5 2.1 2.3 4.3 0.9 1.4 0.6 1.1 0.2 0.1 2.9 0.1 1.1 5.2 3.1 5.6

TABLE 3 (continued ) Total Trade (Exports + Imports) of Various Regions of the World and the Emerging East Asian Economies, 1980–99 1998 100.0 67.1 14.9 38.6 6.1 32.8 1.9 16.0 9.3 3.3 2.1 2.0 1.9 3.7 0.7 1.2 0.6 0.9 0.2 0.1 3.0 0.1 1.1 5.2 2.8 5.8

1999 100.0 67.0 15.2 37.9 6.4 32.9 1.9 16.6 9.4 3.1 2.3 2.0 2.0 3.9 0.8 1.3 0.6 1.0 0.2 0.1 3.1 0.1 1.1 4.7 2.9 5.7

Trade and Foreign Direct Investment in East Asia 225

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore ASEAN-9 Indonesia Malaysia Philippines Thailand Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1980 52,216 46,418 16,930 21,264 280 5,798 674 2,374 1,242 0 6 1,236 1,018 0 934 -106 190 0 0 114 107 140 -3,934 6,438 1981 66,860 45,662 25,190 16,272 190 21,198 1,515 3,745 1,762 0 102 1,660 1,860 133 1,265 172 291 0 0 123 157 230 6,864 8,686 1982 54,805 30,536 12,474 14,363 440 24,269 1,710 4,061 1,671 0 69 1,602 1,829 225 1,397 16 191 0 430 131 127 161 11,381 6,829 1983 48,655 32,410 10,470 15,423 410 16,245 1,202 4,022 1,202 0 69 1,134 2,007 292 1,261 105 350 0 636 176 68 155 5,456 5,342 1984 56,710 40,861 24,760 9,110 -10 15,849 1,085 4,248 1,412 0 110 1,302 1,429 222 797 9 401 0 1,258 148 88 220 5,998 4,210 1985 55,502 42,033 20,010 15,836 638 13,470 1,010 4,230 1,280 0 234 1,047 1,180 310 695 12 163 0 1,659 111 158 191 2,178 5,704 1986 83,695 70,623 35,419 22,431 226 13,072 681 5,286 2,170 0 460 1,710 1,136 258 489 127 263 0 1,875 104 143 209 2,270 4,484 1987 129,223 116,256 58,471 39,452 1,161 12,967 1,493 7,366 3,453 0 616 2,836 1,467 385 423 307 352 0 2,314 133 197 198 -53 3,766

1988 155,542 132,939 57,736 59,849 -482 22,603 1,421 11,400 4,669 0 1,014 3,655 3,337 576 719 936 1,105 2 3,194 198 235 472 1,532 7,543

TABLE 4 Foreign Direct Investment Inflows of the World and the Emerging East Asian Economies, 1980–99 1989 191,644 166,421 68,273 80,760 -1,038 25,223 2,678 12,331 4,004 0 1,118 2,887 4,688 682 1,668 563 1,775 12 3,393 233 235 1,053 1,159 7,768

226 Masahiro Kawai and Shujiro Urata

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore ASEAN-9 Indonesia Malaysia Philippines Thailand Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(a) Millions of US dollars 1990 201,305 170,886 48,497 96,173 1,777 30,419 1,205 16,687 6,363 0 788 5,575 6,399 1,093 2,332 530 2,444 167 3,487 271 297 1,156 2,774 8,299 1991 154,735 114,136 23,171 78,374 1,286 40,599 2,630 18,879 6,067 0 1,180 4,887 8,038 1,482 3,998 544 2,014 245 4,366 163 388 3,418 2,176 13,108 1992 167,137 117,554 19,823 81,830 2,760 49,583 2,560 23,855 2,933 0 728 2,204 9,301 1,777 5,183 228 2,113 212 11,156 252 746 4,612 2,794 15,017 1993 215,447 144,677 51,363 79,889 119 70,770 2,877 43,242 5,275 0 589 4,686 10,052 2,004 5,006 1,238 1,804 189 27,515 212 1,114 6,385 3,378 13,775 1994 238,602 141,616 46,121 71,975 912 96,986 4,285 52,974 9,360 0 810 8,550 9,408 2,109 4,342 1,591 1,366 254 33,787 164 1,581 7,124 2,520 28,504 1995 317,324 204,117 57,776 115,316 39 113,206 4,672 57,992 8,982 0 1,776 7,206 12,070 4,346 4,178 1,478 2,068 523 35,849 567 2,931 17,194 259 30,159 1996 363,446 223,962 86,503 111,560 200 139,484 4,823 67,548 11,310 0 2,326 8,984 15,125 6,194 5,078 1,517 2,336 764 40,180 168 3,510 16,598 3,211 43,794

1997 448,270 271,177 106,035 128,893 3,200 177,093 7,506 70,821 10,929 0 2,844 8,085 14,930 4,677 5,137 1,222 3,895 591 44,237 133 4,899 22,006 6,157 65,703

1998 670,032 475,979 186,315 245,956 3,268 194,053 4,498 81,535 25,675 14,776 5,406 5,493 11,409 -356 2,163 2,287 7,315 435 43,751 265 3,042 25,222 7,437 72,320

TABLE 4 (continued ) Foreign Direct Investment Inflows of the World and the Emerging East Asian Economies, 1980–99 1999 914,555 702,453 275,535 371,839 12,308 212,102 4,075 84,398 39,386 23,068 9,333 6,984 5,594 -2,745 1,553 573 6,213 342 38,753 324 2,540 27,444 3,256 90,388

Trade and Foreign Direct Investment in East Asia 227

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore ASEAN-9 Indonesia Malaysia Philippines Thailand Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1980 100.0 88.9 32.4 40.7 0.5 11.1 1.3 4.5 2.4 0.0 0.0 2.4 1.9 0.0 1.8 -0.2 0.4 0.0 0.0 0.2 0.2 0.3 -7.5 12.3 1981 100.0 68.3 37.7 24.3 0.3 31.7 2.3 5.6 2.6 0.0 0.2 2.5 2.8 0.2 1.9 0.3 0.4 0.0 0.0 0.2 0.2 0.3 10.3 13.0 1982 100.0 55.7 22.8 26.2 0.8 44.3 3.1 7.4 3.0 0.0 0.1 2.9 3.3 0.4 2.5 0.0 0.3 0.0 0.8 0.2 0.2 0.3 20.8 12.5 1983 100.0 66.6 21.5 31.7 0.8 33.4 2.5 8.3 2.5 0.0 0.1 2.3 4.1 0.6 2.6 0.2 0.7 0.0 1.3 0.4 0.1 0.3 11.2 11.0 1984 100.0 72.1 43.7 16.1 0.0 27.9 1.9 7.5 2.5 0.0 0.2 2.3 2.5 0.4 1.4 0.0 0.7 0.0 2.2 0.3 0.2 0.4 10.6 7.4 1985 100.0 75.7 36.1 28.5 1.1 24.3 1.8 7.6 2.3 0.0 0.4 1.9 2.1 0.6 1.3 0.0 0.3 0.0 3.0 0.2 0.3 0.3 3.9 10.3 1986 100.0 84.4 42.3 26.8 0.3 15.6 0.8 6.3 2.6 0.0 0.5 2.0 1.4 0.3 0.6 0.2 0.3 0.0 2.2 0.1 0.2 0.2 2.7 5.4

1987 100.0 90.0 45.2 30.5 0.9 10.0 1.2 5.7 2.7 0.0 0.5 2.2 1.1 0.3 0.3 0.2 0.3 0.0 1.8 0.1 0.2 0.2 0.0 2.9

1988 100.0 85.5 37.1 38.5 -0.3 14.5 0.9 7.3 3.0 0.0 0.7 2.3 2.1 0.4 0.5 0.6 0.7 0.0 2.1 0.1 0.2 0.3 1.0 4.8

TABLE 4 (continued ) Foreign Direct Investment Inflows of the World and the Emerging East Asian Economies, 1980–99 1989 100.0 86.8 35.6 42.1 -0.5 13.2 1.4 6.4 2.1 0.0 0.6 1.5 2.4 0.4 0.9 0.3 0.9 0.0 1.8 0.1 0.1 0.5 0.6 4.1

228 Masahiro Kawai and Shujiro Urata

1990 100.0 84.9 24.1 47.8 0.9 15.1 0.6 8.3 3.2 0.0 0.4 2.8 3.2 0.5 1.2 0.3 1.2 0.1 1.7 0.1 0.1 0.6 1.4 4.1

Source: International Monetary Fund, IFS CD-ROM.

Regions/Countries WORLD INDUSTRIAL COUNTRIES United States European Union-15 Japan DEVELOPING COUNTRIES Africa Emerging East Asia NIE-4 Hong Kong SAR Korea Singapore ASEAN-9 Indonesia Malaysia Philippines Thailand Other ASEAN-9 China Other East Asia South Asia Europe Middle East Western Hemisphere

(b) Percentage 1991 100.0 73.8 15.0 50.7 0.8 26.2 1.7 12.2 3.9 0.0 0.8 3.2 5.2 1.0 2.6 0.4 1.3 0.2 2.8 0.1 0.3 2.2 1.4 8.5 1992 100.0 70.3 11.9 49.0 1.7 29.7 1.5 14.3 1.8 0.0 0.4 1.3 5.6 1.1 3.1 0.1 1.3 0.1 6.7 0.2 0.4 2.8 1.7 9.0 1993 100.0 67.2 23.8 37.1 0.1 32.8 1.3 20.1 2.4 0.0 0.3 2.2 4.7 0.9 2.3 0.6 0.8 0.1 12.8 0.1 0.5 3.0 1.6 6.4 1994 100.0 59.4 19.3 30.2 0.4 40.6 1.8 22.2 3.9 0.0 0.3 3.6 3.9 0.9 1.8 0.7 0.6 0.1 14.2 0.1 0.7 3.0 1.1 11.9 1995 100.0 64.3 18.2 36.3 0.0 35.7 1.5 18.3 2.8 0.0 0.6 2.3 3.8 1.4 1.3 0.5 0.7 0.2 11.3 0.2 0.9 5.4 0.1 9.5 1996 100.0 61.6 23.8 30.7 0.1 38.4 1.3 18.6 3.1 0.0 0.6 2.5 4.2 1.7 1.4 0.4 0.6 0.2 11.1 0.0 1.0 4.6 0.9 12.0

1997 100.0 60.5 23.7 28.8 0.7 39.5 1.7 15.8 2.4 0.0 0.6 1.8 3.3 1.0 1.1 0.3 0.9 0.1 9.9 0.0 1.1 4.9 1.4 14.7

1998 100.0 71.0 27.8 36.7 0.5 29.0 0.7 12.2 3.8 2.2 0.8 0.8 1.7 -0.1 0.3 0.3 1.1 0.1 6.5 0.0 0.5 3.8 1.1 10.8

TABLE 4 (continued ) Foreign Direct Investment Inflows of the World and the Emerging East Asian Economies, 1980–99 1999 100.0 76.8 30.1 40.7 1.3 23.2 0.4 9.2 4.3 2.5 1.0 0.8 0.6 -0.3 0.2 0.1 0.7 0.0 4.2 0.0 0.3 3.0 0.4 9.9

Trade and Foreign Direct Investment in East Asia 229

230

Masahiro Kawai and Shujiro Urata FIGURE 1 Total Trade of East Asia and Latin America (Percentage of Total World Trade)

%

20.0 18.0

East Asia Latin America

16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0

Year

0.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Source: Authors

FIGURE 2 FDI Inflows in East Asia and Latin America (Percentage of World FDI Inflows) %

25.0

Figure 2. FDI Inflows in East Asia and Latin America (Percentage of World FDI Inflows)

East Asia

20.0

Latin America

15.0

10.0

5.0

Year

0.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Source: Authors

Trade and Foreign Direct Investment in East

Asia

231

the four newly industrialized economies (NIE-4, i.e., Hong Kong, Korea, Singapore and Taiwan POC) and the core Association of Southeast Asian Nations (ASEAN) economies (Indonesia, Malaysia, the Philippines, and Thailand), China registered a significantly higher growth rate in the 1990s. As a result of rapid export expansion, East Asia increased its share of world exports from 9 per cent in 1980–85 to 18 per cent in 1997, before declining slightly in 1998. As a group, the NIE-4 expanded their share from 5 per cent in 1980–85 to 10 per cent in 1997. However, China became the largest exporter among the emerging East Asian economies in 1999, accounting for 3 per cent of world exports. One notable development was the rapid expansion of manufactured exports. Specifically, the share of manufactured products in total exports for the NIE-4 and the ASEAN-5 increased from 71 per cent and 18 per cent, in 1980 to 87 per cent and 60 per cent in 1995, respectively. For China, the corresponding share increased from 67 per cent in 1990 to 79 per cent in 1995. FDI inflows to emerging East Asian economies grew at a remarkably high rate from the mid-1980s to 1998, significantly faster than exports. Indeed, FDI inflows increased more than 12 times in the 12 years from 1985 to 1999. Unlike exports, FDI inflows continued to grow throughout the period. As result of this rapid expansion, the share of emerging East Asian economies in world FDI inflows increased from 8 per cent in 1985 to 22 per cent in the mid-1990s, before declining sharply to 9 per cent in 1999. China increased its share in world FDI inflows from 3 per cent in 1985 to 14 per cent in 1994, though the share declined to 4 per cent in 1999. Despite this decline, China was the largest recipient of FDI among emerging market economies and the third largest recipient in the world, behind the United States and the United Kingdom, in 1999. There are two important developments with regards to recent FDI into emerging East Asia. One is its resilience even during the period of economic crisis. Compared with other forms of international capital flows such as bank lending, which declined precipitously before and after the crisis, FDI inflows remained relatively stable in emerging East Asia, even in economies that were seriously affected by the crisis. Another important development is the increase in mergers and acquisitions (M&As) as a mode of entry, particularly after the economic crisis (United Nations 1999). Historically, greenfield operations used to be a preferred mode of entry for multinationals in East Asia, mainly because of the

232

Masahiro Kawai and Shujiro Urata

restrictions on equity participation. The economic crisis has changed this trend. Emerging East Asian economies with a keen interest in attracting FDI relaxed the restrictions. Coupled with the relaxation of the FDI regime, the huge decline in the values of East Asian currencies and assets encouraged multinationals to undertake M&As. Exports and FDI inflows became increasingly important in the emerging economies of East Asia. All of the economies except China and Indonesia registered a ratio of exports to GDP exceeding 30 per cent, significantly higher than the average ratio of approximately 23 per cent for the developing economies in 1997 (World Bank 1999). Hong Kong and Singapore had extremely high ratios, which were attributable to their engagement in entrepôt trade. Although the ratios were high, the ratios for Korea and Taiwan OC declined from the mid-1980s to the mid1990s because of the rapid increase in GDP. The ASEAN-4 countries, consisting of Indonesia, Malaysia, Philippines, and Thailand, exhibited an increase in the ratio of exports to GDP, reflecting faster growth of exports compared with GDP. Considering that large countries tend to be less dependent on foreign trade than small countries, it is notable that the export to GDP ratios for China and Indonesia exceeded 20 per cent. Although the ratio of FDI inflows to GDP have been increasing steadily for most developing East Asian economies it varied widely within the region. Singapore had the highest ratio, around 10 per cent, while Korea and Taiwan had the lowest, around 0.5–1.0 per cent. China and Malaysia registered a rapid increase in the ratio, each was about 5 per cent in 1997. It shows that the role of FDI in East Asia’s economic activities is even more important because the foreign affiliates of multinationals engage in production, employment, purchases and sales, including foreign trade, in the FDI recipient economies. The Changing Patterns of Intra-regional Trade and FDI in East Asia Increasing intra-regional interdependence Several studies have examined the changes in intra-regional dependence in foreign trade in East Asia. Computing three sets of measures, Petri (1993) finds that intra-regional dependence in foreign trade in East Asia increased steadily in the post-World War II period, after declining in the pre-World War II period, and that intra-regional bias declined in the post-World War II–period. Frankel (1993) also finds a decline in intraregional bias in foreign trade in the 1980s by estimating the magnitude

Trade and Foreign Direct Investment in East

Asia

233

of the bias in the gravity model framework. This subsection investigates the changing patterns of intra-regional trade and FDI in East Asia from the early 1980s to the mid-1990s. Following Petri (1993), the following three measures are computed: • Absolute measure (A): A = Xij/X.. • Relative measure (B): B = A/(Xi./X..) = Xij/Xi. • Double-relative measure (C): C = A/[(Xi./X..)(X.j/X..)] = sXij*X../ Xi.*X.j, where Xij represents exports (or outward FDI) from region i to region j, and “.” indicates the summation across all i or j. Therefore, Xi. represents total exports (or outward FDI flows) of region i, X.j represents total imports (or inward FDI flows) of region j, and X.. represents world trade (or world total FDI flows). The absolute measure compares the scale of a particular bilateral trading (or FDI) relationship to world trade (or world FDI), while the relative measure compares the scale to trade (or FDI) of one or the other of the two partners participating in the relationship. The doublerelative measure, which is commonly called the trade intensity index, shows the intensity or bias of the bilateral trading (or FDI) relationship by taking into account its importance in world trade (or world FDI). The value of unity for the double-relative measure can be interpreted that the bilateral relationship is neutral. Meanwhile the bilateral relationship is more (or less) biased when the measure is greater (or less) than unity. Table 5 shows the estimated values of the three measures of foreign trade and FDI for several regions in the world — East Asia, the North American Free Trade Agreement (NAFTA), the European Union, and MERCOSUR. The results indicate that intra-regional trade in East Asia became more important not only in terms of world trade but also in terms of regional trade. However, intra-regional bias became smaller over time. Table 6 summarizes changes in the double relative measures (trade intensity indices) for various regions vis-à-vis economies within each group and outside of the group over the period of 1980–99. The table demonstrates that within groups of East Asia, the measures are larger than those for NAFTA or EU-15, though they are smaller than those for MERCOSUR. Again it is confirmed that these measures

1985 40.5 24.2 8.2 19.7 6.9 34.4 9.5 57.5

1980 35.3 21.1 7.1 18.2 5.0 32.8 8.3 54.0

East Asia, incl. Japan Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9, excl. Singapore NAFTA MERCOSUR European Union-15

East Asia, incl. Japan Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9, excl. Singapore NAFTA MERCOSUR European Union-15

1985 6.7 2.5 0.5 0.7 0.1 7.9 0.1 21.7

1985 34.5 26.4 8.9 19.8 5.1 43.9 5.5 59.2

1980 5.4 1.7 0.4 0.7 0.1 5.7 0.2 24.3

1980 35.9 23.3 9.7 18.7 3.9 33.6 11.6 60.8

(b) Relative Measure (%)

East Asia, incl. Japan Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9, excl. Singapore NAFTA MERCOSUR European Union-15

(a) Absolute Measure (%)

1995 49.3 39.6 16.1 25.4 7.3 46.2 20.3 62.4

1995 51.2 34.6 11.8 19.4 7.3 38.4 18.2 61.3

Imports 1990 43.6 30.6 10.3 16.4 4.8 33.9 14.2 63.1

1995 12.7 6.6 1.5 1.5 0.3 7.8 0.3 23.8

Exports 1990 40.1 32.4 12.4 19.8 5.0 41.4 8.9 65.9

Trade 1990 8.3 3.9 0.9 0.8 0.1 6.6 0.1 28.3

1999 54.1 40.5 11.4 23.9 10.7 41.1 19.2 59.6

1999 45.0 37.0 14.8 22.2 8.1 54.6 20.5 62.8

1999 11.3 6.4 1.2 1.4 0.4 10.3 0.3 23.1

TABLE 5 Intra-Regional Interdependence for Trade and FDI FDI 1994 8.4 5.5 0.1 0.8 – 5.3 – 19.3

1980 42.0 19.7 4.1 10.2 – 41.5 – 36.2

38.6

Inward FDI 1994 54.0 38.3 4.6 11.3 – 21.2 – 55.0

47.9

Ouward FDI 1980 1994 38.1 35.0 86.8 86.6 8.6 2.8 73.2 56.5 – – 27.5 18.7

1980 3.5 1.5 0.1 0.5 – 13.6 – 12.9

234 Masahiro Kawai and Shujiro Urata

1985 2.28 2.93 1.75 6.06 2.65 1.96 4.93 1.60

1985 37.3 25.3 8.6 19.7 5.9 38.3 7.0 58.3

Trade 1990 2.27 2.84 1.70 4.60 1.87 2.15 9.70 1.51

Trade (Exports+Imports) 1990 41.8 31.5 11.3 18.0 4.9 37.2 11.0 64.5

1995 2.14 2.32 1.64 3.80 1.64 2.39 13.27 1.66

1995 50.2 37.1 13.9 22.2 7.3 42.0 19.2 61.9

Notes: Definitions are described in the text. Source: Computed from the data from the following sources: Trade data: IMF, Direction of Trade Statistics, and FDI data: Industry Canada

East Asia, incl. Japan Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9, excl. Singapore NAFTA MERCOSUR European Union-15

1980 2.56 2.97 2.09 5.12 1.70 2.05 6.55 1.48

(c) Double-Relative Measure (Trade Intensity Index, %)

East Asia, incl. Japan Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9, excl. Singapore NAFTA MERCOSUR European Union-15

1980 35.6 22.2 8.3 18.4 4.3 33.2 9.7 57.2

1999 2.25 2.49 1.75 4.15 2.34 2.27 14.68 1.66

1999 49.2 38.7 13.2 22.9 9.2 46.8 19.8 61.2

TABLE 5 (continued ) Intra-Regional Interdependence for Trade and FDI

1980 4.59 11.36 4.20 14.09 – 0.84 – 1.08

FDI 1994 2.25 6.08 0.98 7.59 – 0.74 – 1.37

FDI (Outward + Inward) 1980 1994 40.0 42.5 32.1 53.1 5.6 3.5 17.9 18.8 – – 33.0 19.9 – – 37.3 51.2

Trade and Foreign Direct Investment in East Asia 235

(a) East Asia

1980 2.555 3.159 2.782 3.622 3.806 1.837 1.350 0.598 0.306

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

(c) NIE-4

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

1981 3.033 2.990 3.010 3.435 3.012 3.082 1.147 0.351 0.331

1981 2.693 3.010

2.092 3.365 4.127 2.330 1.317 0.273 0.321

1980 2.782 3.008

2.091 3.459 4.213 2.513 1.362 0.256 0.333

1981 2.386 3.033 2.693 3.459 3.612 1.645 1.304 0.549 0.308

1980 3.159 2.973 3.008 3.498 3.044 3.381 1.214 0.338 0.336

(b) Emerging East Asia-14

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

1.891 3.709 4.724 2.183 1.434 0.246 0.311

1982 2.667 3.068

1982 3.042 3.121 3.068 3.823 3.348 2.947 1.220 0.332 0.320

1982 2.395 3.042 2.667 3.662 3.778 1.613 1.368 0.520 0.301

1.719 3.648 4.701 2.186 1.548 0.297 0.301

1983 2.596 2.928

1983 2.942 3.025 2.928 3.819 3.341 2.840 1.271 0.503 0.322

1983 2.326 2.942 2.596 3.538 3.624 1.567 1.425 0.613 0.311

1.633 3.118 3.977 2.196 1.477 0.235 0.307

1984 2.467 2.687

1984 2.796 2.816 2.687 3.372 3.002 2.772 1.210 0.397 0.316

1984 2.233 2.796 2.467 3.232 3.359 1.534 1.420 0.513 0.305

1.751 3.136 4.003 2.135 1.485 0.228 0.308

1985 2.524 2.836

1985 2.868 2.933 2.836 3.444 3.124 2.787 1.177 0.504 0.323

1985 2.281 2.868 2.524 3.215 3.368 1.548 1.444 0.565 0.312

1.665 3.012 3.755 2.314 1.621 0.296 0.310

1986 2.490 2.636

1986 2.729 2.813 2.636 3.333 3.033 2.627 1.304 0.484 0.340

1986 2.146 2.729 2.490 3.096 3.200 1.440 1.630 0.634 0.345

1.576 2.832 3.520 2.491 1.586 0.323 0.330

1987 2.508 2.521

1987 2.732 2.782 2.521 3.239 2.995 2.663 1.308 0.435 0.338

1987 2.234 2.732 2.508 3.069 3.151 1.546 1.571 0.575 0.358

1.551 2.578 3.224 2.423 1.490 0.373 0.334

1988 2.424 2.425

1988 2.613 2.655 2.425 2.888 2.702 2.549 1.246 0.505 0.335

1988 2.175 2.613 2.424 2.817 2.903 1.524 1.485 0.610 0.366

1.600 2.483 3.049 2.356 1.426 0.413 0.333

1989 2.424 2.468

1989 2.599 2.672 2.468 2.742 2.555 2.485 1.199 0.526 0.331

1989 2.172 2.599 2.424 2.714 2.790 1.511 1.442 0.623 0.362

1.697 2.599 3.200 2.308 1.349 0.450 0.337

1990 2.507 2.629

1990 2.707 2.837 2.629 2.808 2.641 2.495 1.152 0.512 0.336

1990 2.267 2.707 2.507 2.826 2.931 1.547 1.398 0.616 0.365

1.635 2.471 3.038 2.204 1.231 0.533 0.333

1991 2.413 2.530

1991 2.600 2.715 2.530 2.640 2.471 2.395 1.066 0.518 0.331

1991 2.218 2.600 2.413 2.687 2.761 1.536 1.286 0.628 0.362

1.642 2.405 2.910 2.143 1.188 0.481 0.323

1992 2.398 2.528

1992 2.551 2.663 2.528 2.515 2.357 2.332 1.042 0.462 0.324

1992 2.211 2.551 2.398 2.567 2.620 1.544 1.246 0.551 0.355

1.585 2.249 2.725 2.035 1.085 0.527 0.355

1993 2.192 2.267

1993 2.293 2.310 2.267 2.318 2.159 2.258 0.980 0.503 0.365

1993 2.042 2.293 2.192 2.391 2.410 1.523 1.163 0.563 0.378

1.579 2.316 2.840 2.080 1.048 0.522 0.346

1994 2.241 2.314

1994 2.338 2.362 2.314 2.405 2.246 2.283 0.950 0.495 0.356

1994 2.101 2.338 2.241 2.427 2.431 1.575 1.136 0.538 0.367

1.636 2.266 2.705 2.154 1.072 0.567 0.343

1995 2.255 2.297

1995 2.335 2.316 2.297 2.346 2.163 2.380 0.968 0.552 0.352

1995 2.138 2.335 2.255 2.415 2.396 1.673 1.138 0.580 0.365

TABLE 6 Trade Intensity Indices of Sub-groups in East Asia and Other Parts of the World

1.639 2.338 2.819 2.101 1.008 0.541 0.350

1996 2.268 2.334

1996 2.365 2.356 2.334 2.394 2.248 2.388 0.918 0.540 0.358

1996 2.179 2.365 2.268 2.448 2.457 1.709 1.077 0.556 0.368

1.655 2.336 2.777 2.031 0.961 0.495 0.357

1997 2.283 2.377

1997 2.363 2.391 2.377 2.391 2.250 2.292 0.888 0.505 0.365

1997 2.172 2.363 2.283 2.421 2.420 1.665 1.035 0.544 0.374

1.771 2.496 2.996 2.053 0.981 0.505 0.364

1998 2.429 2.572

1998 2.502 2.580 2.572 2.597 2.481 2.298 0.934 0.493 0.370

1998 2.272 2.502 2.429 2.546 2.548 1.666 1.084 0.535 0.386

1.747 2.503 2.982 2.144 0.954 0.440 0.349

1999 2.396 2.492

1999 2.458 2.493 2.492 2.576 2.465 2.366 0.896 0.442 0.358

1999 2.253 2.458 2.396 2.539 2.544 1.714 1.030 0.486 0.375

236 Masahiro Kawai and Shujiro Urata

(d) ASEAN-10

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

(f) Japan

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

(e) ASEAN-9

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

1981 3.612 3.012 4.127 4.418

1.728 4.299 0.925 0.298 0.343

1981 1.645 3.082 2.330 3.486 4.299

– 1.484 0.777 0.282

1.702 4.714 1.054 0.268 0.335

1980 1.837 3.381 2.513 3.770 4.714

– 1.512 0.907 0.271

5.116 4.418 3.486 0.858 0.279 0.321

5.124 4.378 3.770 0.965 0.260 0.319

1980 3.806 3.044 4.213 4.378

1981 3.459 3.435 3.365

1980 3.622 3.498 3.459

– 1.547 0.748 0.277

1982 1.613 2.947 2.183 3.467 4.299

1.700 4.299 0.950 0.211 0.340

1982 3.778 3.348 4.724 5.017

5.865 5.017 3.467 0.874 0.235 0.312

1982 3.662 3.823 3.709

– 1.614 0.750 0.297

1983 1.567 2.840 2.186 3.192 3.972

1.761 3.972 0.953 0.313 0.348

1983 3.624 3.341 4.701 5.346

6.222 5.346 3.192 0.929 0.289 0.316

1983 3.538 3.819 3.648

– 1.679 0.656 0.291

1984 1.534 2.772 2.196 3.060 3.801

1.933 3.801 0.902 0.316 0.340

1984 3.359 3.002 3.977 4.977

5.635 4.977 3.060 0.884 0.292 0.321

1984 3.232 3.372 3.118

– 1.777 0.641 0.298

1985 1.548 2.787 2.135 2.930 3.672

2.650 3.672 0.882 0.274 0.348

1985 3.368 3.124 4.003 5.606

6.065 5.606 2.930 0.888 0.253 0.334

1985 3.215 3.444 3.136

– 2.024 0.816 0.351

1986 1.440 2.627 2.314 2.809 3.403

2.523 3.403 0.986 0.389 0.384

1986 3.200 3.033 3.755 5.841

6.369 5.841 2.809 1.002 0.348 0.351

1986 3.096 3.333 3.012

– 1.935 0.769 0.386

1987 1.546 2.663 2.491 2.834 3.366

2.592 3.366 0.987 0.373 0.371

1987 3.151 2.995 3.520 5.849

6.296 5.849 2.834 1.016 0.358 0.346

1987 3.069 3.239 2.832

– 1.841 0.765 0.414

1988 1.524 2.549 2.423 2.710 3.203

2.054 3.203 0.941 0.507 0.369

1988 2.903 2.702 3.224 5.029

5.374 5.029 2.710 1.003 0.468 0.349

1988 2.817 2.888 2.578

–1.819 0.773 0.409

1989 1.511 2.485 2.356 2.672 3.154

2.007 3.154 0.928 0.560 0.358

1989 2.790 2.555 3.049 4.446

4.773 4.446 2.672 0.991 0.494 0.346

1989 2.714 2.742 2.483

– 1.800 0.785 0.413

1990 1.547 2.495 2.308 2.855 3.403

1.872 3.403 0.928 0.597 0.368

1990 2.931 2.641 3.200 4.254

4.597 4.254 2.855 0.975 0.502 0.352

1990 2.826 2.808 2.599

– 1.678 0.826 0.416

1991 1.536 2.395 2.204 2.772 3.279

1.650 3.279 0.883 0.501 0.373

1991 2.761 2.471 3.038 4.036

4.439 4.036 2.772 0.920 0.446 0.350

1991 2.687 2.640 2.471

– 1.646 0.724 0.415

1992 1.544 2.332 2.143 2.669 3.136

1.754 3.136 0.931 0.423 0.380

1992 2.620 2.357 2.910 3.847

4.226 3.847 2.669 0.955 0.398 0.362

1992 2.567 2.515 2.405

– 1.541 0.686 0.406

1993 1.523 2.258 2.035 2.541 2.930

1.613 2.930 0.884 0.401 0.404

1993 2.410 2.159 2.725 3.517

3.842 3.517 2.541 0.900 0.389 0.384

1993 2.391 2.318 2.249

– 1.549 0.632 0.394

1994 1.575 2.283 2.080 2.475 2.842

1.666 2.842 0.859 0.391 0.386

1994 2.431 2.246 2.840 3.680

4.018 3.680 2.475 0.865 0.362 0.369

1994 2.427 2.405 2.316

– 1.539 0.645 0.397

1995 1.673 2.380 2.154 2.579 2.947

1.637 2.947 0.861 0.446 0.385

1995 2.396 2.163 2.705 3.464

3.804 3.464 2.579 0.879 0.402 0.366

1995 2.415 2.346 2.266

TABLE 6 (continued ) Trade Intensity Indices of Sub-groups in East Asia and Other Parts of the World

– 1.476 0.595 0.393

1996 1.709 2.388 2.101 2.584 2.985

1.754 2.985 0.824 0.450 0.395

1996 2.457 2.248 2.819 3.471

3.765 3.471 2.584 0.852 0.395 0.377

1996 2.448 2.394 2.338

– 1.425 0.647 0.399

1997 1.665 2.292 2.031 2.501 2.870

1.929 2.870 0.836 0.416 0.410

1997 2.420 2.250 2.777 3.524

3.796 3.524 2.501 0.851 0.351 0.392

1997 2.421 2.391 2.336

– 1.478 0.647 0.428

1998 1.666 2.298 2.053 2.411 2.723

2.424 2.723 0.919 0.341 0.395

1998 2.548 2.481 2.996 4.088

4.328 4.088 2.411 0.925 0.296 0.386

1998 2.546 2.597 2.496

– 1.382 0.599 0.420

1999 1.714 2.366 2.144 2.444 2.753

2.343 2.753 0.850 0.339 0.366

1999 2.544 2.465 2.982 3.882

4.146 3.882 2.444 0.852 0.296 0.363

1999 2.539 2.576 2.503

Trade and Foreign Direct Investment in East Asia 237

(g) NAFTA

1981 0.308 0.331 0.321 0.321 0.343 0.282 0.520 0.660 1.531

0.660

0.696

1980 0.306 0.336 0.333 0.319 0.335 0.271 0.495 0.696 1.480

1981 0.549 0.351 0.273 0.279 0.298 0.777 1.237 5.187

2.026 1.237 0.520

2.052 1.361 0.495

1980 0.598 0.338 0.256 0.260 0.268 0.907 1.361 6.552

1981 1.304 1.147 1.317 0.858 0.925 1.484

1980 1.350 1.214 1.362 0.965 1.054 1.512

1982 0.301 0.320 0.311 0.312 0.340 0.277 0.526 0.623 1.528

0.623

1982 0.520 0.332 0.246 0.235 0.211 0.748 1.299 5.329

2.047 1.299 0.526

1982 1.368 1.220 1.434 0.874 0.950 1.547

1983 0.311 0.322 0.301 0.316 0.348 0.297 0.500 0.673 1.563

0.673

1983 0.613 0.503 0.297 0.289 0.313 0.750 1.212 4.584

2.046 1.212 0.500

1983 1.425 1.271 1.548 0.929 0.953 1.614

Source: International Monetary Fund, IFS CD-ROM.

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

(i) European Union-15

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

(h) MERCOSUR

East Asia Emerging East Asia-14 NIE-4 ASEAN-10 ASEAN-9 Japan NAFTA MERCOSUR European Union-15

1984 0.305 0.316 0.307 0.321 0.340 0.291 0.505 0.682 1.611

0.682

1984 0.513 0.397 0.235 0.292 0.316 0.656 1.292 5.158

1.918 1.292 0.505

1984 1.420 1.210 1.477 0.884 0.902 1.679

1985 0.312 0.323 0.308 0.334 0.348 0.298 0.515 0.660 1.600

0.660

1985 0.565 0.504 0.228 0.253 0.274 0.641 1.303 4.931

1.961 1.303 0.515

1985 1.444 1.177 1.485 0.888 0.882 1.777

1986 0.345 0.340 0.310 0.351 0.384 0.351 0.498 0.671 1.546

0.671

1986 0.634 0.484 0.296 0.348 0.389 0.816 1.436 7.700

1.919 1.436 0.498

1986 1.630 1.304 1.621 1.002 0.986 2.024

1987 0.358 0.338 0.330 0.346 0.371 0.386 0.478 0.661 1.538

0.661

1987 0.575 0.435 0.323 0.358 0.373 0.769 1.483 7.367

2.013 1.483 0.478

1987 1.571 1.308 1.586 1.016 0.987 1.935

1988 0.366 0.335 0.334 0.349 0.369 0.414 0.473 0.666 1.573

0.666

1988 0.610 0.505 0.373 0.468 0.507 0.765 1.425 7.090

2.005 1.425 0.473

1988 1.485 1.246 1.490 1.003 0.941 1.841

1989 0.362 0.331 0.333 0.346 0.358 0.409 0.467 0.679 1.582

0.679

1989 0.623 0.526 0.413 0.494 0.560 0.773 1.368 8.832

1.982 1.368 0.467

1989 1.442 1.199 1.426 0.991 0.928 1.819

1990 0.365 0.336 0.337 0.352 0.368 0.413 0.460 0.664 1.510

0.664

1990 0.616 0.512 0.450 0.502 0.597 0.785 1.397 9.699

2.148 1.397 0.460

1990 1.398 1.152 1.349 0.975 0.928 1.800

1991 0.362 0.331 0.333 0.350 0.373 0.416 0.440 0.675 1.550

0.675

1991 0.628 0.518 0.533 0.446 0.501 0.826 1.351 11.316

2.227 1.351 0.440

1991 1.286 1.066 1.231 0.920 0.883 1.678

1992 0.355 0.324 0.323 0.362 0.380 0.415 0.428 0.679 1.577

0.679

1992 0.551 0.462 0.481 0.398 0.423 0.724 1.310 13.145

2.259 1.310 0.428

1992 1.246 1.042 1.188 0.955 0.931 1.646

1993 0.378 0.365 0.355 0.384 0.404 0.406 0.434 0.679 1.652

0.679

1993 0.563 0.503 0.527 0.389 0.401 0.686 1.182 14.364

2.163 1.182 0.434

1993 1.163 0.980 1.085 0.900 0.884 1.541

1994 0.367 0.356 0.346 0.369 0.386 0.394 0.424 0.706 1.674

0.706

1994 0.538 0.495 0.522 0.362 0.391 0.632 1.194 13.600

2.255 1.194 0.424

1994 1.136 0.950 1.048 0.865 0.859 1.549

1995 0.365 0.352 0.343 0.366 0.385 0.397 0.414 0.704 1.660

0.704

1995 0.580 0.552 0.567 0.402 0.446 0.645 1.173 13.266

2.394 1.173 0.414

1995 1.138 0.968 1.072 0.879 0.861 1.539

TABLE 6 (continued ) Trade Intensity Indices of Sub-groups in East Asia and Other Parts of the World

1996 0.368 0.358 0.350 0.377 0.395 0.393 0.412 0.689 1.672

0.689

1996 0.556 0.540 0.541 0.395 0.450 0.595 1.169 14.369

2.410 1.169 0.412

1996 1.077 0.918 1.008 0.852 0.824 1.476

1997 0.374 0.365 0.357 0.392 0.410 0.399 0.426 0.686 1.691

0.686

1997 0.544 0.505 0.495 0.351 0.416 0.647 1.106 13.971

2.347 1.106 0.426

1997 1.035 0.888 0.961 0.851 0.836 1.425

1998 0.386 0.370 0.364 0.386 0.395 0.428 0.426 0.694 1.621

0.694

1998 0.535 0.493 0.505 0.296 0.341 0.647 1.076 14.191

2.302 1.076 0.426

1998 1.084 0.934 0.981 0.925 0.919 1.478

1999 0.375 0.358 0.349 0.363 0.366 0.420 0.423 0.711 1.661

0.711

1999 0.486 0.442 0.440 0.296 0.339 0.599 1.129 14.676

2.270 1.129 0.423

1999 1.030 0.896 0.954 0.852 0.850 1.382

238 Masahiro Kawai and Shujiro Urata

Trade and Foreign Direct Investment in East

Asia

239

have declined over time for East Asia. It is also interesting to observe that inter-regional trade intensity measures are usually low, suggesting that there has been a bias toward regional trade at the global level.

Changing patterns of trade The importance of intra-East Asian trade in world trade increased significantly from 5 per cent in 1980 to 13 per cent in 1995, though it declined slightly to 11 per cent in 1999. The share of intra-NAFTA trade in world trade also increased over the same period, but it increased smaller, to 10 per cent in 1999. The corresponding share for the European Union was significantly higher, at 23 per cent in 1999, although the share had declined sharply from 29 per cent in 1990. A significant part of intra-East Asian trade takes place between Japan and emerging East Asian economies. This can be seen from the fact that the share of intra-regional trade among emerging East Asian economies (6 per cent in 1999) amounted to only slightly more than half of the level observed for East Asia as a whole (11 per cent) including Japan. The magnitude of intra-regional trade for the Asian NIE-4 and for the ASEAN10 was still quite small in world trade, amounting to 1.2 per cent and 1.4 per cent of world trade in 1999, respectively. Intra-East Asian trade increased its importance for East Asia’s total trade over time, as shown by the increase in the relative measure from 36 per cent in 1980 to 50 per cent in 1997, followed by a slight decline to 49 per cent in 1999. The comparable figures for emerging East Asia were 22 and 39 per cent in 1980 and 1999, respectively. The importance of intra-regional trade in total regional trade also increased for the members of NAFTA. It increased from 33 to 47 per cent during the same period, but it declined for the European Union from 65 per cent in 1990 to 61 per cent in 1999, after rising between 1980 and 1990. Among the sub-groups in East Asia, intra-group trade among the NIE-4 was quite small, amounting to only 13 per cent of total trade, while intra-ASEAN10 trade was larger, at 23 per cent. An analysis of the relative measures computed for exports and for imports shows that intra-East Asian trade is more important as a source of imports than as a destination for exports. This finding indicates a trading pattern in which East Asian economies procure imports within the region and sell exports outside the region. This appears to reflect the

240

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behaviour of multinationals, as will be confirmed in a later section. Many multinationals use East Asia as an export platform, in which they assemble export products for regions outside of East Asia by importing parts and components from within the region. In contrast, intra-NAFTA trade is more important for NAFTA’s exports than for its imports. The results of the double-relative measure (or the trade intensity index) reveal an interesting contrast concerning the intra-regional trade bias for East Asia, on the one hand, and the NAFTA and the European Union, on the other hand. Specifically, intra-regional bias declined in East Asia from 2.6 in 1980 to 2.3 in 1999, while the corresponding values for the NAFTA and the European Union increased from 2.1 and 1.5 to 2.3 and 1.7, respectively, over the same period. Among East Asian subgroups, intra-regional trade bias was very high for ASEAN, with the double-relative measure at 4.2 in 1999, although the size of the bias has declined over time. The estimated measures of intra-regional trade dependence reveal that the importance of intra-regional trade in East Asia increased not only in world trade but also in regional trade over time. However, extraregional trade also expanded rapidly. Indeed, intra-regional trade bias declined in East Asia, while it increased in the NAFTA and the European Union. One may attribute these differences partly to differences in the institutional arrangements. Both the NAFTA and the European Union have trade arrangements that give preferential treatment to their members, possibly leading to an increasing regional bias. In East Asia, a preferential trading arrangement has been set up only for the ASEAN members that make up a small portion of intra-East Asian trade, and other economies do not have any discriminatory arrangements. The absence of discriminatory trade arrangements may have caused a decline in trade bias. Unilateral trade liberalization without discriminatory treatment among trading partners, even including those of ASEAN, may have contributed to a decline in regional trade bias in East Asia. Furthermore, a decline in the cost of communications and transportation services, resulting from technological progress and liberalization, contributed to the diversification of trading partners. Rapid industrialization centred on similar industries such as textiles and electric machinery has forced many East Asian economies to look outside the region for markets for their products, diminishing the intra-regional trade bias (Petri 993).

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Changing patterns of FDI Similarly to the changing patterns of trade, intra-regional FDI in East Asia increased from 4 per cent of world FDI in 1980 to 8 per cent in 1994. The corresponding share for the European Union also increased from 13 to 19 per cent, while it declined for the NAFTA from 14 to 5 per cent. Among the East Asian sub-groups, the stock of intra-regional FDI in the emerging economies registered relatively high growth, increasing from 2 to 6 per cent of world FDI during the 1980–94 periods. Intra-regional FDI in East Asia increased from 40 per cent in 1980 to 43 per cent in 1994. Among the sub-groups, intra-regional FDI became particularly important for emerging East Asia. Coupled with this observation, the relatively small shares of intra-regional FDI for NIEs and ASEAN indicate the importance of FDI from the former to the latter sub-group. Intraregional FDI is particularly important because 87 per cent of outward FDI has been directed to emerging East Asia. The share of inward FDI has increased in East Asia, which means that an increasing share of inward FDI originates inside the region. However, the share of intraregional FDI in regional FDI is substantially smaller for emerging East Asian economies, reflecting the importance of Japan as a source of FDI. The results of double-relative measures show an interesting contrast between East Asia and the European Union. Although the magnitude of the bias was higher for East Asia than for the European Union, the magnitude of the bias declined for East Asia, while it increased for the European Union. The extent of the bias remained more or less the same for the NAFTA. These observations are consistent with those made for foreign trade, and differences in the direction of bias for East Asia and for the European Union may reflect differences in institutional arrangements, as argued in the case of foreign trade. Patterns similar to those of trade are found for intra-regional FDI in East Asia. That is, from 1980 to 1994 the importance of intra-regional FDI in East Asia increased not only in world FDI but also in overall regional FDI in East Asia. However, a regional bias declined during the 1980–94 period. These findings indicate that the increasing importance of intra-regional trade and FDI was attributable largely to the rapid expansion of overall trade and FDI in the region that was driven by market forces. This contrasts with the case in the European Union or the NAFTA, where intra-regional bias in foreign trade and FDI increased possibly because of discriminatory institutional arrangements under

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which regional members receive preferential treatment, worsening resource allocation. Factors behind the Rapid Expansion of Trade and FDI The factors behind the significant expansion in foreign trade and FDI inflows in East Asia fall into two groups, domestic and external factors. The most important domestic factor is the liberalization of both trade and FDI. In addition, a stable macroeconomic environment, reflected in relatively stable price levels, together with an abundant supply of well educated, low-wage labour contributes to the expansion of exports and FDI inflows. As for the external factors, the substantial realignment of exchange rates, particularly the yen-dollar exchange rate in the mid1980s, is important. It is as well as the remarkable technical progress achieved in information technology, which reduces the cost of communications. Finally, increased competition among multinational firms, which resulted partly from liberalization and deregulation in various sectors in many countries in the world, to promote their global activities, thereby to expand trade and FDI.

Liberalization of trade and FDI regimes Emerging East Asian economies have embarked on liberalization of trade and FDI and deregulation in domestic economic activities as part of more comprehensive structural reform policies. Such policy changes were due to the realization that liberalization and deregulation would promote economic growth. The liberalization of trade and FDI led to the expansion of exports and inward FDI because it shifted the incentives from importsubstituting production to export production and increased the attractiveness of these economies to foreign investors. Emerging East Asian economies liberalized their import regimes by lowering tariff rates and non-tariff barriers from the early 1980s to the early 1990s. The notable exception were Hong Kong SAR and Singapore, which had adopted virtually free trade regimes. China and Indonesia significantly reduced their average tariff rates. The incidence of nontariff barriers declined in many East Asian economies, except in China. The most remarkable is Indonesia, which reduced non-tariff barriers from 95 per cent in 1984–87 to less than 3 per cent in 1991–93. Korea also reduced both its tariff rates and the incidence of non-tariff barriers during the period from 1988 to 1993.

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Inward FDI policies were liberalized in the mid-1980s, as East Asian economies began to realize that FDI inflows would promote economic growth. Although it is difficult to quantify the restrictiveness of an FDI regime, it is clear that many emerging East Asian economies have liberalized their FDI policies since the mid-1980s. Restrictions on FDI took various forms, including restrictions on market access, mostfavoured-nation treatment, and national treatment. Many emerging East Asian economies reduced the restrictions on market access by reducing the number of sectors and industries on the negative list and by relaxing the limits on foreign equity ownership. Among the emerging East Asian economies, Indonesia, Korea, Malaysia, the Philippines, and Thailand adopted substantial FDI liberalization measures in an effort to attract foreign investors. Furthermore, recognizing the important contribution that FDI may make toward economic growth, a number of economies introduced incentives such as tax breaks to attract FDI. Indeed, there has been keen competition among emerging East Asian economies to attract FDI by reducing barriers and providing incentives.

AFTA liberalization Liberalization of trade and FDI also has progressed under regional and global frameworks. The members of the ASEAN formed the ASEAN Free Trade Area (AFTA) in 1992, the only formal regional trade arrangement in East Asia. The 1992 agreement provided for the liberalization of tariff and non-tariff measures under the Common Effective Preferential Tariffs. The target year for achieving tariff and non-tariff liberalization was originally set for 2008, but later was moved forward to 2003. FDI liberalization in the ASEAN has been underway after the creation of the ASEAN Investment Area (AIA) in 1998, which provides coordinated investment cooperation and facilitation programmes, market access, and national treatment of all industries. Indonesia, Malaysia, the Philippines, Singapore, Thailand and Brunei Darussalam have started to implement AFTA in 2002, while it will be implemented in Vietnam by 2006, Laos and Myanmar by 2008 and Cambodia by 2010.

APEC liberalization process APEC has also contributed to the liberalization and facilitation of trade and FDI for emerging East Asian economies. This trans-regional forum

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includes not only East Asian economies but also countries in North and South America and Oceania. One important characteristic of APEC is its inclusion of China and Taiwan as members. Following the Bogor declaration in 1994, there was a strong call for full liberalization of trade and FDI by 2010 for developed-country members and by 2020 for developing-country members. Then, APEC members agreed to prepare and implement individual action plans to specify near- and medium-term liberalization measures. Peer pressure is expected to play a crucial role in implementation. There is no doubt that all APEC members have made significant progress toward freer trade and FDI regimes. The Uruguay Round of multilateral trade negotiations under the former GATT started in 1986 and ended in 1994. Although the negotiations lasted eight years, the Uruguay Round made substantial progress toward liberalizing trade and FDI. The achievements include: a reduction in tariff rates; framework of agreements on trade in services, on intellectual property rights and on trade-related investment measures; a timetable for phasing out all quantitative restrictions on trade; first steps toward bringing agriculture more firmly under a multilateral discipline; a stronger dispute settlement mechanism; and the establishment of the World Trade Organization. Though it is difficult to estimate the impact of these achievements individually, there is no doubt that the GATT/WTO has promoted trade and FDI liberalization in East Asia.

Changing Patterns of Trade Changing Export and Import Patterns in East Asia The share of manufactured exports in total exports increased notably for the major East Asian economies during the 1990s except for Korea and Hong Kong SAR (Table 7). From 1990 to 1995 and then to 1999, the shares of manufactured exports in total exports for the East Asian economies except Hong Kong and Korea increased as follows: China (71 per cent to 84 per cent, and then to 88 per cent), Singapore (71 per cent to 84 per cent, and to 86 per cent), Taiwan (93 per cent in the first two years to 95 per cent), Indonesia (35 per cent to 51 per cent, and to 54 per cent), Malaysia (54 per cent to 75 per cent, and to 80 per cent), the Philippines (38 per cent to 41 per cent in the last two years), and Thailand

1999 1.9 1.7 0.2 2.2 0.6 0.4 1.2 93.3 0.1 3.2 2.3 22.9 0.4 1.7 16.1 4.5 0.0 0.2 5.5 42.8 16.7 2.6 100.0

World 1995 2.9 2.6 0.3 1.7 0.7 0.3 0.7 93.6 0.1 3.9 4.2 29.4 0.4 2.7 19.8 6.2 0.0 0.2 6.1 31.9 18.0 1.8 100.0

1990 2.8 2.6 0.3 1.4 0.7 0.4 0.3 94.5 0.1 2.9 3.9 24.9 0.4 2.1 16.5 5.8 0.0 0.2 7.5 32.0 23.3 1.3 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Hong Kong SAR

1999 7.3 6.0 1.3 4.4 0.6 2.4 1.4 88.3 1.6 5.3 7.6 30.1 1.0 2.7 15.5 7.6 0.5 3.0 6.8 15.5 21.5 0.1 100.0

World 1995 10.1 8.3 1.8 5.7 0.8 3.6 1.3 83.9 3.7 6.0 7.7 21.0 0.8 2.2 9.8 5.6 0.4 2.4 9.5 16.2 19.9 0.4 100.0

1990 16.2 12.7 3.5 10.6 1.2 8.4 1.0 71.4 2.1 6.0 6.0 17.5 0.3 3.7 5.0 1.8 5.6 1.1 11.6 15.6 12.7 1.9 100.0

China

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 7.8 6.9 0.9 1.8 1.4 0.0 0.5 89.7 0.4 4.6 4.1 40.1 0.1 4.6 28.6 6.6 0.0 0.2 19.9 3.1 17.6 0.7 100.0

1990 20.9 17.0 3.9 25.0 1.1 23.1 0.9 54.1 8.1 7.5 8.4 15.6 1.0 5.9 1.7 1.5 4.1 1.5 10.0 1.5 3.0 0.0 100.0 ASEAN-10 1995 6.8 6.0 0.8 1.1 0.4 0.0 0.7 91.3 0.1 4.4 5.0 55.1 0.2 4.5 41.7 8.4 0.0 0.3 10.5 1.7 14.5 0.8 100.0

ASEAN-10 1995 16.1 14.1 2.0 6.8 0.6 4.5 1.7 76.6 10.5 9.4 9.6 29.2 1.2 6.4 10.0 4.5 1.2 5.9 8.7 2.4 6.8 0.5 100.0

1999 7.6 7.1 0.5 2.2 0.3 0.0 1.9 89.3 0.0 5.8 3.2 49.5 0.3 4.1 36.8 7.7 0.0 0.6 11.9 1.3 17.6 0.9 100.0

1999 11.5 10.0 1.5 8.0 0.7 5.1 2.2 80.5 2.8 9.2 6.8 42.5 1.6 4.5 23.7 6.6 0.4 5.8 7.4 4.6 7.4 0.0 100.0

1990 15.5 14.7 0.8 3.1 2.2 0.0 0.9 80.9 0.1 2.9 3.5 44.9 0.4 1.9 34.4 8.1 0.0 0.2 6.3 4.5 18.8 0.5 100.0

1990 11.1 9.0 2.1 5.6 0.5 4.1 1.0 83.3 1.5 4.5 5.5 26.3 0.2 4.1 9.0 2.4 9.8 0.9 13.3 15.8 16.5 0.0 100.0 NIE-4 1995 4.9 4.6 0.3 1.9 1.5 0.0 0.4 92.8 0.0 2.3 2.9 60.8 0.1 2.6 49.7 8.3 0.0 0.2 2.2 10.8 13.7 0.5 100.0

NIE-4 1995 9.9 8.0 2.0 6.0 0.5 3.6 1.9 83.9 4.3 5.2 7.2 22.2 0.8 1.5 10.5 6.8 0.1 2.5 14.7 14.8 15.5 0.2 100.0

1999 2.0 2.0 0.0 3.1 2.4 0.1 0.6 84.1 0.0 2.9 1.7 49.6 0.5 3.0 39.1 7.0 0.0 0.0 1.0 12.3 16.5 10.7 100.0

1999 6.5 5.4 1.1 7.1 0.4 4.0 2.6 86.4 2.2 4.3 6.3 31.8 1.1 1.8 16.8 8.7 0.1 3.2 10.3 15.7 15.9 0.0 100.0

1990 6.1 6.0 0.1 6.3 6.1 0.0 0.2 87.4 0.3 2.2 4.6 14.0 0.6 0.5 10.1 2.5 0.0 0.3 1.7 34.0 30.6 0.3 100.0

1990 25.6 18.9 6.7 33.9 2.6 29.8 1.5 40.5 3.3 5.3 2.7 3.8 0.5 0.7 0.5 0.4 1.7 0.1 7.4 15.1 2.9 0.1 100.0 Japan 1995 9.4 9.3 0.1 4.0 3.7 0.0 0.3 86.2 0.1 1.4 3.8 26.1 0.4 0.6 20.9 3.8 0.0 0.5 0.9 19.7 34.2 0.5 100.0

Japan 1995 17.1 14.5 2.5 9.7 1.2 6.9 1.7 73.0 4.4 4.1 5.1 15.4 1.3 1.0 8.3 3.7 0.2 0.9 6.1 26.1 11.8 0.2 100.0

1999 4.3 4.3 0.0 2.5 2.4 0.0 0.1 92.6 0.0 1.0 2.5 40.6 0.1 0.8 34.9 4.2 0.0 0.7 0.9 10.3 37.2 0.7 100.0

1999 15.5 13.6 1.9 5.5 0.8 3.5 1.2 79.0 1.5 3.7 5.5 22.4 1.8 1.7 11.1 6.3 0.4 1.1 5.0 27.3 13.7 0.0 100.0

1990 5.9 5.3 0.6 3.5 1.8 1.0 0.7 88.8 0.3 7.5 6.5 31.6 0.8 4.4 19.9 6.5 0.0 0.1 12.4 8.5 22.0 1.9 100.0

1990 15.0 11.7 3.3 12.0 1.0 9.9 1.1 73.1 2.4 4.9 5.1 21.1 0.3 3.6 6.8 1.9 7.8 0.8 11.8 14.9 12.9 0.0 100.0 East Asia 1995 4.6 3.9 0.7 3.5 1.5 0.7 1.3 89.7 0.3 7.7 6.9 39.2 0.7 5.1 25.2 8.1 0.0 0.2 8.5 10.0 17.1 2.2 100.0

East Asia 1995 12.9 10.8 2.1 7.2 0.8 4.7 1.8 79.7 5.1 5.4 6.8 20.3 1.0 1.8 9.3 5.6 0.3 2.4 11.3 17.5 13.4 0.2 100.0

1999 2.5 2.0 0.5 3.3 1.2 0.8 1.3 91.1 0.2 6.9 3.7 31.7 0.8 3.3 20.1 7.3 0.0 0.2 7.6 24.7 16.5 3.0 100.0

1999 10.3 8.9 1.4 6.4 0.6 3.8 2.0 83.3 2.0 4.8 6.1 28.9 1.4 2.0 15.0 7.7 0.3 2.6 8.4 18.7 14.4 0.0 100.0

1990 1.1 1.0 0.0 0.1 0.0 0.0 0.1 98.4 0.0 0.1 2.1 20.5 0.2 0.5 13.9 5.5 0.0 0.3 2.8 50.8 22.2 0.4 100.0

1990 10.0 8.7 1.3 15.3 1.9 12.0 1.4 74.7 1.3 5.8 6.4 9.2 0.3 3.1 1.9 1.5 1.9 0.6 10.0 22.4 19.6 0.0 100.0

TABLE 7 Changing Export Structures of East Asia Countries (shares, per cent)

NAFTA 1995 1.1 1.1 0.0 0.1 0.0 0.0 0.1 98.4 0.0 0.1 1.7 21.0 0.2 0.4 15.2 4.8 0.0 0.4 2.5 58.0 15.2 0.5 100.0

NAFTA 1995 3.0 2.4 0.6 2.8 0.7 1.8 0.4 94.1 1.3 3.6 7.3 24.7 0.5 2.0 12.8 6.3 0.7 2.4 3.9 12.8 40.5 0.1 100.0

1999 1.1 1.1 0.0 0.1 0.0 0.0 0.1 98.6 0.0 0.1 1.3 14.2 0.1 0.4 11.0 2.6 0.0 0.3 3.0 65.5 14.4 0.2 100.0

1999 2.4 1.9 0.5 1.6 0.4 0.6 0.7 96.0 1.2 3.5 8.5 32.9 0.5 2.8 18.6 7.9 0.8 2.2 2.7 9.7 37.6 0.0 100.0

European Union-15 1990 1995 1999 0.5 0.8 0.9 0.4 0.7 0.9 0.1 0.0 0.0 0.2 0.2 0.2 0.1 0.0 0.1 0.0 0.0 0.0 0.1 0.2 0.1 99.1 98.6 96.5 0.0 0.0 0.0 0.1 0.2 0.1 2.1 1.4 0.6 23.5 21.5 20.6 0.3 0.0 0.0 0.4 0.5 0.2 17.0 16.0 18.1 5.8 4.9 2.3 0.0 0.0 0.0 0.1 0.1 0.0 2.3 0.6 0.6 49.2 57.5 57.7 21.9 17.5 16.9 0.2 0.4 2.4 100.0 100.0 100.0

European Union-15 1990 1995 1999 21.7 8.0 5.6 13.3 5.3 3.6 8.4 2.8 1.9 5.0 4.2 3.1 2.0 1.1 0.7 2.0 2.0 1.0 0.9 1.1 1.4 73.3 87.7 91.3 1.2 2.7 1.3 13.9 10.6 7.2 9.4 9.4 9.4 6.8 21.9 35.9 0.2 0.4 0.6 2.0 2.0 3.0 1.4 12.1 19.5 0.6 5.9 8.9 1.0 0.1 0.4 1.5 1.4 3.4 13.0 5.5 3.7 17.0 13.3 10.3 12.1 24.3 23.5 0.0 0.1 0.0 100.0 100.0 100.0

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1990 7.8 5.2 2.6 19.7 0.4 18.2 1.1 71.2 0.8 6.2 3.3 50.1 0.9 5.2 36.5 4.3 0.6 2.6 1.7 3.0 6.0 1.3 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Singapore

1990 4.6 3.3 1.3 1.9 0.3 1.1 0.6 93.2 5.7 3.8 6.7 39.3 0.9 2.8 22.1 3.5 3.3 6.7 9.4 12.3 16.0 0.3 100.0

Korea, Rep. Of

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1995 5.0 4.0 1.1 8.8 0.3 6.9 1.7 83.7 0.8 5.8 2.7 65.6 1.1 5.2 51.0 6.0 0.6 1.6 1.3 1.2 6.4 2.4 100.0

World

World 1995 3.5 2.3 1.3 3.0 0.1 2.0 0.9 91.5 4.4 7.1 7.1 52.5 0.8 4.8 26.6 7.3 7.3 5.8 9.9 4.0 6.5 2.0 100.0

1999 3.4 2.8 0.6 9.2 0.2 8.0 1.0 85.9 0.5 7.8 2.2 66.3 0.8 4.6 52.8 6.1 0.5 1.4 0.7 1.4 7.1 1.5 100.0

1999 2.9 2.0 1.0 5.4 0.1 4.1 1.3 89.6 4.2 7.4 6.2 54.2 0.6 4.6 29.9 4.0 8.9 6.2 8.1 3.4 6.1 2.1 100.0

1990 5.8 4.6 1.3 26.9 0.6 24.5 1.8 66.0 2.5 10.0 5.1 39.2 1.1 10.3 18.4 6.7 1.2 1.5 3.2 0.3 5.7 1.3 100.0

1990 3.1 2.0 1.1 2.6 0.2 1.2 1.3 93.3 10.0 8.5 9.1 47.9 0.9 8.5 28.3 4.0 1.0 5.2 13.3 0.3 4.3 0.9 100.0

1995 5.0 4.3 0.7 10.9 0.3 8.3 2.3 82.8 1.9 7.9 4.8 58.4 2.2 9.6 32.7 11.1 1.5 1.4 2.6 0.4 6.9 1.3 100.0

ASEAN-10

ASEAN-10 1995 2.0 0.9 1.1 3.5 0.1 2.4 1.0 87.8 7.0 8.9 7.1 53.0 0.6 7.7 31.3 6.2 2.6 4.6 9.0 0.2 2.7 6.7 100.0

1999 3.8 3.4 0.5 9.7 0.3 8.0 1.4 85.1 1.1 8.5 3.7 63.4 1.4 7.9 41.0 11.5 0.7 0.8 1.5 0.3 6.7 1.4 100.0

1999 1.8 0.8 1.0 6.4 0.1 4.4 2.0 90.7 4.3 8.7 5.6 60.1 0.4 4.6 43.6 3.5 2.2 5.8 8.6 0.3 3.2 1.1 100.0

1990 8.6 6.3 2.3 29.9 0.4 28.3 1.2 60.5 0.5 7.9 3.8 40.0 1.4 3.7 26.2 3.5 0.7 4.4 1.8 0.2 6.4 1.0 100.0

1990 5.0 1.9 3.1 2.9 0.1 0.8 2.0 91.0 3.8 5.6 6.6 40.0 0.6 2.0 27.4 3.8 0.3 5.9 25.8 0.8 8.5 1.1 100.0

1995 5.2 4.6 0.6 16.2 0.4 13.8 2.1 77.3 0.4 8.5 2.1 58.6 1.0 4.2 47.2 4.5 0.3 1.4 0.7 0.2 6.8 1.3 100.0

NIE-4

NIE-4 1995 2.4 1.2 1.2 4.6 0.1 2.4 2.1 84.8 3.7 8.3 6.2 47.0 0.4 2.5 33.0 5.2 0.9 5.0 15.5 0.6 3.6 8.3 100.0

1999 2.6 2.2 0.4 14.6 0.2 13.1 1.4 81.6 0.3 8.2 1.9 64.0 0.8 3.9 52.1 5.2 0.6 1.4 0.8 0.1 6.4 1.1 100.0

1999 1.8 0.8 1.0 9.5 0.1 6.7 2.8 86.2 4.5 8.5 5.7 49.9 0.3 2.3 40.0 3.1 0.7 3.5 8.8 0.3 8.4 2.5 100.0

1990 13.4 10.6 2.8 42.6 1.2 39.2 2.2 42.3 0.3 5.2 2.7 26.6 1.2 3.1 17.6 3.3 0.1 1.3 0.4 0.5 6.6 1.7 100.0

1990 13.0 10.7 2.3 5.8 1.0 4.0 0.8 80.4 11.1 3.9 5.9 23.0 0.5 1.9 15.7 3.1 0.3 1.5 4.1 19.3 13.0 0.8 100.0

1995 9.0 7.8 1.2 10.8 0.8 8.8 1.2 77.7 0.1 3.6 1.4 64.1 1.1 2.2 55.5 4.4 0.1 0.9 0.2 0.7 7.7 2.6 100.0

Japan

Japan 1995 11.4 10.1 1.3 7.2 0.6 5.5 1.2 79.9 10.9 5.2 5.4 32.8 0.5 2.6 24.4 4.1 0.4 0.8 3.7 10.9 11.1 1.5 100.0

1999 6.6 6.0 0.6 7.7 0.6 6.1 1.0 83.2 0.1 5.2 1.1 58.9 1.4 2.2 49.4 4.4 0.2 1.2 0.1 0.6 17.2 2.6 100.0

1999 13.3 12.2 1.1 14.5 0.4 13.1 1.0 72.1 7.2 5.4 5.0 34.0 0.5 3.2 25.5 3.5 0.7 0.6 2.4 7.0 11.1 0.1 100.0

1990 8.6 6.4 2.2 30.7 0.6 28.4 1.7 59.4 1.4 8.8 4.2 36.5 1.2 6.9 20.2 5.0 0.9 2.5 2.2 0.3 6.0 1.3 100.0

1990 9.3 7.0 2.3 4.6 0.7 2.7 1.3 85.2 9.4 6.1 6.9 30.5 0.5 3.5 19.4 3.5 0.8 2.8 11.4 10.9 10.1 0.9 100.0

1995 5.7 4.9 0.8 13.0 0.4 10.3 2.3 79.7 1.2 7.7 3.6 58.5 1.7 7.1 39.3 8.0 0.9 1.5 1.6 0.3 6.8 1.6 100.0

East Asia

East Asia 1995 5.8 3.8 2.0 5.6 0.2 3.7 1.6 84.6 7.3 10.7 7.9 38.2 0.4 5.2 24.1 4.4 1.6 2.5 11.4 3.5 5.7 4.0 100.0

1999 3.8 3.3 0.6 11.1 0.3 9.4 1.4 83.6 0.7 8.3 2.8 62.4 1.2 5.8 45.4 8.3 0.6 1.1 1.0 0.3 8.3 1.5 100.0

1999 5.2 3.7 1.5 10.6 0.1 8.2 2.2 83.3 5.9 11.2 6.9 41.6 0.5 3.9 30.6 3.4 1.1 2.1 8.6 2.2 7.0 1.0 100.0

1990 2.7 1.6 1.1 2.2 0.0 1.8 0.4 94.0 0.2 3.6 0.9 76.8 0.8 3.4 67.1 3.3 0.2 2.0 0.2 8.3 4.2 1.2 100.0

1990 1.3 1.1 0.2 0.2 0.0 0.1 0.1 98.5 3.3 1.3 5.9 43.3 1.9 2.6 24.5 3.6 7.2 3.7 3.6 17.2 23.9 0.0 100.0

TABLE 7 (continued ) Changing Export Structures of East Asia Countries (shares, per cent)

1995 1.3 0.9 0.4 0.8 0.0 0.5 0.2 97.1 0.0 2.6 0.6 86.3 0.3 1.8 80.4 2.9 0.1 0.9 0.1 3.7 3.8 0.8 100.0

NAFTA

NAFTA 1995 1.3 0.7 0.6 0.6 0.0 0.4 0.1 98.1 2.5 1.8 6.0 67.8 1.7 3.5 42.1 10.4 7.1 3.0 3.2 7.4 9.6 0.0 100.0

1999 1.1 0.9 0.2 1.7 0.0 1.5 0.2 95.9 0.0 3.4 0.7 83.6 0.3 1.9 76.4 4.0 0.1 0.8 0.1 4.0 4.3 1.3 100.0

1999 1.1 0.7 0.5 1.6 0.0 1.0 0.5 97.3 3.6 2.7 5.4 66.8 1.2 4.8 40.9 5.0 12.2 2.7 4.2 7.4 7.3 0.0 100.0

1990 5.4 2.5 2.9 4.3 0.1 3.7 0.5 89.1 0.1 2.4 3.0 69.7 0.6 2.4 59.1 5.4 0.1 2.1 0.5 5.9 7.6 1.2 100.0

1995 3.2 1.9 1.3 0.2 0.1 0.1 0.1 93.9 0.1 2.8 1.7 81.1 0.4 1.9 72.8 4.3 0.1 1.7 0.2 2.1 6.1 2.7 100.0

European Union-15 1999 2.3 1.6 0.7 2.5 0.0 2.4 0.1 94.3 0.1 11.0 1.5 74.4 0.4 1.9 66.2 3.6 0.1 2.1 0.1 2.6 4.7 0.9 100.0

European Union-15 1990 1995 1999 2.2 1.2 1.2 1.8 0.8 0.5 0.4 0.4 0.7 0.2 0.2 0.5 0.0 0.1 0.2 0.0 0.0 0.1 0.1 0.1 0.2 97.5 98.6 96.9 1.2 0.6 1.6 2.9 4.8 4.6 6.0 7.5 4.8 47.1 70.9 73.2 0.2 0.7 0.4 1.7 4.4 4.6 28.2 28.1 35.8 3.5 16.5 4.1 1.2 13.5 17.0 12.4 7.7 11.4 5.5 4.3 4.2 13.7 3.5 3.6 21.3 7.1 5.1 0.1 0.0 1.4 100.0 100.0 100.0

246 Masahiro Kawai and Shujiro Urata

1990 16.2 11.1 5.1 48.1 2.6 43.8 1.8 35.2 0.9 2.4 14.5 1.4 0.0 0.2 0.5 0.3 0.1 0.4 4.9 6.5 4.6 0.5 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Indonesia

1990 5.5 4.0 1.5 1.8 0.2 0.6 1.0 92.6 1.5 4.0 11.4 39.1 0.6 6.4 21.0 6.2 1.1 3.7 9.3 6.0 21.4 0.1 100.0

Taiwan

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1995 18.0 11.4 6.7 31.3 4.4 25.3 1.6 50.6 0.8 3.3 14.8 8.4 0.2 0.7 5.0 1.5 0.2 0.9 6.0 7.6 9.6 0.1 100.0

World

World 1995 5.0 3.4 1.5 2.2 0.2 0.8 1.2 92.8 2.1 6.5 9.9 48.0 0.5 7.3 28.3 7.1 1.2 3.6 10.7 2.9 12.6 0.1 100.0

1999 15.5 11.7 3.8 27.7 3.2 23.0 1.5 53.9 1.0 4.8 14.2 10.8 0.5 0.8 6.1 2.2 0.5 0.8 6.2 8.0 8.8 3.0 100.0

1999 2.4 1.4 1.1 2.1 0.1 0.9 1.1 95.3 3.1 5.6 8.6 55.8 0.5 6.4 36.4 8.1 1.3 3.0 9.2 2.4 10.7 0.2 100.0

1990 25.4 16.0 9.4 23.1 1.5 13.8 7.8 48.3 2.4 10.8 9.3 3.9 0.0 0.7 1.4 0.6 0.2 1.0 15.7 3.9 2.4 3.1 100.0

1990 4.9 2.7 2.2 2.8 0.1 0.4 2.3 92.2 3.2 7.5 8.1 46.7 1.3 16.7 18.6 7.9 0.8 1.4 17.2 0.9 8.7 0.2 100.0

1995 17.0 12.0 5.0 23.5 5.3 13.7 4.4 59.0 2.2 8.7 9.2 23.1 0.9 1.9 12.8 3.4 0.4 3.7 6.1 2.1 7.7 0.6 100.0

ASEAN-10

ASEAN-10 1995 3.9 1.7 2.2 2.7 0.1 0.7 1.9 93.3 3.8 9.1 8.3 51.7 1.0 12.7 26.0 9.4 1.2 1.4 13.2 0.6 6.7 0.2 100.0

1999 13.7 11.9 1.8 16.4 2.2 9.9 4.3 64.3 2.2 9.1 9.7 30.3 2.2 2.0 17.5 5.3 1.1 2.2 4.9 1.8 6.4 5.6 100.0

1999 2.7 1.1 1.6 2.8 0.1 0.9 1.8 94.3 4.1 7.4 7.3 54.9 0.8 8.0 34.1 9.5 1.0 1.4 14.0 0.6 6.0 0.2 100.0

1990 16.5 9.5 7.0 41.0 1.6 35.8 3.7 40.0 0.9 5.0 17.5 2.3 0.0 0.4 0.9 0.5 0.2 0.4 9.2 2.1 3.1 2.5 100.0

1990 3.8 1.6 2.3 3.2 0.3 0.2 2.7 92.8 1.4 9.0 13.1 32.7 1.0 6.4 15.5 8.2 0.3 1.3 24.7 1.1 10.8 0.2 100.0

1995 13.5 6.5 7.0 36.3 3.0 30.6 2.7 49.7 0.9 3.5 16.8 13.2 0.5 0.6 7.7 2.5 0.1 1.9 6.8 1.2 7.3 0.5 100.0

NIE-4

NIE-4 1995 3.3 1.1 2.2 3.1 0.3 0.6 2.3 93.5 3.1 11.5 9.2 41.0 0.8 7.8 20.6 8.0 0.5 3.3 20.1 0.6 8.0 0.2 100.0

1999 10.8 8.0 2.9 21.8 0.7 17.6 3.6 61.5 1.2 5.9 14.2 26.7 2.2 1.5 16.6 4.5 0.6 1.4 5.0 1.6 7.0 5.8 100.0

1999 2.0 0.6 1.4 3.4 0.2 0.8 2.5 94.4 5.0 10.2 7.9 49.1 0.7 7.1 30.2 8.7 0.3 2.1 14.7 0.5 6.9 0.3 100.0

1990 7.5 6.1 1.4 78.3 4.1 72.3 1.9 14.2 0.9 0.4 9.4 0.3 0.0 0.1 0.1 0.1 0.0 0.0 0.6 1.0 1.7 0.0 100.0

1990 27.7 23.5 4.2 3.5 1.0 0.6 1.9 68.6 3.9 3.7 8.0 24.4 1.4 4.0 10.9 4.0 0.8 3.4 4.0 5.2 19.6 0.1 100.0

1995 12.7 10.7 2.0 59.2 8.8 48.1 2.2 28.1 0.8 1.1 14.5 2.3 0.1 0.2 1.1 0.7 0.1 0.2 2.0 2.8 4.6 0.0 100.0

Japan

Japan 1995 23.9 21.3 2.6 3.3 0.9 0.2 2.3 72.8 3.1 3.9 6.8 37.4 0.8 4.1 25.2 4.1 0.9 2.5 3.1 2.0 16.6 0.1 100.0

1999 10.1 8.5 1.7 57.8 6.8 48.7 2.3 31.0 0.3 1.9 13.0 7.2 0.2 0.6 4.5 1.3 0.3 0.5 2.9 1.6 4.1 1.1 100.0

1999 8.5 6.9 1.6 1.7 0.5 0.1 1.1 89.6 3.1 4.7 5.7 57.4 0.5 4.4 44.9 4.6 1.0 2.0 3.1 1.0 14.7 0.2 100.0

1990 10.3 7.4 3.0 63.7 3.3 58.0 2.5 25.2 1.0 2.8 13.7 1.2 0.0 0.2 0.3 0.2 0.1 0.4 3.3 1.3 2.0 0.7 100.0

1990 12.2 9.2 3.0 3.1 0.5 0.4 2.2 84.6 2.7 7.2 10.6 32.0 1.1 8.5 13.7 6.1 0.6 2.1 16.4 2.4 13.3 0.1 100.0

1995 14.0 9.6 4.3 46.0 6.2 37.5 2.4 39.9 1.1 4.0 15.8 7.5 0.3 0.7 3.9 1.4 0.1 1.2 4.4 1.9 5.1 0.2 100.0

East Asia

East Asia 1995 8.3 5.9 2.5 3.0 0.4 0.4 2.2 88.6 3.4 9.7 8.7 40.9 0.8 8.6 21.1 7.0 0.8 2.7 15.4 0.9 9.6 0.1 100.0

1999 13.1 10.0 3.0 37.7 3.8 31.2 2.7 46.3 1.1 6.2 14.1 14.6 0.9 1.1 8.4 2.6 0.6 1.0 4.4 1.5 4.5 3.0 100.0

1999 3.7 2.0 1.8 2.8 0.2 0.6 2.0 93.2 4.7 9.5 7.4 50.5 0.7 7.1 32.4 7.8 0.6 1.9 12.4 0.6 8.2 0.3 100.0

1990 23.9 10.2 13.7 28.0 0.4 27.6 0.0 48.1 0.0 0.5 14.0 1.5 0.1 0.2 0.8 0.3 0.0 0.1 2.6 19.3 10.3 0.0 100.0

1990 1.5 1.2 0.3 0.2 0.0 0.0 0.2 98.2 1.0 1.4 12.9 39.7 0.3 4.6 22.5 6.8 1.8 3.7 2.2 11.2 29.8 0.1 100.0

TABLE 7 (continued ) Changing Export Structures of East Asia Countries (shares, per cent)

1995 24.5 8.3 16.2 9.7 0.4 9.3 0.0 65.8 0.5 0.8 9.6 14.5 0.0 1.7 10.7 1.4 0.3 0.4 2.4 18.0 20.0 0.0 100.0

NAFTA

NAFTA 1995 1.4 1.0 0.4 0.3 0.0 0.1 0.2 98.3 0.8 1.2 12.1 56.8 0.3 5.5 37.7 8.5 1.9 3.0 2.4 7.7 17.3 0.1 100.0

1999 17.3 10.7 6.6 7.5 0.4 7.1 0.1 72.3 1.7 1.7 13.5 10.6 0.2 0.5 7.0 2.1 0.4 0.3 3.1 22.0 19.7 2.9 100.0

1999 1.4 1.0 0.3 0.3 0.0 0.0 0.3 98.2 1.8 1.2 10.8 62.4 0.3 5.9 41.1 10.4 2.2 2.5 2.6 6.0 13.3 0.2 100.0

1990 35.1 28.8 6.3 4.3 2.2 1.2 0.9 60.6 0.7 1.4 13.7 2.2 0.0 0.0 1.2 0.1 0.0 0.8 11.9 18.7 12.0 0.0 100.0

1995 25.2 19.1 6.2 7.8 3.6 3.4 0.8 66.9 0.4 1.7 13.2 7.3 0.1 0.1 4.7 1.6 0.0 0.9 10.2 15.7 18.3 0.0 100.0

European Union-15 1999 20.7 17.7 2.9 7.8 4.6 2.7 0.4 67.4 0.8 2.7 13.6 7.6 0.1 0.4 4.6 1.4 0.2 0.9 7.8 17.2 17.8 4.2 100.0

European Union-15 1990 1995 1999 1.1 0.8 0.7 0.5 0.3 0.3 0.5 0.5 0.4 0.2 0.2 0.3 0.0 0.1 0.0 0.0 0.0 0.0 0.1 0.2 0.3 98.6 98.9 98.9 0.3 0.5 1.1 2.1 3.4 1.5 10.8 11.6 8.6 55.0 64.9 69.3 0.3 0.2 0.1 5.0 5.3 4.9 37.3 46.1 51.4 5.9 6.9 6.4 0.5 0.8 0.8 6.0 5.7 5.7 3.5 2.7 3.1 4.4 2.5 2.0 22.5 13.4 13.4 0.1 0.1 0.1 100.0 100.0 100.0

Trade and Foreign Direct Investment in East Asia 247

1999 5.1 4.5 0.5 2.1 0.6 0.6 0.9 41.2 0.1 0.8 1.4 31.7 0.1 0.4 25.6 3.9 1.2 0.4 0.7 3.4 3.2 51.7 100.0

World 1995 14.3 13.0 1.3 5.9 1.8 1.5 2.6 41.1 0.4 1.9 2.4 22.1 0.0 0.4 16.1 4.2 1.2 0.2 1.2 6.4 6.7 38.8 100.0

1990 20.8 18.9 1.9 10.4 4.6 2.2 3.6 37.9 1.0 3.2 3.8 12.2 0.0 0.3 8.2 3.0 0.3 0.5 1.2 8.4 8.1 30.9 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Philippines

1999 10.9 8.0 2.9 8.0 0.2 6.8 1.0 80.3 0.6 3.2 4.6 62.3 0.7 2.1 52.4 5.3 0.3 1.5 1.3 2.7 5.5 0.9 100.0

World 1995 15.6 9.5 6.1 8.3 0.3 7.0 1.1 74.7 0.7 3.0 5.6 55.1 0.7 2.9 44.4 4.1 0.4 2.7 1.6 3.1 5.7 1.3 100.0

1990 25.3 11.7 13.7 20.4 0.5 18.3 1.5 53.9 0.8 1.6 4.5 35.7 0.2 1.8 27.9 3.1 0.3 2.4 1.3 4.5 5.5 0.4 100.0

Malaysia

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 6.4 5.9 0.4 4.3 0.6 2.4 1.3 36.7 1.6 19.0 2.8 10.7 0.0 1.0 6.1 1.1 1.9 0.6 0.9 0.3 1.5 52.7 100.0

1990 16.7 10.8 5.9 26.4 0.3 24.9 1.2 56.6 1.5 2.6 5.3 37.4 0.4 2.6 24.7 5.0 0.2 4.5 1.1 1.0 7.7 0.3 100.0 ASEAN-10 1995 7.8 6.5 1.3 4.6 0.3 1.8 2.6 34.9 0.2 6.7 1.6 23.8 0.0 0.6 17.5 2.0 3.7 0.0 1.1 0.2 1.3 52.7 100.0

ASEAN-10 1995 11.0 7.9 3.1 11.9 0.3 10.1 1.5 74.7 1.4 3.4 5.1 57.5 1.7 3.6 42.6 7.1 0.4 2.1 1.2 0.7 5.3 2.4 100.0

1999 2.2 2.0 0.2 3.1 0.2 1.8 1.1 34.6 0.1 2.0 1.0 30.3 0.0 0.5 25.7 1.8 2.1 0.2 0.4 0.1 0.7 60.1 100.0

1999 8.5 7.2 1.3 9.1 0.2 7.4 1.5 80.4 1.2 4.3 4.7 63.4 1.2 3.6 47.8 8.6 0.3 1.9 1.1 0.5 5.2 2.0 100.0

1990 15.6 13.0 2.5 23.0 2.6 7.8 12.6 34.1 1.2 5.2 4.4 18.6 0.0 0.6 15.3 1.3 0.1 1.3 1.5 0.5 2.9 27.3 100.0

1990 20.7 10.3 10.4 21.9 0.4 20.0 1.5 57.2 1.2 1.9 5.3 39.0 0.3 2.4 28.3 4.7 0.2 3.1 1.1 1.0 7.7 0.3 100.0 NIE-4 1995 10.2 8.4 1.8 12.8 1.1 1.9 9.7 42.1 0.3 2.5 2.2 30.6 0.0 0.5 27.6 2.1 0.4 0.0 2.0 1.9 2.7 34.9 100.0

NIE-4 1995 11.3 7.1 4.2 9.0 0.2 7.3 1.4 77.7 1.1 3.8 6.0 58.2 1.4 3.7 45.0 6.2 0.2 1.7 2.3 0.7 5.7 2.1 100.0

1999 2.9 2.7 0.3 3.2 0.5 1.2 1.4 30.7 0.0 0.8 1.0 27.7 0.0 0.4 25.6 1.1 0.3 0.2 0.5 0.1 0.6 63.2 100.0

1999 7.8 5.7 2.1 8.7 0.2 7.1 1.4 82.1 1.0 3.5 5.1 65.1 1.1 2.8 52.3 7.8 0.2 0.9 2.0 0.6 4.8 1.5 100.0

1990 28.7 26.0 2.7 34.4 20.0 5.1 9.3 20.2 1.6 1.9 2.8 7.9 0.0 0.1 2.9 4.0 0.4 0.4 0.3 1.7 4.1 16.6 100.0

1990 28.6 4.0 24.7 44.3 2.2 40.5 1.7 26.6 0.1 1.7 2.4 18.1 0.1 0.9 14.1 2.2 0.0 0.7 1.3 0.8 2.3 0.4 100.0 Japan 1995 21.7 20.3 1.4 15.6 8.6 3.0 4.0 38.2 0.5 1.3 3.0 26.5 0.0 0.7 15.9 8.5 0.8 0.5 0.4 1.8 4.6 24.6 100.0

Japan 1995 15.6 5.0 10.6 22.6 1.1 20.4 1.1 61.3 0.1 2.6 8.3 41.0 0.8 2.7 33.8 3.5 0.1 0.2 1.2 1.2 6.9 0.6 100.0

1999 9.6 8.9 0.7 4.0 1.7 1.0 1.3 53.3 0.1 0.6 2.7 45.1 0.1 1.2 33.3 7.7 1.5 1.4 0.6 0.8 3.5 33.2 100.0

1999 8.6 3.8 4.8 18.6 0.3 17.2 1.0 72.1 0.1 3.2 8.3 52.3 0.7 1.5 45.6 4.1 0.2 0.1 0.8 1.2 6.3 0.7 100.0

1990 21.4 19.0 2.4 27.3 11.9 5.7 9.7 27.8 1.6 6.9 3.1 11.1 0.0 0.4 6.7 2.7 0.6 0.6 0.7 1.1 3.3 23.6 100.0

1990 24.8 9.6 15.2 30.6 0.9 28.3 1.4 44.2 1.1 2.2 4.4 29.2 0.2 1.9 20.9 3.5 0.1 2.5 1.2 0.9 5.3 0.3 100.0 East Asia 1995 14.8 13.3 1.5 14.1 4.1 3.7 6.3 36.4 0.4 3.7 2.3 24.5 0.0 0.7 17.5 4.4 1.7 0.2 1.1 1.5 3.0 34.7 100.0

East Asia 1995 15.2 8.6 6.6 13.7 0.5 11.8 1.4 69.5 1.0 3.9 7.6 48.9 1.2 3.9 37.4 4.9 0.2 1.4 2.0 0.8 5.4 1.6 100.0

1999 4.9 4.5 0.4 4.3 1.2 1.2 1.9 35.8 0.1 1.3 1.5 30.7 0.0 0.7 25.1 3.1 1.2 0.6 0.5 0.3 1.5 55.1 100.0

1999 9.7 6.4 3.4 12.4 0.2 10.7 1.5 76.6 0.9 4.3 6.1 58.2 0.9 2.8 46.9 6.2 0.3 1.2 1.7 0.7 4.8 1.3 100.0

1990 15.9 15.4 0.5 0.2 0.2 0.1 0.0 42.9 0.7 0.8 2.4 14.9 0.0 0.2 9.9 4.7 0.1 0.1 1.1 12.5 10.6 41.0 100.0

1990 7.6 4.6 2.9 6.4 0.0 5.5 0.9 85.9 0.0 0.4 2.7 64.4 0.1 1.7 57.2 3.0 0.1 2.4 1.0 11.6 5.9 0.2 100.0

TABLE 7 (continued ) Changing Export Structures of East Asia Countries (shares, per cent)

NAFTA 1995 10.9 10.5 0.4 0.1 0.1 0.0 0.0 43.0 0.6 0.4 1.7 20.5 0.0 0.1 14.8 4.8 0.6 0.2 0.7 9.9 9.2 46.0 100.0

NAFTA 1995 3.5 1.6 1.9 0.8 0.0 0.4 0.3 95.0 0.1 1.3 2.0 77.9 0.2 1.0 68.0 2.9 0.0 5.6 0.5 7.2 6.0 0.8 100.0

1999 5.0 4.8 0.2 0.0 0.0 0.0 0.0 43.5 0.1 0.2 1.1 26.8 0.2 0.2 20.3 5.5 0.6 0.1 0.9 8.9 5.5 51.5 100.0

1999 2.3 1.6 0.7 1.9 0.0 1.7 0.2 95.6 0.3 1.3 2.3 79.2 0.4 0.8 71.5 5.5 0.1 1.0 0.5 6.3 5.8 0.2 100.0

European Union-15 1990 1995 1999 28.8 18.8 4.8 24.9 16.3 3.5 3.9 2.5 1.3 0.7 0.1 0.1 0.7 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.1 45.0 43.9 50.6 0.2 0.0 0.0 1.0 0.8 0.3 7.6 3.6 1.3 11.0 22.2 43.5 0.0 0.0 0.0 0.1 0.1 0.1 9.5 17.8 37.1 0.4 2.4 3.7 0.1 1.8 2.2 1.0 0.1 0.4 1.8 1.6 0.4 11.5 6.7 2.0 11.9 8.9 3.2 25.6 37.3 44.6 100.0 100.0 100.0

European Union-15 1990 1995 1999 30.2 17.0 11.0 12.8 8.4 7.1 17.5 8.5 3.9 2.7 1.1 0.8 0.1 0.0 0.1 0.0 0.1 0.2 2.6 1.0 0.6 66.6 80.6 87.6 0.4 0.1 0.4 0.7 2.4 2.1 6.2 4.5 3.1 39.8 59.3 70.1 0.3 0.2 0.5 0.4 1.6 1.5 33.4 49.5 60.6 2.6 4.3 4.8 1.5 1.1 0.7 1.5 2.6 2.0 1.5 1.5 1.0 11.4 6.7 4.6 6.8 6.2 6.3 0.5 1.3 0.6 100.0 100.0 100.0

248 Masahiro Kawai and Shujiro Urata

1999 1.0 0.5 0.5 1.6 0.2 0.4 1.0 94.1 3.2 7.1 4.6 68.5 1.3 12.0 21.9 8.0 18.4 6.9 1.6 0.1 9.0 3.3 100.0

World 1995 1.1 0.5 0.6 1.7 0.1 0.6 0.9 95.1 4.0 6.6 4.8 70.2 1.4 14.0 24.1 7.5 16.3 7.0 1.6 0.1 7.9 2.1 100.0

1990 1.2 0.6 0.6 1.4 0.1 0.5 0.8 95.9 4.4 5.4 4.9 70.6 1.2 12.4 23.4 6.4 21.5 5.7 2.0 0.2 8.4 1.6 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Japan

1999 20.0 17.0 3.0 2.8 0.6 1.8 0.5 73.9 1.0 5.0 7.2 41.9 1.4 3.5 26.1 7.1 2.8 1.1 3.1 6.0 9.6 3.3 100.0

World 1995 24.6 19.3 5.3 1.3 0.4 0.7 0.2 73.1 0.9 3.8 7.4 33.6 0.8 3.5 20.7 6.1 0.4 2.2 3.5 9.0 15.0 1.0 100.0

1990 33.8 28.7 5.1 1.9 0.5 0.8 0.5 63.1 0.6 2.0 8.6 21.9 0.4 2.1 15.3 3.1 0.3 0.8 4.0 12.3 13.8 1.2 100.0

Thailand

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 1.3 0.7 0.7 2.0 0.1 0.5 1.4 94.9 8.6 7.0 5.7 66.5 2.3 19.8 18.2 7.9 12.8 5.6 2.0 0.1 5.1 1.8 100.0

1990 31.9 25.1 6.8 2.0 0.8 0.3 1.0 64.5 1.1 3.5 4.1 43.6 1.1 3.4 34.4 3.4 0.8 0.6 4.3 3.6 4.4 1.6 100.0 ASEAN-10 1995 1.1 0.4 0.7 1.9 0.1 0.5 1.4 95.0 6.2 6.7 5.4 69.9 2.3 18.0 25.0 9.0 10.5 5.1 1.1 0.0 5.7 2.1 100.0

ASEAN-10 1995 14.1 11.5 2.6 2.1 0.4 1.4 0.2 82.6 1.2 7.0 5.8 51.5 1.4 4.4 35.6 7.6 0.5 2.1 2.4 3.9 10.9 1.2 100.0

1999 1.2 0.5 0.7 2.3 0.1 0.4 1.8 91.4 6.2 7.6 5.0 63.3 1.7 12.9 29.5 10.1 5.4 3.7 1.5 0.0 7.7 5.1 100.0

1999 15.9 13.5 2.4 6.8 0.5 5.9 0.5 75.9 1.4 8.5 5.4 54.5 4.0 3.2 35.1 8.8 0.8 2.6 2.6 0.5 2.8 1.4 100.0

1990 2.4 1.3 1.1 3.8 0.4 1.6 1.8 91.8 6.3 9.8 6.0 56.1 1.7 16.3 22.2 8.5 4.1 3.3 4.0 0.3 9.3 2.1 100.0

1990 29.7 22.6 7.1 1.4 0.7 0.1 0.5 67.2 0.8 5.3 7.5 37.1 0.9 2.4 29.7 3.7 0.2 0.3 4.1 4.3 8.1 1.8 100.0 NIE-4 1995 1.8 1.1 0.7 3.9 0.3 1.6 2.0 91.6 5.9 10.1 5.4 58.3 1.5 15.8 25.7 9.0 3.6 2.8 2.1 0.2 9.7 2.8 100.0

NIE-4 1995 14.1 10.5 3.7 1.9 0.4 1.2 0.3 82.9 1.1 6.4 8.2 48.7 1.3 4.6 33.9 7.5 0.3 1.0 2.8 3.8 11.9 1.1 100.0

1999 1.8 1.2 0.6 3.3 0.5 0.7 2.1 90.9 5.2 11.3 4.7 56.0 1.2 14.1 24.5 11.3 3.0 2.0 1.8 0.2 11.7 4.0 100.0

1999 13.0 10.1 2.8 6.0 0.4 4.9 0.6 78.9 1.4 8.1 7.1 55.3 3.3 3.1 38.0 9.7 0.3 0.9 2.4 0.7 4.0 2.2 100.0

1990 – – – – – – – – – – – – – – – – – – – – – – –

1990 47.5 36.9 10.6 2.5 1.4 0.0 1.1 49.1 0.7 2.2 10.8 18.3 0.7 5.3 7.2 3.2 0.1 1.8 1.5 5.6 10.1 0.9 100.0 Japan 1995 – – – – – – – – – – – – – – – – – – – – – – –

Japan 1995 38.6 28.7 10.0 1.3 1.0 0.1 0.2 59.4 0.7 2.3 5.8 30.7 1.2 5.5 17.6 5.8 0.1 0.5 1.5 5.3 13.0 0.7 100.0

1999 – – – – – – – – – – – – – – – – – – – – – – –

1999 30.0 25.0 5.0 1.6 0.5 0.4 0.7 66.8 0.8 3.8 6.0 38.2 1.4 4.9 20.1 9.4 1.3 1.3 1.3 3.4 13.2 1.6 100.0

1990 2.3 1.1 1.2 3.1 0.3 1.3 1.6 92.8 8.1 9.5 6.0 57.6 1.7 17.8 19.0 7.9 7.4 4.0 3.7 0.2 7.8 1.8 100.0

1990 41.8 31.9 9.9 2.1 1.1 0.1 0.9 54.8 0.8 4.0 8.5 25.8 0.7 3.9 16.7 3.2 0.3 1.1 2.8 4.6 8.3 1.3 100.0 East Asia 1995 1.7 0.8 0.9 3.2 0.3 1.2 1.7 92.9 6.8 9.2 5.3 60.9 1.8 18.0 22.1 8.8 6.5 3.8 2.6 0.2 7.9 2.2 100.0

East Asia 1995 28.3 21.5 6.8 1.8 0.7 0.9 0.3 68.9 1.1 5.7 7.2 37.5 1.1 4.8 23.6 6.4 0.3 1.3 2.7 3.8 11.0 1.0 100.0

1999 1.8 0.9 0.8 3.3 0.5 0.7 2.1 91.1 6.0 10.8 5.1 56.3 1.5 14.3 23.6 10.8 3.8 2.4 3.0 0.2 9.8 3.9 100.0

1999 21.2 16.8 4.4 4.6 0.5 3.4 0.7 72.2 1.3 8.4 6.7 45.5 2.4 3.8 28.8 8.3 0.8 1.5 2.4 1.5 6.5 2.0 100.0

1990 0.5 0.3 0.1 0.7 0.1 0.1 0.6 97.2 2.6 2.6 4.3 78.7 0.9 9.4 26.6 5.4 32.3 4.1 0.7 0.2 8.2 1.6 100.0

1990 21.5 19.6 2.0 1.7 0.0 1.6 0.1 75.9 0.6 0.2 7.8 31.2 0.2 0.6 24.4 4.8 0.7 0.6 2.5 11.2 22.3 0.9 100.0

TABLE 7 (continued ) Changing Export Structures of East Asia Countries (shares, per cent)

NAFTA 1995 0.4 0.3 0.1 0.6 0.0 0.2 0.4 96.5 1.5 3.9 4.2 78.5 0.8 10.7 29.3 6.5 24.9 6.3 0.5 0.1 7.9 2.5 100.0

NAFTA 1995 20.9 17.0 3.9 0.4 0.2 0.0 0.2 78.1 0.7 0.6 6.2 37.6 0.5 1.6 26.6 8.3 0.3 0.3 2.2 12.6 18.2 0.7 100.0

1999 0.5 0.3 0.2 0.6 0.0 0.2 0.4 95.5 1.5 4.6 4.3 75.7 1.3 9.9 23.0 6.2 28.6 6.8 0.4 0.1 8.9 3.4 100.0

1999 17.5 15.9 1.6 0.4 0.0 0.2 0.2 80.7 0.8 0.7 6.7 42.1 0.4 1.3 32.2 7.7 0.5 0.1 2.2 13.8 14.4 1.4 100.0

European Union-15 1990 1995 1999 0.7 0.5 0.6 0.3 0.1 0.1 0.4 0.4 0.5 0.4 0.4 0.5 0.0 0.1 0.1 0.1 0.1 0.1 0.3 0.2 0.3 97.5 97.3 96.0 0.8 0.7 0.6 4.9 6.8 6.6 3.5 4.0 3.7 75.5 74.7 73.4 0.6 0.9 1.1 10.6 11.5 12.1 32.3 30.8 26.4 6.4 8.3 8.0 20.9 17.1 19.1 4.8 6.1 6.8 1.3 1.0 0.9 0.3 0.2 0.2 11.2 10.1 10.6 1.5 1.8 3.0 100.0 100.0 100.0

European Union-15 1990 1995 1999 31.2 21.7 16.7 28.6 16.8 14.4 2.6 4.9 2.3 0.8 0.5 0.7 0.3 0.1 0.4 0.0 0.3 0.0 0.4 0.1 0.3 66.7 76.3 81.6 0.1 0.4 0.5 0.5 0.9 1.7 10.1 10.2 8.3 16.4 33.2 46.9 0.3 0.7 0.8 1.5 2.4 4.7 12.3 22.0 29.3 1.7 6.4 5.6 0.1 0.8 6.1 0.6 0.8 0.4 5.6 4.7 3.3 17.3 9.9 8.4 16.7 16.9 12.4 1.3 1.6 0.9 100.0 100.0 100.0

Trade and Foreign Direct Investment in East Asia 249

1999 9.9 8.4 1.5 4.6 0.6 2.6 1.4 81.9 2.5 12.1 9.0 43.7 2.0 10.0 10.7 5.0 11.2 4.8 2.5 2.3 9.8 3.7 100.0

World 1995 11.5 9.7 1.8 5.2 0.8 2.7 1.7 79.8 3.7 11.9 10.1 39.2 1.4 10.1 8.0 4.9 10.6 4.1 3.0 2.4 9.5 3.5 100.0

1990 11.8 9.7 2.1 6.4 0.9 3.6 1.9 80.1 4.1 11.4 10.2 38.3 1.5 11.1 6.2 4.3 10.7 4.4 3.4 2.7 9.8 1.8 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Source: World Bank Trade Database

European Union-15

1999 10.0 7.9 2.1 3.4 0.8 1.6 1.0 82.4 0.9 10.7 5.7 52.2 2.9 9.3 16.2 5.5 8.1 10.2 1.4 1.2 10.2 4.3 100.0

World 1995 14.4 10.5 3.9 4.6 1.3 1.9 1.3 76.4 1.1 10.9 5.6 46.9 2.4 9.5 14.7 5.1 8.4 6.8 1.3 1.2 9.5 4.6 100.0

1990 15.6 11.1 4.5 6.3 1.7 3.3 1.4 73.3 1.0 10.2 4.9 46.0 2.6 9.0 12.1 4.5 7.6 10.3 1.3 0.7 9.2 4.8 100.0

United States

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 5.9 5.5 0.5 2.9 0.8 0.9 1.2 89.5 3.2 12.8 9.8 53.7 3.5 19.7 10.8 5.6 6.8 6.5 1.3 0.5 8.2 1.6 100.0

1990 9.1 5.5 3.6 2.6 0.8 1.1 0.8 84.4 0.5 9.7 3.5 61.4 3.3 10.5 29.2 3.7 1.1 13.6 0.9 0.2 8.1 4.0 100.0 ASEAN-10 1995 5.2 4.7 0.6 2.9 0.8 1.0 1.1 89.4 2.5 9.8 8.0 59.8 2.6 19.4 14.2 6.1 6.4 9.4 1.3 0.5 7.2 2.5 100.0

ASEAN-10 1995 10.1 6.7 3.4 3.1 0.8 1.4 1.0 83.7 0.8 9.0 4.2 60.1 2.8 9.6 35.8 4.3 1.0 6.8 0.6 0.2 9.0 3.0 100.0

1999 6.3 5.3 1.0 2.6 0.5 1.0 1.1 88.6 1.8 12.7 7.2 56.9 3.2 14.4 26.1 7.0 2.6 3.7 1.5 0.4 8.1 2.5 100.0

1999 7.4 5.7 1.7 1.7 0.3 1.1 0.3 87.8 0.3 8.1 3.4 66.0 2.6 8.5 42.0 4.6 0.6 7.7 0.4 0.1 9.5 3.1 100.0

1990 6.8 5.4 1.4 2.8 0.6 0.8 1.5 88.6 3.1 14.4 10.9 44.2 2.1 18.6 7.7 5.1 5.8 4.5 3.2 2.2 10.6 1.8 100.0

1990 19.1 11.4 7.7 7.7 2.5 3.6 1.6 68.5 0.6 11.8 4.2 43.5 2.7 8.7 17.4 4.1 2.9 7.7 1.0 0.1 7.3 4.7 100.0 NIE-4 1995 6.9 5.6 1.4 3.4 0.8 0.9 1.7 87.9 3.0 12.0 10.3 46.5 1.8 16.3 10.5 5.3 5.9 5.9 2.9 2.6 10.5 1.8 100.0

NIE-4 1995 15.2 10.1 5.1 5.4 1.8 1.9 1.6 75.3 0.9 11.7 4.0 49.4 2.6 10.1 20.7 4.4 2.8 8.9 0.9 0.2 8.2 4.1 100.0

1999 7.3 5.5 1.8 2.9 0.7 0.8 1.4 88.1 1.8 12.7 8.0 49.6 3.2 13.9 19.1 6.5 3.1 3.9 2.6 1.9 11.5 1.8 100.0

1999 11.0 8.3 2.7 3.2 1.1 1.5 0.7 82.5 0.3 10.1 3.4 57.9 2.3 10.8 30.1 4.8 1.0 9.0 0.7 0.1 9.9 3.3 100.0

1990 10.8 9.4 1.4 2.9 0.8 0.3 1.9 85.5 0.8 15.3 8.7 36.0 0.6 10.4 2.2 3.1 17.7 2.0 4.0 5.1 15.6 0.8 100.0

1990 32.1 21.8 10.3 9.4 2.8 3.2 3.4 56.5 0.5 9.8 3.7 31.0 1.7 4.4 11.6 2.1 2.9 8.4 0.6 0.6 10.3 2.0 100.0 Japan 1995 10.9 9.0 1.9 2.0 0.5 0.2 1.4 85.8 0.6 17.3 7.3 38.9 0.7 8.0 7.4 3.6 16.7 2.6 3.0 4.9 13.7 1.3 100.0

Japan 1995 30.6 22.5 8.1 4.7 1.6 1.6 1.5 62.1 0.4 9.8 4.1 35.3 2.0 4.8 13.8 2.9 6.3 5.5 0.5 1.6 10.5 2.6 100.0

1999 13.0 10.6 2.5 2.3 0.8 0.2 1.4 83.2 0.4 17.7 5.4 38.7 1.1 7.5 9.0 4.0 15.0 2.1 1.7 4.1 15.2 1.5 100.0

1999 25.5 21.4 4.1 3.2 0.9 1.4 0.9 68.5 0.2 10.4 3.6 40.7 2.1 5.4 16.5 3.5 3.4 9.7 0.4 0.8 12.4 2.7 100.0

1990 8.3 7.0 1.3 2.7 0.8 0.5 1.4 87.6 2.4 14.3 9.3 44.6 2.6 17.2 5.7 4.4 10.3 4.0 3.0 2.7 11.2 1.5 100.0

1990 24.6 15.7 8.9 7.7 2.5 2.9 2.3 64.6 0.5 11.2 3.9 39.5 2.3 7.0 15.4 2.9 2.6 9.2 0.8 0.4 8.3 3.2 100.0 East Asia 1995 7.5 6.1 1.4 2.6 0.8 0.5 1.3 88.2 2.3 12.3 8.1 51.1 1.9 17.3 10.5 4.9 9.3 6.1 2.4 2.4 9.5 1.8 100.0

East Asia 1995 21.6 14.9 6.7 4.7 1.7 1.5 1.5 70.6 0.8 11.0 4.1 44.9 2.4 8.4 19.7 3.6 3.7 7.1 0.7 0.7 8.6 3.2 100.0

1999 8.7 6.7 2.0 2.7 0.8 0.7 1.2 86.0 1.4 13.4 6.8 49.4 2.7 13.8 17.0 5.9 6.3 3.8 2.0 2.0 11.0 2.7 100.0

1999 16.0 12.7 3.3 3.1 1.0 1.3 0.7 78.1 0.3 10.3 3.6 52.9 2.2 8.2 27.0 4.2 1.8 9.5 0.6 0.3 10.1 2.8 100.0

1990 6.8 6.1 0.7 6.5 0.3 4.9 1.4 85.6 3.8 9.4 8.7 46.8 5.1 13.5 5.5 3.7 12.0 6.9 1.9 1.9 13.1 1.1 100.0

1990 8.4 6.0 2.3 5.9 1.4 2.9 1.6 81.2 1.9 7.6 7.6 52.7 1.4 10.2 8.5 7.6 19.2 5.7 1.6 0.6 9.3 4.6 100.0

TABLE 7 (continued ) Changing Export Structures of East Asia Countries (shares, per cent)

NAFTA 1995 5.8 5.1 0.6 4.7 0.3 3.2 1.3 88.2 3.3 11.6 8.5 49.1 3.8 14.5 8.7 4.6 10.3 7.2 1.8 1.5 12.4 1.3 100.0

NAFTA 1995 7.9 5.6 2.3 4.8 1.3 1.8 1.7 84.2 1.8 8.9 8.6 52.1 1.4 9.3 9.9 7.8 18.2 5.5 1.9 1.2 9.7 3.2 100.0

1999 5.5 5.0 0.5 3.7 0.3 2.5 1.0 89.5 2.0 14.3 7.1 50.9 6.2 13.1 7.6 4.6 12.3 7.0 1.4 1.4 12.5 1.3 100.0

1999 7.0 5.3 1.7 4.3 0.8 2.0 1.5 85.7 1.7 9.0 9.0 52.4 1.7 9.3 10.3 7.8 17.2 5.9 2.4 1.4 9.9 3.0 100.0

European Union-15 1990 1995 1999 13.3 13.5 11.5 10.8 11.3 9.9 2.4 2.2 1.7 6.9 5.8 5.0 1.0 0.9 0.7 3.8 2.9 2.8 2.1 2.0 1.5 78.9 78.1 80.2 4.4 4.2 2.8 11.1 12.0 11.4 10.5 10.3 9.4 36.8 36.8 42.5 1.0 1.0 1.2 9.2 7.8 8.3 6.7 8.2 11.1 4.2 4.7 4.8 11.9 11.9 13.1 3.8 3.2 4.0 3.7 3.1 2.3 3.0 2.6 2.6 9.3 9.0 9.2 1.0 2.6 3.3 100.0 100.0 100.0

European Union-15 1990 1995 1999 12.3 12.1 6.9 8.6 8.6 4.8 3.7 3.5 2.1 6.0 4.7 2.8 1.3 1.3 0.9 3.9 2.2 1.1 0.8 1.2 0.8 76.5 77.8 85.6 0.4 0.6 0.4 10.8 12.6 13.0 3.5 3.9 3.6 48.9 47.5 55.2 4.6 3.6 5.2 7.8 8.8 8.8 15.6 17.8 17.0 3.8 4.8 4.8 2.7 4.1 4.1 14.4 8.4 15.2 1.2 1.1 0.8 0.4 0.5 0.2 11.2 11.6 12.4 5.3 5.4 4.8 100.0 100.0 100.0

250 Masahiro Kawai and Shujiro Urata

Trade and Foreign Direct Investment in East

Asia

251

(63 per cent to 73 per cent, and then to 74 per cent). For Hong Kong SAR, the corresponding share declined continuously from 95 per cent in 1990 to 93 per cent in 1999. Korea also witnessed a trend decline from 93 per cent in 1990 to 90 per cent in 1999. The observation made on the changes in the share of manufactured exports for emerging East Asia indicate that a large part of the increase in the manufacture export share took place in the first half of the 1990s, and the share increased only slightly in the second half. For example, the share of manufacture exports in total exports of Singapore increased by 13 percentage points in five years from 1990 to 1995, while the corresponding increase was a mere 2 points in four years from 1995 to 1999. A similar pattern can be found for Indonesia, Malaysia, the Philippines, and Thailand. Several reasons may be given for the rapid increase in the share of manufactured exports in total exports in the early 1990s when it was compared with the later 1990s. First, one may argue that it is relatively easy to expand the share of manufactured exports in total exports at the early stage of development, where room still exists for the expansion in the share. Second, because of the characteristics of the export production system, under which a large part of inputs are imported, substantial currency depreciation in the affected economies caused by the crisis in 1997, made it difficult for them to increase exports of manufactured products. This resulted in relatively low growth of manufactured exports after 1997. Despite a similar pattern of change in export structure toward higher share of manufactured exports in total exports, one finds wide variations in the export structures among the emerging East Asian economies. Taiwan POC registered the highest share of manufactured exports in total exports at 95 per cent in 1999, followed by Hong Kong (93 per cent), Korea (90 per cent), China (88 per cent), Singapore (86 per cent), Malaysia (80 per cent), Thailand (74 per cent), Indonesia (54 per cent), and the Philippines (41 per cent). Similar to the case for the share of manufactured exports in total exports, the importance of the types of manufactured exports differs among the East Asian economies. Singapore, Malaysia, Taiwan, and Korea exhibit similar patterns in that machinery and transport equipment account for more than 50 per cent. Specifically, the shares of machinery and transport equipment in total exports for these four economies in 1999 were 66 per cent, 62 per cent, 56 per cent, and 54 per

252

Masahiro Kawai and Shujiro Urata

cent, respectively. Thailand recorded a lower share at 42 per cent, but they were higher than those of the Philippines (32 per cent), China (30 per cent), Hong Kong SAR (23 per cent), and Indonesia (11 per cent). Singapore and Malaysia, and to a lesser extent Taiwan POC, Korea, Thailand and the Philippines, had some similarity in that among machinery and transport equipment office machines and telecommunications equipment takes up a sizeable portion. Indeed, for Singapore and Malaysia, more than 50 per cent of total exports came from office machines and communications equipment in 1999. For Taiwan POC, Korea, Thailand and the Philippines the share of office machines and telecommunications equipment in total exports was lower in the range of 26–36 per cent for the same year, while the corresponding share for Indonesia was significantly lower at 2 per cent. Our findings so far indicate that for major emerging East Asian economies, except Indonesia, manufactured exports, particularly office machines and telecommunications equipment, account for a large portion of their exports. By contrast, Indonesia has had a relatively low share of manufactured exports in total exports despite a rapid increase in the share in recent years. This reflects the fact that Indonesia is an oil-producing country and had a sizeable value of export in mining products such as fuel, capturing 28 per cent of total in 1999. Indonesia also exhibits a different pattern concerning its manufactured exports when compared to other ASEAN members. Unlike the pattern observed for other ASEAN-4 countries where office machines and telecommunications equipment amount to a large part of manufactured exports, for Indonesia, other semi-manufactures (consumer goods such as household articles and footwear), textiles and clothing captures a higher share of manufactured exports rather than office machine and telecommunication equipment. An examination of the export structures for East Asian economies by their destinations reveal several interesting patterns. First, the share of manufactured exports in total exports is relatively low for their exports to Japan, except for the Philippines. By contrast, relatively large shares of their exports to Japan consist of non-manufactured goods such as agricultural products and mining products. These patterns reflect poor natural resource endowments in Japan, requiring Japan to import natural resource intensive products. Second, the share of open

1999 6.2 4.9 1.3 3.7 0.2 2.1 1.4 89.1 1.7 6.3 8.0 38.5 1.4 3.5 24.1 7.5 0.9 1.1 7.0 8.2 19.5 1.0 100.0

World 1995 7.0 5.4 1.6 4.0 0.5 1.9 1.6 87.0 1.9 7.3 8.3 36.5 1.0 4.2 20.5 6.2 2.0 2.5 8.7 6.5 17.9 2.0 100.0

1990 9.8 7.7 2.1 3.9 0.3 2.4 1.3 83.3 1.8 7.2 8.9 27.2 0.8 3.9 14.6 5.3 1.1 1.5 12.1 8.2 18.0 3.1 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Hong Kong SAR

1999 8.2 4.0 4.2 10.7 2.5 5.4 2.9 80.2 4.6 14.3 6.8 41.9 2.1 10.8 18.4 6.3 1.3 3.0 6.8 0.7 5.2 0.9 100.0

World 1995 12.0 7.0 5.0 8.4 2.4 3.9 2.0 78.5 5.0 12.8 6.6 39.7 1.9 18.0 10.9 4.4 1.8 2.7 8.5 0.7 5.3 1.2 100.0

1990 14.5 8.7 5.8 5.3 1.8 2.4 1.1 79.7 5.4 12.5 5.1 40.3 2.8 15.9 7.6 2.4 7.9 3.7 10.2 0.1 6.1 0.5 100.0

China

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 16.6 13.3 3.3 20.3 0.2 19.3 0.8 62.3 0.5 6.0 10.4 32.4 0.8 2.9 24.9 3.0 0.2 0.6 2.9 1.2 8.9 0.9 100.0

1990 36.5 21.3 15.2 23.1 1.0 21.2 0.9 40.3 0.5 8.0 18.6 10.9 0.2 2.0 0.9 0.7 6.4 0.8 0.9 0.0 1.3 0.0 100.0 ASEAN-10 1995 10.9 9.1 1.8 12.9 0.3 11.5 1.1 75.8 0.5 6.6 7.6 49.1 0.6 4.5 39.5 3.5 0.2 0.7 5.1 0.5 6.2 0.4 100.0

ASEAN-10 1995 29.2 19.9 9.3 25.5 0.8 23.4 1.3 44.6 0.6 8.6 12.2 19.2 0.5 4.5 8.2 1.7 0.1 4.4 2.8 0.0 1.3 0.6 100.0

1999 10.3 7.9 2.4 11.3 0.2 10.1 1.0 77.1 0.9 8.2 6.7 52.6 1.6 2.9 42.8 4.6 0.3 0.4 3.4 0.6 4.8 1.4 100.0

1999 17.0 7.5 9.4 15.9 0.6 13.2 2.1 66.4 0.8 13.4 10.9 36.7 1.1 3.4 27.9 3.9 0.1 0.3 2.3 0.1 2.3 0.8 100.0

1990 5.2 3.3 1.9 10.3 0.1 8.4 1.8 84.2 1.2 9.2 7.7 28.3 0.8 4.2 16.1 6.0 0.1 1.0 26.6 1.1 10.2 0.3 100.0

1990 4.1 2.0 2.1 3.9 0.1 3.1 0.6 91.9 1.0 6.0 6.2 42.8 0.4 13.6 12.2 2.4 13.8 0.5 24.3 0.2 11.3 0.2 100.0 NIE-4 1995 3.8 2.3 1.5 8.6 0.1 6.5 1.9 85.6 2.2 11.5 6.4 40.3 0.6 3.9 27.4 5.3 0.4 2.7 18.9 0.5 5.7 2.1 100.0

NIE-4 1995 3.7 0.8 2.9 7.3 0.3 4.7 2.3 88.4 3.3 16.3 10.6 32.8 0.9 13.5 10.7 5.5 0.4 1.8 17.7 1.2 6.5 0.7 100.0

1999 2.8 1.7 1.1 9.6 0.1 7.6 1.9 86.2 3.3 10.3 5.5 48.5 0.7 3.5 37.6 5.3 0.3 1.1 13.4 0.4 4.8 1.4 100.0

1999 2.4 0.5 2.0 8.4 0.2 4.9 3.3 88.8 6.3 18.5 8.7 35.5 0.9 7.8 19.1 6.9 0.2 0.6 13.5 1.4 5.0 0.3 100.0

1990 3.5 2.8 0.6 1.8 0.1 0.4 1.3 94.4 3.4 6.8 7.4 49.9 1.4 8.2 27.4 7.2 4.1 1.7 8.6 0.8 17.5 0.4 100.0

1990 3.9 0.8 3.1 2.0 0.1 0.9 1.0 94.0 18.0 11.2 4.7 47.6 0.8 18.0 13.2 4.3 7.1 4.2 6.5 0.0 5.9 0.0 100.0 Japan 1995 2.5 1.9 0.6 2.2 0.2 0.6 1.4 94.7 4.7 7.9 5.3 60.1 1.5 9.7 31.9 8.0 5.2 3.8 3.6 0.3 12.9 0.6 100.0

Japan 1995 2.3 0.8 1.6 3.0 0.5 0.7 1.8 94.2 10.3 9.5 3.6 53.7 2.1 22.9 18.0 7.2 1.8 1.7 8.0 1.5 7.5 0.6 100.0

1999 2.5 2.1 0.4 2.0 0.2 0.4 1.4 95.1 4.2 8.9 5.2 56.6 1.3 8.5 31.2 10.7 3.6 1.4 3.7 0.4 16.1 0.4 100.0

1999 2.2 0.8 1.4 4.3 0.7 0.8 2.9 93.4 7.3 13.1 4.7 52.9 1.8 14.5 22.0 10.1 2.3 2.2 7.0 0.9 7.5 0.0 100.0

1990 7.4 5.7 1.7 4.2 0.3 2.7 1.2 87.9 1.5 5.6 6.7 29.1 0.9 3.6 16.7 5.9 1.0 1.0 14.8 10.4 19.8 0.6 100.0

1990 7.2 3.3 3.8 4.1 0.2 3.2 0.7 88.6 5.6 7.4 7.3 41.5 0.5 13.8 11.5 2.8 11.5 1.5 17.6 0.2 9.0 0.1 100.0 East Asia 1995 4.7 3.7 1.0 3.7 0.2 2.3 1.3 90.7 1.8 6.1 6.1 37.8 1.0 3.9 22.9 7.0 1.2 1.9 10.3 8.1 20.5 0.9 100.0

East Asia 1995 6.7 3.3 3.3 6.6 0.4 4.2 2.0 86.2 5.9 12.8 8.4 38.9 1.3 16.3 13.0 5.8 0.9 1.6 12.6 1.2 6.4 0.6 100.0

1999 3.8 3.1 0.8 3.7 0.1 2.5 1.0 91.8 1.6 5.0 5.9 39.9 1.3 2.9 25.9 8.3 0.7 0.8 7.6 10.1 21.7 0.7 100.0

1999 4.7 1.7 3.0 7.6 0.5 4.1 3.1 87.4 6.0 15.8 7.9 41.3 1.2 9.6 20.8 7.6 1.0 1.1 9.9 1.1 5.5 0.2 100.0

TABLE 8 Changing Import Structures of East Asia Countries (shares, per cent)

1990 20.3 17.1 3.2 1.7 0.3 0.4 1.0 68.8 0.8 11.0 10.4 35.2 0.6 3.7 19.2 4.1 0.1 7.5 2.8 0.5 8.1 9.2 100.0

1990 32.2 19.1 13.1 2.7 1.1 0.7 0.9 65.1 1.1 22.4 2.7 32.9 1.7 12.2 6.0 1.9 1.5 9.7 1.5 0.0 4.6 0.0 100.0 NAFTA 1995 16.8 12.9 3.9 3.1 1.7 0.3 1.2 75.1 0.9 10.8 9.3 44.0 1.1 4.5 26.2 4.7 5.1 2.4 1.9 0.5 7.7 5.0 100.0

NAFTA 1995 28.9 18.2 10.7 3.7 2.1 0.6 1.0 66.7 1.5 16.4 4.9 36.7 2.5 13.9 11.3 2.6 1.5 5.0 1.3 0.1 5.8 0.8 100.0

1999 16.3 13.2 3.1 1.7 0.3 0.2 1.2 81.7 0.3 9.9 8.5 49.3 0.8 4.8 33.2 6.0 0.3 4.3 1.9 0.4 11.4 0.4 100.0

1999 15.0 8.6 6.4 4.2 2.2 0.9 1.1 80.0 0.6 17.5 6.4 48.0 3.5 10.0 21.3 4.5 1.3 7.5 0.6 0.0 6.9 0.8 100.0

European Union-15 1990 1995 1999 13.0 10.1 10.4 11.4 7.9 6.7 1.6 2.2 3.7 1.5 3.0 1.8 0.1 0.9 0.4 0.2 0.3 0.2 1.2 1.8 1.2 81.6 85.6 85.4 2.2 2.1 2.0 14.5 11.9 12.7 15.3 13.6 12.2 24.7 38.6 38.0 0.9 1.8 2.8 8.3 8.3 8.8 5.4 10.3 15.5 5.4 5.2 5.9 3.4 4.7 3.6 1.2 8.5 1.4 5.4 3.9 4.7 4.8 4.0 3.3 14.8 11.5 12.5 4.0 1.3 2.5 100.0 100.0 100.0

European Union-15 1990 1995 1999 11.3 6.8 5.5 8.2 5.4 2.9 3.2 1.4 2.5 1.8 1.9 3.3 0.5 0.5 0.9 0.2 0.4 1.3 1.1 1.0 1.1 86.9 90.8 91.0 4.5 2.9 1.6 12.9 7.6 10.7 3.9 5.4 6.9 61.2 70.0 65.8 11.1 3.7 4.8 35.0 39.6 24.3 3.8 11.2 20.1 3.2 4.1 6.4 4.3 5.6 3.2 3.8 5.8 7.0 0.8 1.2 1.1 0.0 0.1 0.1 3.5 3.6 4.9 0.0 0.6 0.2 100.0 100.0 100.0

Trade and Foreign Direct Investment in East Asia 253

1990 7.7 6.1 1.7 17.9 0.3 15.9 1.7 73.0 2.9 7.5 5.4 44.7 1.9 8.2 22.0 5.8 2.1 4.6 2.9 1.5 8.1 1.3 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Singapore

1990 13.5 5.6 7.9 22.5 3.9 15.9 2.7 63.2 4.7 10.5 5.1 34.3 1.7 13.8 11.1 3.1 1.2 3.4 3.0 0.2 5.5 0.8 100.0

Korea, Rep. Of

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1995 5.5 4.6 0.9 10.4 0.2 8.1 2.1 83.0 2.3 6.3 4.9 57.8 1.7 8.0 35.2 7.3 1.9 3.8 1.7 1.3 8.6 1.2 100.0

World

1995 10.8 5.4 5.4 20.4 2.8 14.2 3.4 66.5 4.9 9.5 4.7 36.6 2.0 13.4 12.2 3.5 1.3 4.2 3.1 0.8 7.0 2.3 100.0

World

1999 4.5 4.0 0.5 10.6 0.3 9.1 1.3 83.2 1.5 5.8 4.2 60.1 1.6 7.6 38.1 7.5 1.3 4.1 1.0 1.5 9.0 1.7 100.0

1999 9.2 5.6 3.6 25.5 3.0 19.2 3.2 62.1 3.4 9.1 3.7 36.4 1.3 7.0 20.7 4.7 0.9 1.8 2.6 0.7 6.3 3.3 100.0

1990 18.3 12.0 6.3 14.6 0.4 12.8 1.3 66.8 1.2 2.1 5.3 45.9 0.6 2.6 36.1 5.8 0.2 0.7 1.6 5.1 5.6 0.4 100.0

1990 24.6 8.8 15.8 47.0 2.6 42.5 1.9 28.3 0.8 3.7 7.0 14.1 0.6 1.1 10.7 0.9 0.0 0.7 0.7 0.1 1.9 0.1 100.0

1995 9.7 7.1 2.6 6.3 0.4 4.9 1.0 83.7 0.8 1.6 4.2 66.6 1.8 3.1 52.7 7.8 0.2 1.0 1.2 3.2 6.2 0.4 100.0

ASEAN-10

1995 19.1 7.9 11.2 35.6 3.2 29.9 2.6 45.2 1.1 5.2 8.3 24.8 0.9 1.9 19.6 1.8 0.0 0.6 2.0 0.6 3.2 0.1 100.0

ASEAN-10

1999 6.8 5.7 1.1 5.8 0.6 4.3 0.9 87.3 0.9 2.0 4.2 70.5 2.1 2.8 57.8 6.9 0.2 0.6 0.9 3.2 5.6 0.2 100.0

1999 9.8 5.1 4.7 36.4 2.8 32.3 1.4 53.4 0.6 4.2 4.3 38.2 0.7 1.3 33.3 2.7 0.0 0.2 3.2 0.3 2.6 0.4 100.0

1990 7.1 5.6 1.5 4.1 0.1 2.4 1.7 87.8 2.5 4.1 4.6 51.3 1.2 3.9 33.2 8.9 0.5 3.6 12.6 2.0 10.8 1.0 100.0

1990 2.5 1.1 1.4 21.4 3.7 17.0 0.7 75.7 0.6 7.4 3.5 51.1 2.2 3.3 37.8 5.0 0.0 2.8 2.6 0.8 9.7 0.5 100.0

1995 2.4 2.0 0.3 1.8 0.1 0.5 1.3 95.3 1.8 6.5 4.0 67.5 0.7 4.2 51.3 8.3 0.5 2.5 4.4 2.0 9.2 0.5 100.0

NIE-4

1995 2.0 0.9 1.0 9.0 1.3 6.3 1.4 88.8 2.5 6.4 3.8 57.0 1.6 5.2 43.6 5.4 0.1 1.1 10.3 1.2 7.6 0.4 100.0

NIE-4

1999 1.5 1.1 0.4 5.3 0.1 3.6 1.7 92.2 1.6 3.3 3.8 69.0 0.7 3.4 50.9 8.8 0.6 4.6 2.8 2.6 9.1 1.0 100.0

1999 1.8 1.1 0.7 4.6 1.1 2.1 1.4 92.8 1.6 6.5 2.1 69.1 0.6 3.6 57.2 7.1 0.0 0.6 5.1 0.3 8.0 0.9 100.0

1990 1.1 0.8 0.3 2.2 0.2 0.5 1.5 95.0 5.7 6.3 5.3 67.9 2.6 14.3 31.8 9.2 4.9 5.1 2.0 0.2 7.6 1.8 100.0

1990 1.9 0.4 1.5 5.0 0.8 2.7 1.5 93.0 7.6 13.2 5.0 55.7 1.8 23.1 20.5 6.2 2.2 1.9 3.1 0.2 8.3 0.2 100.0

1995 0.8 0.6 0.2 1.8 0.1 0.3 1.4 95.9 3.8 5.0 4.4 73.2 2.0 13.2 40.7 10.6 3.4 3.3 0.8 0.1 8.5 1.5 100.0

Japan

1995 1.7 0.8 0.8 4.7 0.6 2.2 1.9 93.5 7.4 12.6 4.8 55.0 1.7 24.6 17.5 6.8 2.3 2.1 1.9 0.2 11.7 0.1 100.0

Japan

1999 0.7 0.6 0.2 1.8 0.1 0.5 1.3 95.8 3.1 5.2 4.1 71.9 1.5 12.5 38.5 11.5 3.7 4.1 0.5 0.1 10.9 1.6 100.0

1999 1.8 0.9 0.9 5.2 1.3 1.5 2.4 92.9 8.3 14.5 4.4 52.9 1.6 14.0 23.3 11.0 1.9 1.2 1.6 0.1 11.1 0.1 100.0

1990 9.1 6.5 2.7 9.3 0.3 7.6 1.4 80.6 3.3 4.4 5.3 53.3 1.5 7.5 31.5 7.5 2.1 3.2 4.6 2.3 7.4 1.0 100.0

1990 6.9 2.2 4.6 13.5 1.2 10.5 1.8 79.5 6.0 10.7 5.7 46.3 1.6 17.2 19.2 5.1 1.6 1.6 3.4 0.2 7.1 0.2 100.0

1995 5.2 4.0 1.2 4.1 0.2 2.4 1.5 90.0 2.2 4.0 4.4 67.7 1.7 7.0 46.3 9.0 1.4 2.3 2.1 1.8 7.8 0.8 100.0

East Asia

1995 6.3 3.0 3.3 12.3 1.4 8.7 2.2 81.3 7.4 10.2 5.7 42.9 1.4 15.8 17.7 5.2 1.4 1.4 5.1 1.2 8.9 0.1 100.0

East Asia

1999 3.9 3.3 0.6 4.7 0.3 3.0 1.4 90.6 1.7 3.3 4.1 69.9 1.8 5.8 49.2 9.0 1.3 2.8 1.4 2.2 8.1 0.8 100.0

1999 6.1 3.7 2.4 14.6 1.9 10.3 2.4 79.1 5.5 9.9 4.3 46.1 1.4 7.6 27.3 8.0 1.0 0.8 4.1 1.2 8.1 0.2 100.0

TABLE 8 (continued ) Changing Import Structures of East Asia Countries (shares, per cent)

1990 5.1 4.4 0.7 2.7 0.4 1.3 1.0 90.4 1.1 15.3 3.8 57.1 5.2 10.6 25.0 4.9 1.5 9.9 0.8 0.2 12.2 1.8 100.0

1990 25.0 10.0 15.0 14.9 6.1 7.1 1.7 59.5 2.0 11.4 4.3 35.4 3.1 11.4 11.7 2.4 1.0 5.8 0.7 0.0 5.8 0.6 100.0

1995 4.7 4.2 0.4 3.0 0.2 1.6 1.2 90.1 0.9 10.4 3.8 61.2 2.1 10.1 34.0 6.0 1.2 7.8 0.7 0.3 12.9 2.2 100.0

NAFTA

1995 19.5 10.2 9.3 9.0 3.7 3.5 1.8 70.1 1.4 10.2 4.0 45.6 4.4 12.2 17.2 3.1 1.3 7.5 0.8 0.1 8.0 1.4 100.0

NAFTA

1999 3.5 3.2 0.3 1.8 0.1 1.3 0.4 91.7 0.5 8.3 3.2 64.8 2.0 12.8 33.6 6.3 0.6 9.5 0.3 0.1 14.6 3.0 100.0

1999 15.5 9.5 6.0 6.8 2.4 3.0 1.5 74.8 0.7 10.0 3.9 52.4 1.9 8.6 34.2 3.6 1.2 2.9 0.7 0.1 7.1 3.0 100.0

1990 6.8 6.6 0.2 4.4 0.3 1.9 2.2 86.3 3.4 14.8 10.2 45.4 1.7 16.1 9.5 6.8 5.5 5.9 1.6 1.3 9.5 2.5 100.0

1995 6.4 6.2 0.2 3.4 0.2 1.4 1.9 88.3 2.4 11.3 9.2 53.9 2.7 15.0 17.2 7.3 6.1 5.7 1.5 1.2 8.8 2.0 100.0

European Union-15

1995 5.8 3.6 2.2 4.1 1.5 0.7 1.9 87.8 3.2 14.6 8.7 47.1 1.9 27.4 5.0 4.4 3.1 5.3 3.1 2.1 9.0 2.4 100.0

European Union-15 1990 5.4 2.3 3.1 3.7 1.0 0.8 1.9 89.3 3.0 16.5 9.0 48.4 2.0 30.3 5.5 3.9 2.3 4.4 3.6 0.9 8.0 1.6 100.0

1999 5.9 5.7 0.2 2.7 0.2 1.4 1.1 88.3 1.6 13.0 7.5 55.9 1.6 12.9 24.9 7.8 3.5 5.2 0.8 0.6 9.0 3.1 100.0

1999 6.5 4.7 1.9 3.8 1.0 0.7 2.2 82.2 1.9 17.9 7.4 40.7 2.0 15.2 11.2 5.1 1.9 5.2 2.0 1.1 11.2 7.5 100.0

254 Masahiro Kawai and Shujiro Urata

1999 na na na na na na na na na na na na na na na na na na na na na na na

World 1995 15.0 8.8 6.1 12.2 2.1 7.6 2.5 72.6 6.0 15.1 5.1 40.0 2.4 18.6 4.3 3.9 5.9 5.0 3.3 0.1 3.1 0.2 100.0

1990 9.7 5.1 4.7 14.0 3.1 9.0 1.9 76.1 6.1 15.3 5.2 42.6 1.5 21.7 4.1 3.1 5.6 6.8 3.6 0.1 3.2 0.2 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Indonesia

1999 7.0 4.5 2.5 12.2 1.3 7.5 3.4 78.5 3.9 11.1 4.1 48.9 0.9 12.1 26.3 5.6 1.9 2.2 1.4 0.8 8.4 2.3 100.0

World 1995 9.6 5.4 4.2 13.0 1.4 7.1 4.6 74.2 6.4 13.0 5.3 40.2 1.1 9.9 18.1 4.8 4.0 2.3 1.8 0.9 6.7 3.2 100.0

1990 11.3 6.4 4.9 16.8 2.1 11.0 3.7 67.2 5.3 12.5 4.7 37.0 1.5 9.6 13.6 4.8 4.4 3.1 1.9 0.5 5.4 4.7 100.0

Taiwan

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 11.2 8.1 3.1 37.4 3.5 32.4 1.5 51.4 3.4 17.0 4.6 23.2 1.2 11.2 4.3 2.6 1.3 2.5 0.9 0.1 2.2 0.1 100.0

1990 21.3 5.0 16.3 33.0 1.5 28.3 3.2 44.4 0.8 7.1 6.8 25.7 0.2 1.5 21.0 2.3 0.0 0.7 0.7 0.6 2.8 1.3 100.0 ASEAN-10 1995 20.4 17.0 3.4 26.8 1.8 23.9 1.2 52.4 3.2 17.9 4.0 23.0 1.4 8.6 7.2 3.2 0.8 1.8 0.9 0.1 3.4 0.4 100.0

ASEAN-10 1995 13.2 4.6 8.6 18.0 0.8 15.6 1.6 68.2 0.9 7.5 8.4 42.9 0.3 2.4 35.9 3.5 0.1 0.6 3.0 1.2 4.3 0.7 100.0

1999 na na na na na na na na na na na na na na na na na na na na na na na

1999 6.7 3.0 3.8 13.2 0.5 11.3 1.5 79.1 0.3 6.7 5.4 58.6 0.2 1.9 53.1 2.5 0.3 0.7 2.9 1.0 4.3 1.0 100.0

1990 7.2 3.3 3.9 14.4 1.6 11.8 1.0 78.2 5.3 13.9 7.9 36.0 1.1 23.3 5.8 3.4 0.5 1.9 11.7 0.3 3.3 0.2 100.0

1990 7.1 3.1 4.0 18.8 2.2 14.3 2.4 67.4 4.8 8.1 5.4 35.7 0.6 2.3 24.6 5.7 1.5 1.0 4.4 2.5 6.5 6.7 100.0 NIE-4 1995 6.1 2.0 4.2 15.3 1.2 12.7 1.4 78.0 6.6 19.1 8.7 27.7 1.1 14.0 5.8 4.3 1.0 1.4 11.8 0.2 4.0 0.5 100.0

NIE-4 1995 2.6 1.5 1.1 9.0 0.9 6.0 2.2 85.2 3.0 12.1 2.8 54.1 0.2 3.4 42.7 5.9 0.6 1.4 3.5 3.8 6.1 3.3 100.0

1999 na na na na na na na na na na na na na na na na na na na na na na na

1999 1.2 0.7 0.5 7.5 0.3 5.2 2.0 88.7 2.0 9.4 2.3 64.9 0.3 2.9 55.9 4.2 0.6 1.0 1.9 2.6 5.6 2.7 100.0

1990 1.7 0.4 1.3 1.4 0.3 0.4 0.7 97.0 11.0 11.1 4.3 64.6 1.1 29.8 3.8 3.1 17.5 9.5 2.0 0.0 3.9 0.0 100.0

1990 2.8 1.4 1.4 4.3 0.6 1.3 2.5 91.6 7.5 12.0 5.5 56.9 1.4 15.4 21.3 8.4 4.9 5.5 2.5 0.3 7.0 1.3 100.0 Japan 1995 2.2 0.3 1.9 1.4 0.2 0.5 0.7 96.4 8.0 13.3 3.0 66.1 2.3 24.4 2.4 3.6 19.5 14.0 1.8 0.0 4.3 0.0 100.0

Japan 1995 1.7 0.9 0.8 4.2 0.3 1.2 2.7 93.5 6.9 13.6 5.5 55.9 1.1 16.1 22.7 8.2 4.7 3.1 1.5 0.3 9.8 0.6 100.0

1999 na na na na na na na na na na na na na na na na na na na na na na na

1999 1.8 1.2 0.6 3.8 0.6 0.7 2.6 93.7 4.7 13.0 4.5 59.1 1.0 20.8 22.8 9.1 3.5 1.9 1.1 0.3 11.0 0.7 100.0

1990 6.9 4.2 2.7 8.6 1.2 6.5 0.9 84.4 8.1 12.7 5.8 48.5 1.0 25.4 4.2 3.0 9.2 5.7 6.0 0.1 3.4 0.1 100.0

1990 6.9 2.3 4.6 10.3 1.0 6.6 2.7 80.5 6.2 10.6 5.8 48.1 1.1 11.2 21.2 7.1 3.6 4.0 2.7 0.8 6.3 2.3 100.0 East Asia 1995 8.5 5.6 2.9 8.0 0.8 6.0 1.2 83.3 7.6 15.9 5.7 44.6 1.6 18.1 4.0 3.8 9.7 7.4 5.6 0.1 3.8 0.2 100.0

East Asia 1995 4.9 1.7 3.2 8.2 0.9 4.5 2.8 85.9 6.4 11.7 6.2 50.3 0.8 10.8 26.4 7.2 3.0 2.2 2.2 1.1 8.1 1.0 100.0

1999 na na na na na na na na na na na na na na na na na na na na na na na

1999 3.2 1.5 1.6 7.5 0.7 4.2 2.6 88.2 3.6 10.3 4.7 58.2 0.7 12.0 34.7 7.4 2.0 1.4 1.7 1.0 8.6 1.1 100.0

TABLE 8 (continued ) Changing Import Structures of East Asia Countries (shares, per cent)

1990 16.9 5.5 11.4 4.3 1.6 1.3 1.4 78.6 3.9 22.2 3.6 41.0 2.5 17.0 5.4 2.3 0.8 13.0 3.4 0.0 4.5 0.2 100.0

1990 21.3 14.5 6.9 11.3 2.8 5.2 3.3 61.1 0.8 15.9 3.7 35.0 2.0 6.6 14.1 4.3 5.4 2.6 0.6 0.1 5.0 6.3 100.0 NAFTA 1995 30.7 14.5 16.2 3.8 1.5 1.5 0.8 65.4 2.4 15.9 4.8 37.8 5.1 18.1 7.5 2.5 2.2 2.4 1.6 0.0 2.9 0.1 100.0

NAFTA 1995 18.8 12.3 6.5 6.5 1.4 2.1 3.1 66.4 1.4 17.4 3.8 36.3 1.3 8.0 16.3 3.1 4.4 3.2 0.6 0.1 6.8 8.3 100.0

1999 na na na na na na na na na na na na na na na na na na na na na na na

1999 14.2 10.4 3.8 3.5 1.2 1.2 1.1 77.3 0.4 13.3 3.2 48.8 1.3 14.2 22.2 4.6 1.0 5.5 0.5 0.1 11.0 5.1 100.0

European Union-15 1990 1995 1999 2.8 6.0 na 1.7 3.3 na 1.1 2.6 na 3.8 6.4 na 2.3 3.1 na 0.6 2.0 na 0.9 1.4 na 93.1 87.3 na 3.8 3.0 na 17.5 16.8 na 7.5 6.2 na 59.3 57.0 na 2.8 3.6 na 30.6 31.7 na 5.6 5.8 na 5.7 7.1 na 4.5 3.9 na 10.1 4.9 na 0.7 1.0 na 0.0 0.1 na 4.3 3.3 na 0.4 0.3 na 100.0 100.0 na

European Union-15 1990 1995 1999 5.4 7.6 6.2 4.0 5.9 5.0 1.4 1.6 1.2 4.6 4.2 3.0 1.5 1.4 1.2 1.2 1.0 0.7 1.9 1.8 1.0 84.5 86.3 88.1 2.8 4.4 2.5 19.5 16.2 16.3 6.7 7.3 5.6 45.6 48.6 50.9 1.9 2.6 1.3 19.2 18.2 19.4 5.7 9.6 18.3 4.1 3.5 4.8 10.2 11.3 4.5 4.5 3.5 2.6 2.0 1.8 1.2 1.1 1.7 1.3 6.7 6.5 10.3 5.6 2.0 2.8 100.0 100.0 100.0

Trade and Foreign Direct Investment in East Asia 255

1999 6.9 5.4 1.4 6.4 0.8 3.1 2.5 83.6 3.4 7.3 4.3 61.7 1.3 7.9 38.9 8.4 1.9 3.4 1.6 0.2 5.2 3.2 100.0

1999 9.8 8.2 1.6 10.6 1.5 7.9 1.2 59.5 3.2 8.0 3.6 38.1 1.0 6.3 22.4 4.7 2.2 1.6 2.7 0.2 3.6 20.1 100.0

World 1995 6.0 4.8 1.2 5.5 1.0 2.3 2.2 83.6 4.3 6.9 5.5 59.8 2.0 12.5 28.8 7.7 3.3 5.5 2.0 0.2 4.8 4.9 100.0

World 1995 10.5 8.4 2.2 12.5 2.0 9.2 1.3 57.8 5.2 9.0 4.3 32.4 0.9 8.7 10.5 3.7 4.8 3.8 3.3 0.2 3.3 19.2 100.0

1990 8.2 6.9 1.3 8.6 1.5 5.1 2.0 78.2 5.0 8.3 5.6 50.2 0.7 12.7 19.6 6.3 4.1 6.7 3.3 0.3 5.5 5.0 100.0

1990 12.8 10.3 2.4 18.3 2.0 14.9 1.4 53.1 4.8 11.3 4.3 25.9 1.6 8.1 6.1 2.8 3.8 3.5 4.3 0.1 2.4 15.8 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Philippines

Malaysia

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 20.5 17.4 3.1 32.6 2.1 28.4 2.1 36.5 1.0 14.3 4.6 13.6 0.8 5.4 4.6 1.5 0.3 1.0 1.6 0.1 1.3 10.4 100.0

1990 10.9 9.5 1.4 23.0 1.1 20.6 1.4 60.3 1.2 7.1 5.7 38.3 0.8 4.3 21.4 10.2 0.1 1.5 2.4 0.5 5.2 5.7 100.0 ASEAN-10 1995 13.4 9.7 3.7 19.4 7.1 10.6 1.6 54.3 1.5 12.7 5.5 28.7 0.5 8.2 9.7 4.3 0.8 5.3 2.6 0.3 3.0 13.0 100.0

ASEAN-10 1995 9.0 6.4 2.6 12.2 0.6 10.0 1.6 73.0 1.2 5.9 5.4 54.4 1.5 4.0 34.1 14.0 0.3 0.6 1.7 0.4 4.1 5.8 100.0

1999 12.2 10.1 2.1 11.6 3.7 6.5 1.4 61.6 1.4 12.9 6.3 35.6 0.8 5.3 20.1 6.6 1.6 1.2 2.0 0.2 3.2 14.6 100.0

1999 7.8 5.5 2.4 11.0 0.5 9.1 1.3 78.1 0.9 6.5 4.4 60.2 1.4 3.5 43.2 11.1 0.2 0.8 1.5 0.2 4.3 3.2 100.0

1990 5.4 2.8 2.7 6.4 0.5 3.9 2.0 64.0 3.6 12.6 5.5 20.9 0.8 8.2 6.8 3.2 1.1 0.9 17.8 0.4 3.2 24.2 100.0

1990 1.7 1.3 0.5 17.5 0.7 15.4 1.4 75.9 3.0 7.1 6.3 44.6 1.1 9.0 21.5 10.9 0.1 2.0 7.3 0.4 7.1 4.9 100.0 NIE-4 1995 4.4 2.7 1.7 6.2 0.2 4.7 1.3 71.4 3.4 11.9 6.0 33.0 0.5 8.6 13.1 4.6 2.7 3.5 11.4 0.5 5.2 18.1 100.0

NIE-4 1995 1.5 0.9 0.6 9.2 0.3 7.2 1.6 82.8 3.4 6.7 4.7 58.5 1.4 8.5 34.2 13.0 0.2 1.1 3.9 0.3 5.4 6.5 100.0

1999 3.6 2.5 1.2 4.2 0.2 2.3 1.8 72.6 3.2 9.2 4.0 43.9 0.7 5.7 29.6 5.8 1.5 0.6 7.6 0.4 4.4 19.5 100.0

1999 1.4 0.7 0.7 8.5 0.2 6.8 1.5 86.9 2.7 6.6 3.7 66.3 0.9 5.6 43.7 13.0 0.2 2.8 2.6 0.2 4.9 3.2 100.0

1990 3.2 1.6 1.7 3.9 0.4 1.7 1.8 78.6 7.7 9.3 4.6 52.0 2.6 12.6 9.2 6.2 17.1 4.3 1.7 0.0 3.1 14.3 100.0

1990 0.9 0.4 0.5 2.0 0.1 0.2 1.7 96.8 8.7 6.9 4.8 67.2 0.8 21.1 20.6 8.5 13.1 3.1 2.2 0.0 7.0 0.3 100.0 Japan 1995 0.9 0.4 0.6 1.3 0.2 0.3 0.8 68.7 4.1 4.2 3.1 53.4 1.5 11.3 12.1 6.4 16.5 5.6 0.7 0.0 3.2 29.1 100.0

Japan 1995 0.7 0.2 0.5 2.6 0.1 0.2 2.3 94.4 5.8 6.6 5.7 70.3 1.6 19.8 28.4 9.3 9.0 2.2 0.7 0.0 5.3 2.3 100.0

1999 0.7 0.1 0.5 1.7 0.2 0.3 1.2 71.4 3.9 5.5 2.3 55.5 1.6 11.4 24.6 7.8 6.7 3.5 0.8 0.0 3.4 26.3 100.0

1999 0.9 0.2 0.7 3.5 0.1 0.2 3.1 92.8 7.7 6.6 5.0 67.1 1.0 12.3 34.6 10.5 7.2 1.5 0.5 0.0 6.0 2.8 100.0

1990 8.3 5.9 2.4 10.9 0.8 8.3 1.9 63.2 4.9 10.7 5.5 30.6 1.4 8.8 6.8 4.0 7.6 2.2 8.6 0.2 2.7 17.6 100.0

1990 5.9 4.8 1.0 9.6 0.7 7.4 1.5 82.2 5.5 7.2 5.7 51.8 0.9 13.7 20.3 8.8 5.8 2.4 5.1 0.4 6.6 2.4 100.0 East Asia 1995 5.2 3.5 1.7 6.2 2.0 3.1 1.1 66.9 4.2 8.7 5.3 38.8 0.9 9.1 11.3 5.2 8.3 4.0 5.8 0.3 3.9 21.7 100.0

East Asia 1995 3.9 2.7 1.3 5.5 0.3 3.2 2.0 86.5 4.7 6.7 5.6 61.3 1.5 13.4 30.0 10.5 4.4 1.6 2.8 0.3 5.2 4.0 100.0

1999 5.5 4.3 1.2 4.9 1.2 2.3 1.5 68.4 3.1 8.2 4.4 44.1 0.9 7.3 24.4 6.3 3.4 1.8 4.3 0.3 4.1 21.2 100.0

1999 5.0 3.5 1.5 6.2 0.4 3.7 2.1 86.1 4.2 6.6 4.6 63.3 1.3 7.3 39.2 10.9 2.7 2.0 2.1 0.2 5.0 2.8 100.0

TABLE 8 (continued ) Changing Import Structures of East Asia Countries (shares, per cent)

1990 19.2 14.8 4.4 3.0 2.1 0.2 0.6 52.5 0.7 11.5 4.4 32.5 2.5 8.7 8.5 2.7 1.1 9.1 0.6 0.0 2.7 25.4 100.0

1990 5.0 3.9 1.1 2.6 1.5 0.4 0.8 91.4 0.7 8.3 3.8 73.9 0.8 9.2 36.3 2.1 0.5 25.0 0.4 0.0 4.3 1.0 100.0 NAFTA 1995 17.4 13.8 3.7 3.4 2.0 0.8 0.6 51.1 1.1 7.1 4.0 34.4 1.1 8.3 15.9 2.9 1.4 4.8 0.5 0.1 3.9 28.1 100.0

NAFTA 1995 5.4 4.8 0.7 2.1 0.8 0.2 1.0 89.2 0.8 6.9 4.4 71.0 1.1 7.6 45.4 3.3 0.3 13.3 0.3 0.1 5.8 3.3 100.0

1999 14.9 12.5 2.4 1.3 0.9 0.2 0.2 52.8 0.3 5.0 2.5 41.4 0.5 4.7 31.5 3.2 0.7 0.7 0.5 0.1 3.0 31.1 100.0

1999 5.1 4.4 0.8 1.5 0.3 0.3 0.8 92.0 0.5 6.5 3.0 74.7 1.1 6.0 52.8 4.5 0.1 10.3 0.2 0.1 7.0 1.5 100.0

European Union-15 1990 1995 1999 12.8 10.2 10.3 12.0 9.5 9.3 0.8 0.7 1.0 1.9 1.7 2.8 0.7 0.2 0.1 0.2 0.4 2.1 1.0 1.1 0.6 74.1 73.6 72.4 2.6 2.2 1.3 21.2 16.8 14.5 5.4 5.3 4.6 40.2 44.7 44.9 3.2 1.9 4.0 17.6 19.1 10.8 10.1 12.0 20.3 3.1 3.8 4.8 1.4 1.7 0.8 4.7 6.3 4.2 1.1 1.0 1.5 0.1 0.2 0.2 3.5 3.3 5.5 11.3 14.5 14.5 100.0 100.0 100.0

European Union-15 1990 1995 1999 4.9 3.5 3.9 4.6 3.2 3.1 0.3 0.3 0.8 2.8 2.6 2.3 1.4 1.1 0.8 0.3 0.2 0.4 1.1 1.3 1.1 78.9 89.7 91.3 5.5 3.1 2.0 12.1 7.8 11.1 8.6 6.9 5.8 46.4 67.1 66.0 0.7 3.5 1.7 19.0 18.4 16.7 11.7 21.2 37.8 5.9 5.6 6.4 4.3 4.0 1.6 5.0 14.4 1.8 1.0 0.9 0.8 0.1 0.1 0.1 5.0 3.8 5.5 13.5 4.2 2.6 100.0 100.0 100.0

256 Masahiro Kawai and Shujiro Urata

1999 19.2 15.1 4.1 21.6 2.9 16.1 2.6 57.4 1.0 7.3 4.6 27.5 1.2 3.2 14.2 3.8 2.6 2.5 1.6 5.3 10.3 1.9 100.0

World 1995 22.2 16.0 6.1 22.6 3.4 16.1 3.2 53.0 1.8 7.1 5.0 22.5 0.9 2.9 11.2 2.7 3.5 1.4 1.9 5.6 9.1 2.2 100.0

1990 21.4 14.4 6.9 33.3 4.7 24.5 4.2 42.7 2.0 6.4 4.8 15.3 0.8 3.1 4.8 1.8 3.1 1.8 1.9 3.7 8.5 2.6 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Japan

1999 7.9 5.0 2.9 12.6 0.7 9.7 2.2 77.2 5.4 10.8 9.2 43.1 1.3 7.3 19.4 7.6 2.5 5.1 2.7 0.2 5.8 2.3 100.0

World 1995 7.9 3.8 4.1 10.1 0.7 6.8 2.6 80.1 7.4 10.2 7.4 47.4 1.5 14.2 14.7 6.4 6.8 3.8 2.2 0.1 5.5 2.0 100.0

1990 9.7 5.0 4.7 12.9 1.5 9.3 2.1 74.4 8.1 10.2 8.2 41.0 2.6 13.1 10.3 4.1 6.5 4.5 2.7 0.1 4.1 3.1 100.0

Thailand

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 21.5 11.8 9.7 55.3 4.7 48.6 2.0 21.5 0.5 1.8 6.1 7.4 0.3 1.2 4.3 1.5 0.1 0.1 0.8 1.6 3.3 1.7 100.0

1990 14.9 2.5 12.4 45.2 0.5 43.1 1.6 38.1 2.8 6.3 3.4 22.6 0.6 1.9 16.1 3.1 0.3 0.5 1.1 0.1 2.0 1.8 100.0 ASEAN-10 1995 20.1 13.3 6.8 30.3 4.0 25.2 1.2 47.2 0.4 2.1 6.9 26.5 0.7 1.9 20.4 3.1 0.2 0.2 1.3 3.3 6.7 2.4 100.0

ASEAN-10 1995 11.6 2.7 8.9 27.6 0.3 25.1 2.2 60.1 0.7 6.9 5.3 41.8 1.6 3.4 27.9 7.5 0.9 0.5 1.2 0.1 4.1 0.8 100.0

1999 15.0 11.3 3.6 25.1 2.9 21.1 1.1 57.4 0.2 2.9 6.9 35.9 0.7 2.1 27.2 4.9 0.5 0.5 1.4 2.7 7.4 2.6 100.0

1999 7.1 4.0 3.1 12.1 0.2 10.0 1.9 79.9 1.1 9.5 13.7 49.6 1.0 3.5 31.2 12.1 1.3 0.5 1.1 0.1 4.8 0.9 100.0

1990 17.2 14.8 2.4 11.6 1.6 8.8 1.2 68.4 6.6 4.0 6.4 19.0 0.9 2.9 10.3 3.7 0.3 0.9 3.6 13.5 15.4 2.9 100.0

1990 7.4 6.4 1.1 22.3 0.6 20.9 0.8 67.5 5.2 8.7 6.8 33.0 0.6 7.8 17.7 5.5 0.1 1.3 8.5 0.3 5.0 2.8 100.0 NIE-4 1995 14.6 13.1 1.5 6.6 1.1 4.4 1.2 76.3 5.5 4.0 4.8 40.5 0.7 2.6 31.9 3.9 0.4 1.0 2.7 6.2 12.7 2.4 100.0

NIE-4 1995 3.5 2.3 1.1 14.2 0.3 12.3 1.6 81.6 4.5 11.5 7.7 45.7 1.2 10.6 21.1 10.8 1.2 0.9 6.1 0.2 6.1 0.7 100.0

1999 10.2 9.0 1.2 8.1 0.7 6.6 0.7 78.5 4.1 5.0 4.3 47.9 0.6 3.2 38.2 4.3 0.6 1.0 1.9 3.5 11.7 3.2 100.0

1999 3.4 2.5 0.9 5.6 0.2 3.1 2.3 90.5 3.7 12.6 9.2 50.0 1.2 7.9 26.7 13.7 0.3 0.2 7.6 0.2 7.2 0.6 100.0

1990 – – – – – – – – – – – – – – – – – – – – – – –

1990 1.8 1.2 0.6 1.7 0.1 0.4 1.2 95.3 11.7 8.0 5.8 64.5 3.9 20.2 10.1 5.9 17.7 6.8 1.3 0.0 3.9 1.2 100.0 Japan 1995 – – – – – – – – – – – – – – – – – – – – – – –

Japan 1995 1.4 0.7 0.7 1.8 0.1 0.4 1.3 96.4 9.4 8.6 7.5 63.9 1.7 20.1 12.3 8.2 16.8 4.8 1.1 0.0 5.9 0.5 100.0

1999 – – – – – – – – – – – – – – – – – – – – – – –

1999 1.7 0.8 0.9 2.3 0.1 0.3 1.9 95.6 11.0 10.0 10.6 55.1 1.8 13.0 18.4 10.1 7.7 4.1 1.4 0.1 7.4 0.5 100.0

1990 21.0 14.5 6.4 33.0 3.2 28.2 1.6 44.4 3.4 2.9 5.7 10.5 0.6 1.6 5.6 2.2 0.2 0.4 3.1 9.9 8.7 1.7 100.0

1990 7.7 3.6 4.1 12.3 0.5 10.5 1.3 78.4 9.9 8.2 6.0 46.4 2.3 13.7 11.4 5.1 9.7 4.1 4.2 0.1 3.8 1.6 100.0 East Asia 1995 17.8 13.8 4.1 16.6 2.4 12.9 1.3 63.9 3.1 3.1 5.8 24.9 0.8 1.8 17.8 3.7 0.3 0.6 3.1 12.4 11.4 1.7 100.0

East Asia 1995 4.5 1.6 2.9 8.6 0.3 6.6 1.7 86.4 7.6 9.3 7.1 53.5 1.6 14.5 16.5 8.2 9.7 2.9 3.2 0.2 5.6 0.5 100.0

1999 13.8 11.3 2.5 13.6 1.6 11.0 1.0 70.7 1.7 3.4 5.8 33.1 0.9 2.3 23.0 5.7 0.5 0.7 2.7 11.7 12.3 1.9 100.0

1999 4.0 2.3 1.7 5.8 0.3 3.4 2.1 89.5 6.6 10.4 10.9 50.8 1.5 8.8 23.6 11.1 3.9 2.0 4.0 0.3 6.6 0.6 100.0

TABLE 8 (continued ) Changing Import Structures of East Asia Countries (shares, per cent)

1990 34.2 21.9 12.4 14.4 4.0 6.9 3.5 48.8 0.5 9.1 4.0 25.7 1.8 3.6 10.7 2.7 1.5 5.4 0.5 0.5 8.5 2.6 100.0

1990 13.7 7.6 6.1 5.1 2.8 0.6 1.7 76.0 1.5 13.3 7.0 46.3 3.4 7.7 24.1 3.4 0.7 7.0 0.6 0.1 7.3 5.3 100.0 NAFTA 1995 34.2 22.9 11.3 7.7 2.2 3.5 2.0 55.9 0.3 8.9 4.4 31.2 2.0 3.8 14.7 3.5 4.3 3.0 0.4 1.3 9.3 2.3 100.0

NAFTA 1995 12.5 5.6 6.9 5.5 1.5 1.5 2.5 80.3 1.9 12.1 6.5 49.9 2.1 10.5 29.2 5.0 0.7 2.4 0.7 0.1 9.1 1.7 100.0

1999 29.0 22.2 6.8 5.5 1.6 2.7 1.2 63.0 0.2 8.9 4.0 37.6 2.8 4.8 16.1 4.1 2.3 7.5 0.4 0.7 11.3 2.4 100.0

1999 11.8 7.8 4.0 2.4 0.7 1.0 0.7 84.5 0.6 11.6 6.5 56.9 1.7 6.3 31.0 5.5 0.9 11.6 0.8 0.1 8.1 1.2 100.0

European Union-15 1990 1995 1999 10.4 11.9 13.2 9.0 9.6 10.6 1.4 2.4 2.6 3.7 2.3 2.6 1.1 0.6 0.7 0.5 0.2 0.3 2.2 1.4 1.5 83.5 83.7 82.6 0.7 0.6 0.4 14.5 19.1 21.7 7.6 6.8 5.6 31.8 35.4 34.6 0.7 0.6 1.2 9.0 7.1 6.6 2.1 6.8 8.1 2.5 3.4 3.6 16.0 15.2 13.1 1.6 2.2 2.0 3.4 2.7 1.6 4.8 4.9 3.7 20.7 14.3 15.0 2.5 2.2 1.7 100.0 100.0 100.0

European Union-15 1990 1995 1999 7.7 6.2 7.4 6.9 5.1 5.2 0.8 1.1 2.2 3.4 2.5 3.6 1.8 0.6 1.2 0.4 0.4 0.8 1.2 1.5 1.7 86.4 89.6 87.2 3.7 3.3 2.7 15.6 12.9 17.3 11.3 9.1 9.7 51.4 58.7 49.5 5.1 1.9 1.4 23.5 25.9 12.1 5.2 8.7 15.5 4.1 6.0 5.4 6.0 7.9 1.5 7.5 8.3 13.7 0.8 1.1 2.0 0.1 0.2 0.2 3.6 4.3 5.9 2.6 1.8 1.8 100.0 100.0 100.0

Trade and Foreign Direct Investment in East Asia 257

1999 11.2 9.1 2.1 8.5 1.1 5.6 1.8 76.3 2.4 10.3 7.8 40.3 1.6 6.7 12.7 4.7 10.5 4.1 2.3 3.7 9.6 4.0 100.0

World 1995 13.5 10.7 2.9 10.1 1.5 6.2 2.4 73.4 3.4 11.2 9.0 34.3 1.2 6.6 9.8 4.5 9.2 3.2 2.8 3.7 9.1 3.0 100.0

1990 13.3 10.3 3.1 12.9 1.7 8.8 2.4 71.8 3.3 9.8 9.0 33.4 1.2 7.7 8.2 3.8 8.6 3.8 3.3 3.7 9.4 2.0 100.0

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

Source: World Bank Trade Database

European Union-15

1999 6.2 4.6 1.7 9.7 0.5 7.5 1.7 79.6 1.6 5.9 7.1 46.2 1.6 5.7 16.7 4.9 13.7 3.6 1.4 5.6 11.9 4.5 100.0

World 1995 6.9 4.8 2.1 10.9 0.8 8.2 1.9 78.9 2.0 5.4 7.0 46.4 1.2 6.4 18.2 4.7 12.9 3.0 1.4 5.4 11.4 3.4 100.0

1990 7.7 5.8 1.9 16.3 1.1 13.3 1.9 72.6 2.1 4.5 7.0 41.3 1.5 6.1 12.2 4.2 14.2 3.1 1.3 5.3 11.2 3.4 100.0

United States

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others Total

1990 25.0 16.7 8.3 1.7 0.5 0.7 0.6 72.7 0.2 1.3 7.5 35.7 0.9 1.1 29.0 3.2 0.4 1.1 3.5 11.6 12.8 0.6 100.0

1990 11.4 8.4 3.1 6.5 0.1 6.1 0.3 79.9 0.3 1.8 4.4 49.0 0.4 1.6 42.9 3.5 0.2 0.4 1.1 13.0 10.3 2.2 100.0 ASEAN-10 1995 15.9 11.1 4.8 1.6 0.6 0.7 0.3 81.9 0.1 2.0 6.3 47.5 0.9 1.4 39.4 4.6 0.4 0.8 3.2 8.6 14.2 0.6 100.0

ASEAN-10 1995 8.8 5.8 3.0 1.8 0.1 1.5 0.2 87.9 0.2 1.5 3.1 62.0 0.4 1.1 56.6 3.5 0.2 0.2 0.8 9.7 10.6 1.6 100.0

1999 11.3 8.8 2.5 1.7 1.0 0.5 0.2 86.9 0.3 3.3 4.9 55.2 1.0 2.0 46.0 4.2 1.3 0.8 2.0 8.4 12.9 0.2 100.0

1999 7.1 5.9 1.3 2.1 0.1 1.9 0.1 88.3 0.4 1.5 3.8 62.2 0.3 0.8 56.5 4.1 0.3 0.2 0.9 9.8 9.8 2.5 100.0

1990 2.0 1.2 0.8 0.3 0.1 0.0 0.2 97.1 0.5 1.7 6.8 46.8 0.5 2.7 33.5 6.6 0.4 3.0 3.2 15.7 22.3 0.7 100.0

1990 1.6 1.3 0.3 0.5 0.0 0.4 0.1 96.2 1.4 1.6 6.9 43.2 0.4 3.1 29.9 5.6 2.7 1.5 1.9 17.5 23.8 1.8 100.0 NIE-4 1995 1.5 0.8 0.7 0.3 0.2 0.0 0.1 97.7 0.5 3.1 6.5 60.6 0.6 3.2 40.9 9.8 3.6 2.6 2.1 9.8 15.2 0.6 100.0

NIE-4 1995 1.2 0.9 0.4 0.5 0.0 0.4 0.1 96.3 1.0 1.7 5.6 62.8 0.5 3.1 50.0 5.4 2.7 1.1 1.8 10.9 12.5 2.0 100.0

1999 1.0 0.6 0.4 0.3 0.1 0.0 0.1 98.6 0.7 3.2 5.1 65.6 1.1 3.2 45.9 7.2 5.2 3.1 2.2 8.7 13.0 0.2 100.0

1999 1.2 0.8 0.4 0.9 0.0 0.6 0.3 94.6 1.6 1.9 5.8 63.2 0.5 3.9 47.7 5.8 4.1 1.2 2.0 9.6 10.4 3.4 100.0

1990 0.7 0.3 0.3 0.4 0.1 0.1 0.3 98.5 0.7 4.4 3.5 75.7 0.6 10.3 32.5 6.4 20.9 5.1 1.4 0.3 12.5 0.5 100.0

1990 0.5 0.4 0.1 0.7 0.0 0.1 0.5 97.3 2.5 2.6 4.2 77.1 0.8 9.6 26.3 5.7 30.8 4.0 0.6 0.2 10.1 1.5 100.0 Japan 1995 0.5 0.2 0.4 0.5 0.1 0.1 0.2 98.6 0.5 6.0 4.2 75.6 0.8 10.9 30.4 9.7 17.9 5.9 1.0 0.2 11.2 0.4 100.0

Japan 1995 0.4 0.3 0.2 0.6 0.0 0.2 0.3 97.5 1.4 4.1 4.0 78.7 0.9 10.6 30.7 6.3 24.6 5.6 0.5 0.1 8.7 1.5 100.0

1999 0.5 0.1 0.4 0.5 0.1 0.1 0.3 98.6 0.4 5.8 3.6 76.4 1.2 11.2 27.9 9.6 19.8 6.7 0.9 0.2 11.4 0.4 100.0

1999 0.5 0.4 0.2 0.7 0.0 0.3 0.4 95.8 1.3 4.9 4.1 75.3 1.1 10.0 24.6 6.0 27.4 6.2 0.4 0.1 9.7 3.0 100.0

1990 6.2 4.0 2.2 0.8 0.3 0.3 0.3 92.5 0.6 3.4 5.4 54.6 0.6 6.0 28.5 5.5 10.5 3.5 3.0 8.5 17.0 0.5 100.0

1990 2.8 2.1 0.7 1.8 0.1 1.4 0.4 93.9 1.8 2.1 5.3 56.5 0.6 5.9 26.2 5.4 16.0 2.5 1.5 9.4 17.4 1.5 100.0 East Asia 1995 5.0 3.4 1.7 1.1 0.4 0.4 0.3 93.4 0.5 4.4 6.0 56.1 0.8 5.6 30.3 8.3 8.0 3.2 2.4 7.5 16.5 0.4 100.0

East Asia 1995 2.6 1.8 0.8 1.0 0.1 0.6 0.3 94.9 1.0 2.6 4.8 62.0 0.6 5.6 36.0 5.8 11.1 2.8 1.2 7.0 16.3 1.5 100.0

1999 3.8 2.7 1.1 1.0 0.4 0.3 0.3 95.0 0.6 4.0 5.3 59.1 1.1 5.5 32.8 7.8 8.4 3.5 2.0 7.6 16.4 0.2 100.0

1999 2.3 1.8 0.5 1.1 0.1 0.7 0.3 94.2 1.1 2.8 5.5 59.1 0.7 5.1 33.6 6.2 10.8 2.7 1.3 6.5 17.9 2.4 100.0

TABLE 8 (continued ) Changing Import Structures of East Asia Countries (shares, per cent)

1990 12.4 7.1 5.3 9.4 3.1 4.8 1.5 75.6 0.6 9.2 4.8 47.6 5.1 7.0 16.7 4.0 2.0 12.8 1.2 0.5 11.8 2.6 100.0

1990 11.4 6.2 5.2 18.1 1.8 12.7 3.6 65.3 1.6 4.1 9.5 44.1 1.1 3.4 6.4 5.2 24.1 4.0 0.6 0.8 4.6 5.2 100.0 NAFTA 1995 12.3 7.6 4.7 7.0 2.3 2.7 2.0 78.6 0.8 11.0 4.9 48.1 4.6 7.5 20.5 4.9 2.7 7.8 1.1 0.6 12.2 2.1 100.0

NAFTA 1995 10.3 5.5 4.8 14.1 1.1 9.6 3.3 70.2 1.8 4.6 8.9 46.4 1.2 4.3 8.4 5.2 24.0 3.4 0.9 1.8 5.9 5.5 100.0

1999 7.9 5.1 2.7 4.3 1.4 1.6 1.2 86.6 0.4 11.4 4.8 55.5 7.7 8.1 21.1 5.6 3.4 9.6 0.8 0.4 13.5 1.2 100.0

1999 8.7 5.1 3.6 10.9 0.6 8.0 2.2 74.1 1.3 3.7 8.4 49.7 1.3 4.1 10.0 5.7 24.4 4.2 1.0 3.1 7.0 6.3 100.0

European Union-15 1990 1995 1999 13.3 13.9 12.1 10.7 11.6 10.2 2.5 2.4 1.9 7.2 6.2 4.6 1.2 1.1 0.7 3.9 3.0 2.4 2.2 2.1 1.6 78.1 77.1 78.6 4.4 4.4 3.2 11.8 13.3 12.7 10.6 10.1 9.0 35.4 35.5 40.6 1.0 0.8 0.9 9.2 7.5 7.7 6.3 7.3 10.0 4.2 4.4 4.3 11.5 12.6 14.4 3.2 3.0 3.3 3.7 3.0 2.5 2.9 2.3 2.1 9.3 8.4 8.5 1.5 2.8 4.8 100.0 100.0 100.0

European Union-15 1990 1995 1999 6.6 5.8 5.4 5.8 5.0 4.8 0.8 0.8 0.7 6.7 4.7 3.7 0.4 0.3 0.3 4.8 3.0 2.2 1.5 1.4 1.1 81.7 84.7 85.0 3.5 3.2 2.0 10.1 12.3 15.9 8.7 8.6 7.5 42.9 44.6 44.7 4.5 3.3 4.8 13.4 14.4 11.9 4.3 7.7 5.8 3.9 4.3 4.0 11.8 10.4 12.6 5.1 4.6 5.7 1.8 1.7 1.3 1.8 1.5 1.2 12.9 12.8 12.5 5.0 4.8 5.9 100.0 100.0 100.0

258 Masahiro Kawai and Shujiro Urata

Trade and Foreign Direct Investment in East

Asia

259

manufactured exports in total exports is high for their exports to NAFTA and the EU. The most distinctive case is found for Malaysia’s exports. The share of manufactured products in total exports for Malaysia’s overall exports was 80 per cent in 1999. The corresponding share for its exports to Japan was significantly lower at 72 per cent, while their shares to NAFTA and the EU were significantly higher at 96 per cent and 88 per cent, respectively. Among the manufactured products the share of office machines and telecommunication equipment in total Malaysia’s exports is particularly high for its exports to NAFTA and the EU in comparison with its exports to other regions. These observations suggest that developed countries, except Japan, are important markets for the manufactured products exported by Malaysia. Trade in Electronic Products For many East Asian economies, electronics products (office machines and telecommunications equipment) account for a large share of exports. This section investigates the trade patterns of electronics products for these economies. Table 9 shows the value of exports and imports for electronics products by grouping them into office and data processing machines, electronic appliances, and semiconductors. Office and data processing machines include computers, while electronic appliances include TV sets, VCRs, and other audiovisual products. Office and data processing machines and electronic appliances are each further divided into finished products, and parts and components. An examination of the value of exports and imports for 1990, 1995 and 1999 reveals that both exports and imports increased notably from 1990 to 1995, but they declined from 1995 to 1999. One may argue that the currency and economic crisis in 1997 and 1998 made it difficult for the affected countries to import parts and components used for the productions of exports. This observation in turn seems to reflect the fact that emerging East Asian economies depend on imported parts and components for the production of electronics products. The dependence on foreign supply for the parts and components might be seen from the fact that the trade balance (exports minus imports) for the parts and components for electronic appliance and semiconductors was mostly in deficit for 1990 and 1995. It should be noted that a deficit in the trade

China

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

4,802.7 3,152.3 1,650.5 8,408.6 4,364.6 4,044.0 1,294.6 532.5 154.3 378.2

2,857.9 1,132.3 1,725.6 7,616.4 718.7 6,897.6 3,878.1 2,406.4 1,509.6 896.8

1,944.9 2,020.0 -75.1 792.2 3,645.9 -2,853.6 -2,583.4 -1,873.8 -1,355.3 -518.6

771.6 480.7 290.9 2,539.8 877.7 1,662.2 746.6 4,208.4 723.1 3,485.3

-396.4 -222.9 -173.6 83.5 1,223.6 -1,140.1 -619.0 -729.9 -677.0 -52.8

World 1995

375.1 257.8 117.3 2,623.3 2,101.2 522.1 127.6 3,478.5 46.1 3,432.4

1990

5,634.0 5,703.5 -69.5 3,697.2 4,854.0 -1,156.8 -9,681.3 -1,198.2 -707.9 -490.3

7,734.5 3,522.5 4,212.0 9,363.7 246.7 9,117.0 13,391.0 2,082.2 809.2 1,273.0

13,368.5 9,226.0 4,142.5 13,060.9 5,100.6 7,960.3 3,709.8 883.9 101.3 782.7

1999

0.8 -4.3 5.1 39.9 34.4 5.5 -3.5 -34.0 6.5 -40.5

5.5 4.9 0.6 16.5 4.8 11.7 5.9 194.6 0.1 194.5

6.3 0.6 5.7 56.5 39.2 17.3 2.5 160.6 6.6 154.0

1990

191.9 253.6 -61.7 150.4 162.1 -11.8 -113.5 124.6 72.1 52.5

252.5 73.4 179.1 325.6 33.1 292.4 231.0 5.5 3.7 1.8

444.4 327.0 117.4 475.9 195.3 280.7 117.6 130.1 75.8 54.3

ASEAN-10 1995

-719.3 -208.8 -510.5 483.2 322.1 161.1 -1,027.1 32.4 0.3 32.2

1,920.9 661.1 1,259.8 414.5 10.6 403.9 1,804.8 13.1 6.7 6.4

1,201.6 452.4 749.3 897.7 332.8 564.9 777.7 45.6 7.0 38.6

1999

27.0 76.6 -49.7 745.3 1,044.3 -299.0 -251.2 478.3 -1.5 479.9

273.5 134.2 139.3 1,547.2 789.6 757.6 359.7 2,469.7 8.1 2,461.5

300.4 210.8 89.7 2,292.5 1,833.9 458.7 108.5 2,948.0 6.6 2,941.4

1990

807.2 637.7 169.5 1,020.2 706.7 313.5 -637.0 -93.4 -88.9 -4.5

906.2 290.8 615.4 1,567.1 157.2 1,409.9 1,493.0 157.9 108.4 49.5

1,713.4 928.5 784.9 2,587.3 863.9 1,723.4 855.9 64.5 19.4 45.1

NIE-4 1995

970.8 753.4 217.4 2,326.7 644.0 1,682.8 -3,492.2 -23.7 -23.6 -0.1

2,334.4 875.2 1,459.2 1,297.0 44.5 1,252.4 5,491.9 93.1 53.7 39.4

3,305.2 1,628.6 1,676.6 3,623.7 688.5 2,935.2 1,999.7 69.4 30.1 39.4

1999

-162.3 -82.6 -79.7 -487.7 -64.0 -423.7 -313.2 -381.8 -201.7 -180.1

165.5 82.7 82.8 521.8 81.9 439.9 316.9 536.0 201.7 334.3

3.2 0.1 3.1 34.1 17.9 16.3 3.7 154.2 0.0 154.2

1990

-298.3 424.6 -722.9 -845.7 81.7 -927.4 -1,691.1 -459.0 -272.0 -187.0

1,109.5 214.1 895.4 2,245.9 520.9 1,725.0 1,854.1 511.9 272.3 239.6

811.2 638.8 172.5 1,400.3 602.6 797.6 163.0 52.9 0.3 52.6

Japan 1995

-437.1 227.6 -664.7 83.6 512.1 -428.5 -3,479.5 -639.0 -441.3 -197.7

1,612.8 476.8 1,136.0 1,945.0 167.3 1,777.8 3,879.5 780.3 442.0 338.3

1,175.7 704.3 471.3 2,028.7 679.4 1,349.3 400.0 141.3 0.7 140.7

1999

-135.2 -5.9 -129.4 284.6 1,000.0 -715.4 -563.7 -4.0 -196.9 192.9

439.1 216.9 222.2 2,074.7 872.3 1,202.4 677.2 3,193.0 209.9 2,983.1

303.9 211.1 92.8 2,359.3 1,872.3 487.1 113.5 3,188.9 13.0 3,176.0

1990

479.6 1,069.3 -589.7 332.8 868.2 -535.3 -2,407.4 -445.8 -288.3 -157.5

2,089.1 522.4 1,566.7 3,882.9 694.9 3,188.0 3,476.1 674.0 383.6 290.4

2,568.7 1,591.7 977.0 4,215.8 1,563.1 2,652.7 1,068.7 228.2 95.4 132.8

East Asia 1995

-49.9 814.4 -864.3 2,640.3 1,339.7 1,300.7 -7,826.3 -637.1 -464.7 -172.5

4,920.3 1,632.1 3,288.2 3,517.5 218.5 3,299.1 10,734.3 885.2 502.1 383.1

4,870.3 2,446.5 2,423.8 6,157.9 1,558.1 4,599.7 2,908.0 248.1 37.5 210.6

1999

-256.0 -220.2 -35.7 -97.9 62.0 -159.9 -24.2 -11.7 -35.6 23.8

279.4 223.7 55.6 177.6 1.8 175.8 29.2 119.8 37.2 82.6

23.4 3.5 19.9 79.7 63.8 15.9 5.0 108.0 1.6 106.4

1990

TABLE 9 East Asia’s Trade in Electronic Products and Automobiles (millions US$)

534.7 331.3 203.4 790.6 1,258.9 -468.3 -78.3 -83.5 -191.7 108.2

621.1 494.9 126.2 1,311.9 8.9 1,303.0 204.7 275.2 192.0 83.2

1,155.8 826.2 329.6 2,102.5 1,267.8 834.7 126.4 191.7 0.3 191.4

NAFTA 1995

2,467.2 2,103.4 363.8 2,179.1 1,888.4 290.7 -934.3 86.8 -75.3 162.1

1,853.3 1,296.1 557.1 1,490.2 9.9 1,480.3 1,344.8 294.0 76.1 217.9

4,320.5 3,399.5 921.0 3,669.3 1,898.3 1,771.0 410.4 380.9 0.8 380.1

1999

-44.6 -33.5 -11.0 -173.1 75.0 -248.1 -33.9 -317.8 -230.1 -87.6

46.6 34.7 11.9 252.3 1.5 250.9 35.7 376.8 230.2 146.6

2.0 1.1 0.8 79.2 76.4 2.8 1.8 59.0 0.1 59.0

852.1 553.0 299.1 -888.7 926.9 -1,815.6 -32.2 -1,175.7 -739.2 -436.4

124.1 105.0 19.1 2,169.1 5.0 2,164.1 89.9 1,196.8 741.2 455.6

976.3 658.0 318.2 1,280.4 931.9 348.5 57.8 21.1 2.0 19.2

European Union-15 1990 1995

Masahiro Kawai and Shujiro Urata 3,010.0 2,559.4 450.6 -1,519.2 992.0 -2,511.1 -716.6 -687.0 -148.4 -538.6

467.8 358.6 109.2 3,640.3 7.8 3,632.6 1,008.5 809.8 150.4 659.4

3,477.8 2,918.0 559.8 2,121.1 999.7 1,121.4 291.9 122.8 2.0 120.8

1999

260

Hong Kong SAR

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

2,309.5 590.7 1,718.8 1,368.6 67.5 1,301.1 2,256.9 0.7 0.0 0.7

8,885.5 3,763.7 5,121.8 18,870.0 8,546.4 10,323.6 12,458.7 4,003.4 3,218.3 785.1

-6,576.0 -3,173.0 -3,403.0 -17,501.4 -8,478.9 -9,022.5 -10,201.9 -4,002.7 -3,218.3 -784.4

2,277.7 1,172.8 1,104.8 6,343.3 3,640.6 2,702.7 3,704.9 924.5 704.6 219.9

-191.1 -415.9 224.8 -4,206.2 -3,131.9 -1,074.3 -3,156.3 -923.1 -704.6 -218.6

World 1995

2,086.5 756.9 1,329.6 2,137.1 508.7 1,628.5 548.7 1.4 0.0 1.4

1990

59.5 -191.4 250.9 -273.1 -224.0 -49.1 -870.9 -15.5 -9.8 -5.6

301.5 204.3 97.2 359.3 231.6 127.7 978.1 15.5 9.8 5.7

361.0 12.9 348.1 86.2 7.6 78.6 107.2 0.1 0.0 0.1

1990

-1,098.1 -913.8 -184.3 -3,106.1 -1,639.3 -1,466.7 -2,191.7 -39.3 -17.0 -22.4

1,555.4 960.7 594.7 3,179.8 1,641.0 1,538.8 2,892.8 39.4 17.0 22.4

457.3 46.9 410.4 73.7 1.7 72.0 701.1 0.1 0.0 0.1

ASEAN-10 1995

-2,928.4 -2,006.5 -921.9 -1,295.9 -311.6 -984.3 -2,990.5 -52.7 -26.9 -25.9

3,003.1 2,015.7 987.4 1,309.6 311.7 997.8 3,402.0 52.8 26.9 25.9

74.8 9.3 65.5 13.7 0.2 13.5 411.5 0.0 0.0 0.0

1999

-9.1 -240.9 231.7 -811.5 -360.2 -451.3 -823.5 -15.3 -3.5 -11.8

447.4 257.4 190.0 861.7 374.3 487.5 1,012.8 15.3 3.5 11.8

438.3 16.5 421.8 50.3 14.1 36.2 189.3 0.1 0.0 0.1

1990

-1,441.0 -1,005.8 -435.2 -3,383.6 -1,209.5 -2,174.2 -3,862.2 -160.0 -88.7 -71.3

1,984.8 1,051.7 933.1 3,420.1 1,210.4 2,209.7 4,733.1 160.1 88.7 71.3

543.8 45.9 498.0 36.5 1.0 35.5 870.9 0.1 0.0 0.1

NIE-4 1995

-2,980.2 -1,202.8 -1,777.4 -1,976.0 -182.8 -1,793.2 -5,563.9 -77.4 -20.2 -57.2

3,033.0 1,211.4 1,821.5 1,990.2 183.0 1,807.2 6,073.9 77.5 20.2 57.2

52.8 8.7 44.1 14.3 0.2 14.1 510.0 0.0 0.0 0.0

1999

-675.1 -413.0 -262.1 -1,918.4 -1,012.2 -906.2 -887.9 -543.4 -433.5 -110.0

756.9 419.4 337.5 1,976.5 1,022.3 954.2 905.0 543.5 433.5 110.0

81.8 6.4 75.4 58.1 10.1 48.0 17.1 0.0 0.0 0.0

1990

-1,660.5 -446.0 -1,214.5 -3,949.3 -1,835.6 -2,113.6 -3,240.9 -1,492.7 -1,138.9 -353.7

1,852.7 556.1 1,296.6 3,962.7 1,836.9 2,125.8 3,356.1 1,492.7 1,138.9 353.7

192.1 110.1 82.1 13.4 1.3 12.1 115.2 0.0 0.0 0.0

Japan 1995

-1,485.4 -346.7 -1,138.7 -2,208.6 -818.5 -1,390.1 -2,607.2 -754.9 -568.6 -186.3

1,583.1 379.9 1,203.2 2,219.9 818.6 1,401.3 2,744.0 754.9 568.6 186.3

97.7 33.3 64.4 11.4 0.1 11.3 136.7 0.0 0.0 0.0

1999

-948.0 -868.1 -79.9 -4,753.5 -3,523.3 -1,230.2 -2,461.3 -604.3 -475.4 -128.9

1,630.3 908.8 721.5 5,893.5 3,557.4 2,336.1 2,737.3 604.7 475.4 129.4

682.3 40.7 641.5 1,140.0 34.2 1,105.8 276.0 0.4 0.0 0.4

1990

-5,812.2 -2,905.9 -2,906.3 -15,183.7 -8,326.1 -6,857.6 -8,645.3 -1,751.6 -1,295.5 -456.0

7,003.2 3,116.1 3,887.2 16,295.0 8,343.4 7,951.6 9,878.7 1,751.9 1,295.5 456.3

1,191.1 210.2 980.9 1,111.4 17.3 1,094.0 1,233.4 0.3 0.0 0.3

East Asia 1995

-10,903.8 -5,439.8 -5,464.0 -12,866.0 -4,212.2 -8,653.8 -10,304.6 -916.7 -654.2 -262.5

11,418.5 5,532.2 5,886.3 13,285.0 4,214.3 9,070.7 11,296.9 916.7 654.2 262.5

514.8 92.4 422.3 419.0 2.1 416.9 992.3 0.0 0.0 0.0

1999

252.5 103.9 148.6 185.8 76.5 109.3 -630.7 -9.7 -7.3 -2.4

460.3 146.3 314.1 256.2 42.4 213.8 770.7 10.2 7.3 3.0

712.9 250.1 462.7 442.0 118.9 323.2 140.0 0.5 0.0 0.5

1990

-857.3 -277.1 -580.1 -1,146.7 -86.9 -1,059.8 -1,177.6 -870.8 -825.2 -45.6

1,314.6 413.9 900.7 1,314.0 111.2 1,202.8 1,855.0 870.8 825.2 45.6

457.3 136.7 320.6 167.3 24.3 143.0 677.4 0.1 0.0 0.1

NAFTA 1995

-1,737.3 -664.4 -1,072.8 -706.4 -71.4 -635.0 -1,393.9 -38.0 -22.0 -15.9

1,858.4 721.8 1,136.6 744.1 71.9 672.2 2,011.5 38.1 22.0 16.1

121.2 57.4 63.8 37.7 0.5 37.3 617.5 0.1 0.0 0.1

1999

429.8 307.1 122.7 252.4 239.9 12.5 -65.5 -302.2 -216.0 -86.2

143.3 86.2 57.0 152.5 28.0 124.5 187.0 302.2 216.0 86.2

573.0 393.3 179.7 404.9 267.9 137.0 121.5 0.0 0.0 0.0

30.7 -2.1 32.8 -1,105.3 -32.5 -1,072.9 -242.9 -979.4 -725.6 -253.8

424.4 173.3 251.1 1,160.4 57.2 1,103.2 562.6 979.4 725.6 253.8

455.1 171.2 283.9 55.0 24.7 30.3 319.6 0.0 0.0 0.0

European Union-15 1990 1995

1999

569.7 208.6 361.1 1,194.1 60.7 1,133.4 831.6 605.4 433.5 171.9

340.9 91.7 249.2 13.8 0.4 13.4 425.3 0.1 0.0 0.1

-228.8 -116.9 -111.9 -1,180.3 -60.2 -1,120.1 -406.3 -605.4 -433.5 -171.8

Asia

-12,894.8 -6,264.4 -6,630.4 -14,882.3 -4,362.0 -10,520.3 -12,167.0 -1,612.7 -1,135.0 -477.7

13,958.6 6,521.1 7,437.5 15,371.6 4,365.2 11,006.4 14,223.9 1,613.1 1,135.0 478.1

1,063.8 256.8 807.1 489.3 3.2 486.1 2,056.9 0.4 0.0 0.4

1999

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

Trade and Foreign Direct Investment in East 261

Korea, Rep. of

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

4,966.9 4,161.4 805.5 8,877.5 4,633.8 4,243.7 19,372.9 9,069.5 8,402.1 667.4

3,569.9 2,427.4 1,142.5 3,058.8 400.3 2,658.5 9,838.2 1,789.4 485.8 1,303.7

1,397.0 1,734.0 -337.0 5,818.7 4,233.5 1,585.2 9,534.7 7,280.1 7,916.4 -636.3

1,812.9 1,140.6 672.3 1,368.1 274.0 1,094.1 4,559.7 800.0 316.0 484.0

888.7 960.9 -72.1 4,905.3 4,018.3 886.9 804.2 1,357.3 1,594.8 -237.4

World 1995

2,701.6 2,101.4 600.2 6,273.3 4,292.3 1,981.0 5,363.9 2,157.4 1,910.8 246.6

1990

6,241.8 4,919.9 1,321.9 6,997.1 2,634.2 4,362.9 4,950.8 11,705.0 10,946.7 758.4

4,330.5 2,449.3 1,881.2 3,505.7 345.1 3,160.6 16,892.6 1,108.4 158.1 950.2

10,572.2 7,369.1 3,203.1 10,502.8 2,979.3 7,523.5 21,843.4 12,813.4 11,104.8 1,708.6

1999

73.5 -115.7 189.2 290.0 183.0 107.0 537.1 48.4 33.1 15.3

203.0 180.0 23.0 31.8 12.5 19.3 310.1 0.1 0.0 0.1

276.5 64.2 212.2 321.8 195.5 126.3 847.2 48.5 33.1 15.5

1990

-192.6 -263.8 71.2 601.9 293.2 308.7 3,233.9 464.7 400.1 64.6

608.9 476.0 132.9 279.6 64.6 215.1 1,096.8 1.6 0.1 1.6

416.3 212.2 204.1 881.5 357.7 523.8 4,330.6 466.3 400.2 66.1

ASEAN-10 1995

-980.8 -602.8 -378.0 458.5 95.8 362.7 4,137.5 386.0 333.2 52.8

1,504.3 801.4 702.9 184.0 62.5 121.4 2,384.4 1.6 0.6 1.0

523.5 198.5 324.9 642.4 158.3 484.1 6,521.9 387.5 333.8 53.7

1999

40.2 -75.3 115.5 301.8 225.1 76.7 614.6 17.6 9.4 8.2

158.8 135.9 22.9 26.3 11.9 14.5 386.2 0.3 0.2 0.1

198.9 60.6 138.4 328.2 237.0 91.2 1,000.8 17.9 9.6 8.3

1990

-214.2 -230.2 16.0 606.3 371.4 234.9 4,180.7 190.6 140.4 50.2

710.4 532.9 177.5 256.8 35.4 221.4 1,462.7 6.1 0.1 6.0

496.2 302.7 193.5 863.1 406.8 456.3 5,643.4 196.7 140.5 56.2

NIE-4 1995

330.1 -52.3 382.4 920.8 155.7 765.1 3,353.3 148.3 105.9 42.3

997.4 587.5 409.9 224.4 25.7 198.7 2,308.0 2.1 0.2 1.8

1,327.5 535.2 792.3 1,145.2 181.4 963.8 5,661.3 150.3 106.2 44.2

1999

-509.0 -301.2 -207.8 -216.7 23.2 -239.9 -1,096.4 -367.6 -78.8 -288.8

681.8 351.3 330.5 763.2 195.5 567.7 2,360.1 406.7 87.8 318.9

172.8 50.1 122.7 546.5 218.7 327.8 1,263.7 39.0 9.0 30.0

1990

-665.4 -403.6 -261.8 -98.4 328.7 -427.2 -784.5 -683.2 -45.9 -637.2

1,015.5 621.0 394.5 951.3 144.6 806.8 3,740.6 752.8 49.9 702.9

350.1 217.4 132.7 852.9 473.3 379.6 2,956.1 69.7 4.0 65.7

Japan 1995

690.1 478.6 211.5 -351.0 290.0 -641.0 -1,912.2 -347.9 -9.4 -338.5

691.1 484.9 206.2 1,088.3 126.0 962.3 3,836.4 464.8 14.7 450.1

1,381.2 963.5 417.7 737.3 416.0 321.3 1,924.2 116.9 5.4 111.6

1999

-518.5 -464.5 -54.1 234.7 342.0 -107.3 -211.7 -234.5 30.6 -265.1

1,002.1 600.8 401.3 857.3 225.7 631.5 3,080.2 408.9 88.2 320.7

483.6 136.3 347.3 1,091.9 567.7 524.2 2,868.5 174.4 118.8 55.5

1990

-963.4 -665.4 -298.0 1,108.2 992.8 115.4 4,549.1 147.1 671.0 -523.9

1,998.7 1,262.9 735.8 1,587.2 316.5 1,270.7 5,872.0 762.4 50.6 711.8

1,035.3 597.5 437.8 2,695.4 1,309.3 1,386.1 10,421.1 909.5 721.6 187.9

East Asia 1995

61.6 104.3 -42.7 1,169.0 558.3 610.7 4,512.5 242.4 449.5 -207.1

3,168.5 1,647.2 1,521.4 1,827.2 297.6 1,529.5 8,408.1 472.3 17.2 455.1

3,230.2 1,751.5 1,478.6 2,996.1 855.9 2,140.2 12,920.6 714.8 466.7 248.1

1999

715.1 778.1 -63.0 1,839.9 1,357.9 482.0 577.8 1,378.0 1,329.5 48.5

702.3 445.6 256.7 292.7 15.7 277.0 1,186.2 178.0 84.5 93.5

1,417.4 1,223.7 193.7 2,132.6 1,373.6 759.0 1,764.1 1,555.9 1,414.0 141.9

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

891.9 990.3 -98.4 1,045.1 999.5 45.6 3,724.3 1,471.0 1,589.6 -118.6

1,313.3 944.9 368.4 1,185.4 30.5 1,154.9 3,225.5 446.2 133.7 312.5

2,205.1 1,935.2 270.0 2,230.4 1,030.0 1,200.5 6,949.8 1,917.2 1,723.2 194.0

NAFTA 1995

1999

3,577.1 2,850.0 727.1 1,869.2 607.5 1,261.7 -1,094.1 3,734.8 3,604.7 130.1

888.6 572.6 315.9 1,260.4 31.9 1,228.5 7,105.4 316.1 68.1 248.1

4,465.7 3,422.7 1,043.0 3,129.7 639.4 2,490.2 6,011.4 4,050.9 3,672.7 378.2

639.2 592.0 47.2 1,479.4 1,126.4 353.0 204.4 -84.4 -33.1 -51.3

67.2 59.1 8.1 165.5 8.6 156.9 268.9 203.9 137.1 66.8

706.4 651.1 55.3 1,644.9 1,135.0 509.9 473.3 119.5 104.0 15.5

1,149.3 1,132.8 16.5 1,327.7 410.6 917.1 1,196.1 1,627.7 1,815.0 -187.3

189.1 157.9 31.2 186.1 28.3 157.8 531.9 567.1 299.5 267.6

1,338.5 1,290.8 47.7 1,513.9 439.0 1,074.9 1,728.0 2,194.9 2,114.5 80.4

European Union-15 1990 1995

Masahiro Kawai and Shujiro Urata 2,273.7 1,692.0 581.7 1,814.6 632.4 1,182.2 1,748.3 3,207.4 3,166.6 40.8

219.3 183.7 35.5 312.0 10.8 301.1 884.1 245.2 68.4 176.8

2,493.0 1,875.8 617.2 2,126.5 643.3 1,483.3 2,632.5 3,452.6 3,235.1 217.6

1999

262

Singapore

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

28,962.6 20,061.5 8,901.1 12,966.6 6,092.1 6,874.5 18,392.5 759.5 367.0 392.5

13,180.5 5,741.8 7,438.7 9,203.6 3,218.9 5,984.8 21,384.5 2,331.0 1,359.0 972.0

15,782.1 14,319.7 1,462.4 3,762.9 2,873.2 889.8 -2,992.0 -1,571.4 -991.9 -579.5

4,352.0 1,956.0 2,396.0 4,550.9 2,206.7 2,344.2 4,489.0 1,293.9 701.4 592.4

4,853.2 5,208.0 -354.7 1,803.9 1,810.6 -6.7 -814.4 -1,000.4 -612.5 -388.0

World 1995

9,205.2 7,163.9 2,041.3 6,354.7 4,017.2 2,337.5 3,674.6 293.4 89.0 204.5

1990

-353.6 -101.1 -252.5 -934.8 -793.4 -141.3 -297.5 120.9 51.1 69.8

984.4 247.8 736.6 1,773.7 976.8 796.9 1,006.4 23.4 9.7 13.7

630.8 146.7 484.1 838.9 183.4 655.6 708.8 144.3 60.9 83.4

1990

-2,596.2 -1,022.6 -1,573.6 -660.5 -1,374.1 713.6 230.4 480.5 294.4 186.2

5,171.1 2,061.9 3,109.2 3,837.6 1,848.1 1,989.5 5,571.0 56.7 21.2 35.5

2,574.9 1,039.3 1,535.6 3,177.2 474.0 2,703.1 5,801.3 537.2 315.6 221.6

ASEAN-10 1995

-2,863.6 -1,239.4 -1,624.2 167.8 -506.1 673.9 -485.7 159.0 7.9 151.2

5,677.2 2,134.8 3,542.4 1,884.7 791.0 1,093.8 7,611.5 46.6 27.2 19.4

2,813.6 895.4 1,918.2 2,052.6 284.9 1,767.7 7,125.8 205.6 35.1 170.5

1999

-230.6 311.9 -542.5 34.2 63.0 -28.8 -95.2 21.2 2.9 18.3

951.3 277.1 674.3 493.8 239.5 254.4 728.8 31.2 9.9 21.3

720.7 588.9 131.7 528.0 302.5 225.5 633.7 52.3 12.7 39.6

1990

599.4 1,405.0 -805.6 1,467.9 657.1 810.7 -1,002.3 -8.1 -10.4 2.2

1,865.1 592.4 1,272.8 886.4 271.3 615.1 4,762.9 66.8 18.8 48.0

2,464.5 1,997.4 467.1 2,354.3 928.4 1,425.8 3,760.6 58.7 8.5 50.2

NIE-4 1995

1,435.8 1,690.7 -254.9 360.1 19.9 340.3 1,551.5 36.1 -21.4 57.5

1,602.5 527.9 1,074.6 701.6 152.5 549.1 3,711.0 68.5 34.0 34.5

3,038.3 2,218.7 819.6 1,061.7 172.4 889.3 5,262.5 104.6 12.6 92.0

1999

-432.5 -298.9 -133.6 -1,563.1 -793.2 -769.9 -1,090.7 -597.3 -379.1 -218.2

720.3 516.9 203.4 1,787.2 904.4 882.8 1,385.5 601.9 381.2 220.7

287.8 218.1 69.8 224.2 111.3 112.9 294.8 4.6 2.1 2.5

1990

772.2 1,181.6 -409.4 -1,842.9 -365.1 -1,477.9 -4,536.4 -886.1 -601.7 -284.5

1,955.7 1,206.7 749.0 2,649.0 802.4 1,846.6 6,118.8 891.7 602.8 288.9

2,727.9 2,388.2 339.6 806.0 437.3 368.7 1,582.5 5.6 1.1 4.5

Japan 1995

603.4 892.1 -288.6 -841.3 -230.0 -611.3 -2,669.2 -660.9 -493.9 -167.0

1,823.5 883.2 940.2 1,246.2 413.9 832.3 4,040.2 680.9 499.5 181.4

2,426.9 1,775.3 651.6 404.9 183.9 221.0 1,371.1 20.0 5.6 14.4

1999

-1,007.2 -81.7 -925.5 -2,481.1 -1,547.1 -934.0 -1,474.9 -451.0 -325.5 -125.5

2,662.5 1,047.3 1,615.2 4,094.2 2,150.8 1,943.4 3,123.7 661.8 401.3 260.5

1,655.3 965.7 689.7 1,613.1 603.7 1,009.4 1,648.7 210.8 75.9 134.9

1990

-1,304.9 1,425.4 -2,730.3 -1,321.6 -1,215.0 -106.6 -5,252.0 -417.4 -317.6 -99.8

9,259.9 4,055.1 5,204.8 7,852.9 3,138.7 4,714.2 16,523.2 1,025.6 644.7 380.9

7,955.0 5,480.4 2,474.5 6,531.3 1,923.7 4,607.6 11,271.3 608.2 327.1 281.1

East Asia 1995

-1,307.9 1,237.3 -2,545.2 -806.4 -919.0 112.6 -1,433.3 -457.8 -507.5 49.7

10,502.7 4,009.5 6,493.2 4,446.0 1,569.1 2,876.9 15,650.7 801.9 560.9 241.0

9,194.8 5,246.8 3,948.0 3,639.6 650.1 2,989.5 14,217.4 344.1 53.4 290.7

1999

3,451.4 3,234.0 217.5 1,680.9 1,059.2 621.7 223.3 -128.7 -57.7 -71.0

1,317.5 689.0 628.4 267.8 16.6 251.2 956.7 149.3 57.8 91.5

4,768.9 3,923.0 845.9 1,948.8 1,075.9 872.9 1,180.0 20.6 0.1 20.5

1990

9,560.5 7,522.1 2,038.4 1,271.2 894.4 376.8 533.0 -218.6 -61.9 -156.6

2,864.8 1,156.9 1,707.8 500.4 39.1 461.3 3,243.6 241.3 62.2 179.0

12,425.2 8,679.0 3,746.2 1,771.6 933.5 838.1 3,776.6 22.7 0.3 22.4

NAFTA 1995

9,121.8 7,895.0 1,226.8 809.1 434.1 375.0 1,065.1 -87.0 -34.5 -52.6

2,609.3 938.7 1,670.6 489.5 25.5 464.0 3,623.0 109.7 38.1 71.6

11,731.1 8,833.7 2,897.4 1,298.6 459.6 839.0 4,688.1 22.6 3.6 19.0

1999

1,897.9 1,596.1 301.8 1,710.3 1,514.8 195.5 277.1 -445.3 -234.1 -211.1

289.7 183.7 106.0 153.6 33.1 120.6 351.4 456.0 236.7 219.3

2,187.6 1,779.8 407.8 1,863.9 1,547.9 316.0 628.4 10.8 2.6 8.2

5,796.6 4,056.8 1,739.7 1,613.6 1,603.5 10.1 1,254.8 -987.2 -623.5 -363.7

802.7 421.4 381.3 684.3 30.5 653.9 1,368.3 1,005.7 632.4 373.3

6,599.3 4,478.2 2,121.1 2,298.0 1,634.0 663.9 2,623.1 18.5 8.9 9.6

European Union-15 1990 1995

1999

942.2 420.4 521.7 736.2 35.0 701.1 1,839.3 494.8 261.8 233.0

7,292.5 4,742.5 2,550.0 906.1 301.3 604.9 3,337.9 24.0 16.2 7.8

6,350.3 4,322.1 2,028.3 170.0 266.2 -96.2 1,498.6 -470.8 -245.6 -225.2

Asia

15,900.3 14,538.5 1,361.8 1,496.0 590.6 905.4 923.8 -897.2 -760.3 -136.9

14,387.1 5,617.0 8,770.1 5,780.0 1,654.2 4,125.8 22,113.5 1,441.6 875.2 566.4

30,287.4 20,155.5 10,131.9 7,276.1 2,244.8 5,031.2 23,037.3 544.5 114.9 429.5

1999

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

Trade and Foreign Direct Investment in East 263

Taiwan

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

16,185.2 8,423.3 7,761.9 6,252.3 2,296.9 3,955.4 9,047.7 1,384.4 52.5 1,331.9

2,466.5 1,716.9 749.6 1,977.3 564.6 1,412.6 14,322.2 4,163.2 2,624.5 1,538.7

13,718.7 6,706.4 7,012.3 4,275.0 1,732.3 2,542.8 -5,274.5 -2,778.7 -2,572.0 -206.7

1,574.3 1,126.8 447.5 1,744.5 459.4 1,285.1 4,119.5 2,406.9 1,661.8 745.1

5,098.9 3,242.0 1,856.9 3,251.6 1,717.1 1,534.5 -1,684.2 -1,644.2 -1,625.4 -18.8

World 1995

6,673.3 4,368.8 2,304.4 4,996.1 2,176.4 2,819.6 2,435.3 762.6 36.4 726.2

1990

15,691.5 6,421.7 9,269.8 1,478.6 556.5 922.1 -2,834.3 -509.7 -1,008.4 498.7

8,695.9 6,461.4 2,234.6 3,248.3 396.2 2,852.1 17,228.4 2,071.3 1,050.0 1,021.2

24,387.4 12,883.1 11,504.4 4,726.9 952.7 3,774.2 14,394.1 1,561.5 41.6 1,519.9

1999

86.8 -73.3 160.1 449.6 124.0 325.7 -139.9 51.8 -1.1 52.9

293.2 263.1 30.1 125.6 32.8 92.8 457.1 1.8 1.3 0.5

380.0 189.8 190.2 575.2 156.7 418.5 317.2 53.6 0.2 53.4

1990

164.5 -252.4 417.0 488.2 23.9 464.3 -553.3 165.1 8.4 156.7

782.8 634.5 148.3 398.3 164.3 234.0 2,601.4 12.9 0.9 12.0

947.3 382.1 565.3 886.5 188.2 698.3 2,048.1 178.0 9.3 168.6

ASEAN-10 1995

-873.8 -1,310.9 437.1 -283.1 -43.4 -239.7 -1,797.1 100.0 -3.8 103.8

2,380.0 1,751.3 628.7 636.1 77.9 558.1 4,678.3 44.1 4.4 39.7

1,506.2 440.4 1,065.8 353.0 34.5 318.4 2,881.1 144.2 0.6 143.6

1999

147.7 63.5 84.3 527.9 132.9 395.0 63.1 -29.1 -33.5 4.4

345.9 226.0 119.8 190.1 59.7 130.4 583.4 68.3 34.1 34.3

493.6 289.5 204.1 718.0 192.6 525.4 646.5 39.2 0.5 38.7

1990

1,211.5 304.0 907.5 1,106.7 107.3 999.4 581.3 117.2 16.0 101.3

595.9 336.6 259.3 288.2 93.3 194.9 3,011.0 53.8 11.2 42.6

1,807.4 640.5 1,166.8 1,394.9 200.7 1,194.3 3,592.3 171.1 27.2 143.9

NIE-4 1995

63.6 -1,322.4 1,386.0 -20.7 -0.3 -20.3 2,519.2 8.8 -47.9 56.7

2,579.2 2,023.8 555.3 875.9 47.1 828.8 3,604.6 72.1 52.3 19.8

2,642.8 701.4 1,941.4 855.2 46.8 808.4 6,123.8 80.9 4.4 76.5

1999

-517.2 -360.5 -156.7 -570.4 -188.4 -382.0 -1,430.2 -717.3 -223.3 -494.0

699.0 501.4 197.6 923.0 292.8 630.1 1,801.8 780.2 223.5 556.7

181.8 140.9 40.9 352.5 104.4 248.2 371.6 62.9 0.2 62.7

1990

1,158.6 675.4 483.2 -72.7 116.9 -189.7 -4,651.6 -1,308.1 -176.1 -1,132.0

768.9 580.7 188.2 653.4 179.6 473.9 5,445.7 1,421.7 176.6 1,245.1

1,927.4 1,256.0 671.4 580.7 296.5 284.2 794.1 113.6 0.5 113.1

Japan 1995

195.3 -358.0 553.3 -85.7 -24.0 -61.6 -1,854.2 -955.2 -263.4 -691.8

2,805.5 2,271.8 533.7 486.3 167.6 318.8 3,694.7 1,066.2 264.5 801.8

3,000.8 1,913.8 1,087.0 400.7 143.5 257.1 1,840.4 111.0 1.1 109.9

1999

-276.5 -292.5 16.0 246.6 -7.7 254.3 -1,516.2 -712.2 -256.7 -455.5

1,115.0 790.4 324.6 1,160.6 368.9 791.7 2,674.6 848.7 257.6 591.1

838.5 497.9 340.6 1,407.2 361.2 1,046.0 1,158.4 136.5 0.9 135.6

1990

2,467.7 762.9 1,704.8 1,346.9 214.4 1,132.6 -5,002.8 -1,055.5 -150.3 -905.2

1,798.3 1,293.8 504.4 1,288.2 399.2 889.0 10,101.5 1,487.8 188.1 1,299.7

4,266.0 2,056.7 2,209.2 2,635.2 613.6 2,021.6 5,098.7 432.3 37.8 394.5

East Asia 1995

-824.8 -2,902.6 2,077.8 -357.3 -124.4 -232.9 -1,054.5 -841.6 -304.6 -537.1

7,566.3 5,797.5 1,768.8 1,879.1 330.7 1,548.4 10,994.4 1,188.8 319.6 869.2

6,741.6 2,894.9 3,846.7 1,521.8 206.4 1,315.5 9,939.9 347.2 15.1 332.1

1999

2,209.7 1,406.1 803.6 1,672.8 910.8 762.0 -472.1 -313.2 -680.2 367.0

384.0 281.1 102.9 393.9 82.1 311.8 1,143.6 727.7 715.5 12.2

2,593.7 1,687.2 906.5 2,066.6 992.9 1,073.8 671.6 414.6 35.3 379.3

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

5,701.8 2,820.7 2,881.2 1,461.2 756.4 704.8 -190.6 -460.7 -953.5 492.8

497.8 313.7 184.1 360.0 148.8 211.2 2,826.1 986.5 960.0 26.5

6,199.7 3,134.4 3,065.3 1,821.2 905.2 916.0 2,635.5 525.8 6.5 519.3

NAFTA 1995

8,663.7 5,460.7 3,203.0 1,279.8 325.8 954.0 -1,099.0 517.5 -172.5 690.0

598.1 246.3 351.8 438.0 42.9 395.1 3,720.4 206.6 183.3 23.4

9,261.8 5,707.1 3,554.8 1,717.8 368.6 1,349.1 2,621.4 724.1 10.8 713.3

1999

2,523.6 1,727.7 795.8 987.9 613.8 374.1 318.2 -757.6 -673.7 -83.9

48.5 33.6 14.9 171.9 6.6 165.3 231.2 813.2 673.9 139.3

2,572.0 1,761.3 810.7 1,159.8 620.5 539.3 549.4 55.6 0.2 55.4

4,230.9 2,461.4 1,769.5 966.8 551.2 415.5 82.0 -1,572.9 -1,471.3 -101.6

119.5 71.3 48.2 275.2 12.9 262.3 1,037.1 1,681.8 1,474.5 207.3

4,350.4 2,532.7 1,817.7 1,241.9 564.1 677.8 1,119.1 108.9 3.2 105.7

European Union-15 1990 1995

Masahiro Kawai and Shujiro Urata 6,763.9 3,569.1 3,194.8 188.9 307.7 -118.9 21.8 -503.3 -525.4 22.1

188.7 121.1 67.6 875.2 9.1 866.1 1,580.2 651.4 529.6 121.8

6,952.6 3,690.2 3,262.4 1,064.1 316.8 747.3 1,602.0 148.1 4.3 143.8

1999

264

Indonesia

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

501.4 248.6 252.9 1,634.3 1,245.2 389.0 145.3 73.7 25.5 48.1

241.1 176.1 65.0 1,086.2 25.2 1,061.0 398.1 2,398.9 555.7 1,843.2

260.3 72.4 187.9 548.1 1,220.1 -671.9 -252.7 -2,325.2 -530.1 -1,795.1

246.0 211.1 34.9 490.4 27.2 463.2 155.6 1,212.0 551.3 660.7

-245.2 -210.7 -34.6 -385.2 18.5 -403.6 -137.2 -1,197.9 -543.6 -654.3

World 1995

0.8 0.4 0.3 105.2 45.7 59.5 18.3 14.1 7.6 6.5

1990

-11.6 -9.3 -2.2 11.7 6.2 5.5 -45.1 -18.7 -19.1 0.3

11.8 9.5 2.3 23.0 0.9 22.0 47.0 24.5 20.8 3.6

0.2 0.2 0.0 34.7 7.2 27.5 1.9 5.7 1.8 3.9

1990

246.5 54.2 192.3 351.4 243.4 108.0 -85.6 -8.6 13.9 -22.4

37.7 23.8 13.9 94.8 3.9 90.9 171.5 35.3 6.0 29.3

284.3 78.0 206.3 446.2 247.3 198.9 86.0 26.7 19.9 6.9

ASEAN-10 1995

729.8 149.9 579.9 558.4 113.4 445.0 151.7 90.1 35.8 54.2

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

729.8 149.9 579.9 558.4 113.4 445.0 151.7 90.1 35.8 54.2

1999

-41.6 -32.1 -9.4 -31.7 6.0 -37.6 -105.9 -11.1 -0.3 -10.7

42.1 32.3 9.8 70.2 3.0 67.2 111.3 18.8 6.7 12.1

0.5 0.2 0.3 38.6 9.0 29.6 5.4 7.7 6.3 1.4

1990

169.4 37.4 132.0 319.9 268.7 51.2 -117.5 -63.5 -17.5 -46.0

47.9 28.9 19.0 151.5 6.3 145.3 204.9 69.1 18.3 50.7

217.3 66.3 151.0 471.4 275.0 196.5 87.4 5.6 0.8 4.7

NIE-4 1995

619.1 149.7 469.4 551.9 125.5 426.4 158.8 44.7 23.2 21.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

619.1 149.7 469.4 551.9 125.5 426.4 158.8 44.7 23.2 21.5

1999

-53.3 -43.3 -10.0 -111.1 -2.8 -108.3 -27.4 -925.6 -327.9 -597.7

53.3 43.3 10.0 120.1 3.7 116.4 27.4 927.0 328.1 598.9

0.0 0.0 0.0 9.0 0.9 8.1 0.0 1.4 0.3 1.1

1990

-12.5 -23.6 11.1 -27.8 43.3 -71.1 -41.4 -1,784.5 -202.2 -1,582.3

43.5 30.4 13.0 122.6 8.8 113.8 51.7 1,794.0 202.7 1,591.3

31.0 6.8 24.1 94.8 52.1 42.7 10.4 9.5 0.5 9.0

Japan 1995

271.0 3.2 267.8 134.0 89.3 44.6 57.8 26.9 0.4 26.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

271.0 3.2 267.8 134.0 89.3 44.6 57.8 26.9 0.4 26.5

1999

-96.6 -76.9 -19.8 -149.3 3.0 -152.3 -135.9 -948.8 -342.0 -606.9

97.2 77.1 20.1 197.7 6.9 190.9 141.3 961.2 349.2 612.0

0.5 0.2 0.3 48.5 9.9 38.6 5.4 12.4 7.2 5.2

1990

231.9 25.9 206.0 289.9 315.4 -25.5 -263.2 -1,847.0 -203.8 -1,643.2

98.0 64.8 33.2 314.0 16.5 297.5 370.5 1,885.0 224.3 1,660.8

330.0 90.7 239.3 603.9 331.9 272.0 107.3 38.0 20.5 17.6

East Asia 1995

1,005.6 156.7 848.9 744.6 227.7 517.0 246.7 135.6 36.3 99.4

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1,005.6 156.7 848.9 744.6 227.7 517.0 246.7 135.6 36.3 99.4

1999

-97.6 -85.2 -12.4 -48.2 2.9 -51.1 10.5 -22.4 -18.8 -3.6

97.7 85.3 12.4 62.6 3.7 58.9 2.4 23.4 19.0 4.4

0.1 0.1 0.0 14.4 6.5 7.8 12.9 1.0 0.2 0.8

1990

7.6 26.8 -19.2 273.4 528.5 -255.2 21.2 -103.0 -88.5 -14.5

86.0 59.6 26.4 324.7 4.1 320.6 13.1 124.4 88.5 35.8

93.6 86.4 7.2 598.0 532.7 65.4 34.3 21.4 0.0 21.4

NAFTA 1995

73.7 64.8 8.9 399.9 293.8 106.1 46.5 27.0 2.5 24.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

73.7 64.8 8.9 399.9 293.8 106.1 46.5 27.0 2.5 24.5

1999

-30.7 -28.9 -1.7 -169.4 12.9 -182.2 -11.2 -198.1 -174.8 -23.2

30.7 29.0 1.7 205.8 14.6 191.2 11.2 198.2 174.9 23.4

0.1 0.1 0.0 36.4 27.4 9.0 0.0 0.2 0.0 0.1

16.2 13.0 3.2 -172.3 208.8 -381.2 -1.7 -314.8 -216.0 -98.8

41.4 38.5 2.9 427.5 3.5 424.0 5.3 316.8 216.0 100.8

57.6 51.5 6.2 255.2 212.4 42.8 3.6 1.9 0.0 1.9

European Union-15 1990 1995

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

93.4 88.7 4.7 217.3 108.0 109.3 17.3 13.8 0.5 13.4

1999

93.4 88.7 4.7 217.3 108.0 109.3 17.3 13.8 0.5 13.4

Asia

1,194.2 329.9 864.2 1,468.1 693.0 775.1 314.0 217.8 69.3 148.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1,194.2 329.9 864.2 1,468.1 693.0 775.1 314.0 217.8 69.3 148.5

1999

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

Trade and Foreign Direct Investment in East 265

Malaysia

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

7,180.5 2,412.7 4,767.8 12,300.6 8,516.2 3,784.4 13,240.0 255.1 176.7 78.4

2,790.4 666.8 2,123.7 3,857.1 280.2 3,576.9 15,516.7 2,528.0 2,227.0 301.0

4,390.1 1,745.9 2,644.2 8,443.5 8,236.1 207.5 -2,276.7 -2,272.8 -2,050.3 -222.5

686.1 232.7 453.5 1,245.5 156.7 1,088.8 3,812.2 1,191.0 1,065.8 125.2

-9.7 -130.1 120.4 1,964.0 1,888.8 75.2 509.0 -1,091.5 -984.7 -106.7

World 1995

676.4 102.5 573.9 3,209.5 2,045.5 1,164.0 4,321.2 99.5 81.1 18.5

1990

13,525.4 5,508.7 8,016.8 7,621.6 5,570.1 2,051.5 -2,111.5 -935.1 -840.8 -94.3

3,630.0 1,085.6 2,544.4 2,258.9 147.6 2,111.4 19,343.6 1,213.9 1,008.4 205.5

17,155.4 6,594.2 10,561.2 9,880.5 5,717.7 4,162.8 17,232.1 278.8 167.6 111.2

1999

153.0 -11.7 164.6 694.4 455.0 239.4 77.3 13.8 8.6 5.2

228.1 26.0 202.2 339.9 43.3 296.6 637.7 5.2 2.3 3.0

381.1 14.3 366.8 1,034.3 498.2 536.1 715.0 19.0 10.9 8.1

1990

1,191.6 47.2 1,144.4 2,010.4 1,392.2 618.2 845.3 41.3 23.9 17.4

950.1 165.1 785.0 921.8 90.2 831.5 2,730.1 40.1 11.2 28.8

2,141.6 212.3 1,929.3 2,932.2 1,482.5 1,449.7 3,575.3 81.3 35.1 46.2

ASEAN-10 1995

1,758.8 321.4 1,437.4 960.2 544.9 415.2 257.4 26.3 22.8 3.5

1,452.0 326.4 1,125.5 592.2 31.3 560.9 4,582.8 35.3 1.2 34.2

3,210.7 647.8 2,562.9 1,552.4 576.2 976.2 4,840.2 61.7 24.0 37.7

1999

139.9 -34.9 174.8 560.0 447.6 112.3 457.6 11.7 9.8 1.9

252.6 50.9 201.7 496.3 69.2 427.1 820.3 5.6 0.9 4.7

392.6 16.1 376.5 1,056.3 516.9 539.4 1,277.9 17.3 10.7 6.6

1990

1,066.8 -1.6 1,068.3 2,401.7 1,911.9 489.8 725.9 20.1 10.0 10.1

991.5 258.2 733.3 1,135.5 97.9 1,037.6 4,178.6 27.3 9.2 18.0

2,058.3 256.7 1,801.6 3,537.1 2,009.8 1,527.4 4,904.6 47.3 19.2 28.1

NIE-4 1995

2,565.5 528.4 2,037.1 1,188.6 655.3 533.3 1,100.7 9.2 -1.6 10.8

1,452.8 469.2 983.6 580.0 35.3 544.6 5,713.2 41.4 26.7 14.7

4,018.3 997.6 3,020.7 1,768.6 690.7 1,078.0 6,813.9 50.6 25.1 25.5

1999

-42.2 -30.5 -11.7 -397.6 -26.6 -371.0 -356.4 -921.0 -861.7 -59.3

116.4 61.4 55.0 495.1 68.1 427.0 842.9 923.0 861.8 61.3

74.3 30.9 43.4 97.5 41.6 56.0 486.5 2.0 0.0 2.0

1990

209.1 150.2 58.9 205.8 1,072.1 -866.3 -3,271.1 -1,900.4 -1,781.7 -118.7

375.3 120.0 255.3 1,327.0 79.4 1,247.6 4,313.2 1,906.8 1,782.5 124.3

584.4 270.2 314.2 1,532.8 1,151.5 381.3 1,042.0 6.4 0.8 5.6

Japan 1995

1,298.8 592.6 706.2 804.1 1,060.6 -256.5 -2,340.1 -966.9 -891.0 -75.9

400.6 125.4 275.1 679.4 36.9 642.6 3,635.1 983.8 891.7 92.0

1,699.4 718.1 981.3 1,483.5 1,097.5 386.0 1,295.0 16.9 0.7 16.2

1999

67.1 -63.8 130.9 174.3 430.7 -256.4 -3.5 -909.9 -852.2 -57.7

420.9 112.8 308.1 1,017.6 147.1 870.5 1,838.1 932.9 864.2 68.7

488.0 49.0 439.0 1,191.9 577.7 614.2 1,834.6 22.9 12.0 11.0

1990

1,247.5 148.5 1,099.0 2,599.8 3,030.4 -430.6 -2,488.2 -1,880.2 -1,765.9 -114.3

1,822.4 392.6 1,429.9 2,781.4 250.2 2,531.2 8,968.2 1,973.3 1,802.8 170.5

3,070.0 541.1 2,528.9 5,381.2 3,280.6 2,100.6 6,480.0 93.2 36.9 56.2

East Asia 1995

4,204.9 1,123.4 3,081.6 1,950.5 1,749.3 201.3 -1,859.6 -958.0 -883.0 -75.1

2,588.6 707.5 1,881.2 1,744.7 108.0 1,636.7 11,211.8 1,062.4 919.6 142.8

6,793.6 1,830.9 4,962.7 3,695.2 1,857.2 1,838.0 9,352.3 104.4 36.6 67.8

1999

-45.5 -36.0 -9.5 1,054.1 684.8 369.2 118.7 -23.1 -15.4 -7.6

199.6 77.2 122.4 60.8 1.9 58.8 1,629.3 26.6 15.4 11.1

154.1 41.1 113.0 1,114.8 686.8 428.1 1,748.0 3.5 0.0 3.5

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

1,944.7 1,009.5 935.2 3,638.9 2,903.4 735.5 -464.0 -31.4 -27.1 -4.3

694.7 161.8 532.9 260.3 16.1 244.2 4,949.2 37.7 27.2 10.4

2,639.4 1,171.4 1,468.1 3,899.2 2,919.5 979.7 4,485.2 6.3 0.1 6.2

NAFTA 1995

4,621.8 2,065.4 2,556.5 3,330.2 2,115.2 1,214.9 -322.4 1.1 -0.5 1.6

726.4 260.5 465.9 141.0 3.4 137.6 5,397.6 8.3 0.9 7.4

5,348.2 2,325.8 3,022.4 3,471.2 2,118.6 1,352.5 5,075.2 9.5 0.5 9.0

1999

-17.2 -20.0 2.8 594.7 633.0 -38.3 391.6 -128.4 -98.9 -29.5

48.3 30.8 17.5 153.3 5.8 147.5 339.5 197.5 165.8 31.6

31.0 10.8 20.3 748.0 638.8 109.2 731.0 69.1 66.9 2.1

1,086.4 481.1 605.3 950.1 1,228.4 -278.3 609.2 -365.3 -282.8 -82.4

200.4 99.0 101.4 764.1 11.7 752.3 1,574.4 477.7 390.9 86.9

1,286.7 580.1 706.6 1,714.1 1,240.1 474.0 2,183.6 112.5 108.0 4.4

European Union-15 1990 1995

Masahiro Kawai and Shujiro Urata 3,792.9 1,707.9 2,085.0 1,287.1 947.9 339.2 99.6 -38.8 -16.3 -22.5

210.7 94.5 116.2 312.1 34.5 277.6 2,361.7 125.1 87.0 38.2

4,003.6 1,802.4 2,201.1 1,599.2 982.4 616.8 2,461.4 86.4 70.7 15.7

1999

266

Philippines

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

433.1 270.6 162.5 805.2 209.4 595.8 1,527.0 213.6 5.0 208.6

541.5 231.2 310.3 1,321.7 115.8 1,205.9 1,125.5 1,362.8 1,085.9 276.9

-108.4 39.4 -147.8 -516.4 93.7 -610.1 401.5 -1,149.2 -1,080.9 -68.4

131.9 72.0 59.9 268.2 10.1 258.2 399.1 497.7 305.6 192.1

-63.2 -10.3 -52.9 -41.3 26.1 -67.4 -29.5 -475.7 -304.5 -171.2

World 1995

68.7 61.7 7.0 226.9 36.2 190.7 369.6 22.0 1.1 20.8

1990

-7.5 -2.3 -5.1 -16.1 6.6 -22.8 -5.2 7.0 -0.5 7.5

10.7 4.4 6.4 25.4 0.3 25.0 27.3 3.8 0.5 3.4

3.3 2.0 1.2 9.2 7.0 2.3 22.1 10.8 0.0 10.8

1990

-76.3 -40.8 -35.5 -72.3 -20.3 -52.0 228.8 58.4 -12.9 71.3

114.9 63.9 51.0 119.7 27.9 91.8 90.1 26.8 13.3 13.5

38.5 23.1 15.5 47.4 7.6 39.8 318.9 85.2 0.4 84.8

ASEAN-10 1995

35.4 94.3 -58.9 -132.7 -43.2 -89.5 420.9 31.7 -49.9 81.6

331.1 106.6 224.5 174.5 50.6 123.9 451.3 74.2 50.2 24.0

366.6 201.0 165.6 41.8 7.4 34.4 872.2 105.9 0.3 105.7

1999

22.8 35.0 -12.2 -68.2 -1.0 -67.2 29.5 -26.1 -16.5 -9.6

29.5 16.3 13.2 83.2 8.0 75.2 50.6 27.2 17.4 9.8

52.2 51.3 1.0 15.0 7.0 8.0 80.1 1.1 0.8 0.2

1990

-28.1 -6.9 -21.2 -326.0 -65.0 -261.0 327.8 -151.8 -130.2 -21.6

193.8 125.8 68.0 395.3 75.8 319.5 195.8 161.5 134.2 27.3

165.7 118.9 46.8 69.3 10.8 58.5 523.6 9.7 4.0 5.8

NIE-4 1995

212.4 344.2 -131.8 -191.6 -30.2 -161.3 -137.7 -89.8 -84.7 -5.1

458.0 110.3 347.7 321.5 45.1 276.4 1,499.1 114.8 84.8 30.1

670.5 454.6 215.9 129.9 14.8 115.1 1,361.4 25.1 0.1 25.0

1999

-40.4 -15.9 -24.5 -50.9 -1.3 -49.6 -83.5 -403.0 -247.7 -155.3

42.4 17.1 25.3 65.0 1.3 63.7 113.9 410.0 247.8 162.2

2.1 1.3 0.8 14.1 0.1 14.1 30.4 7.0 0.1 6.9

1990

-100.8 -16.0 -84.8 -81.5 91.1 -172.6 -158.6 -1,016.6 -837.1 -179.5

189.3 30.9 158.4 273.4 18.2 255.2 300.6 1,038.8 837.4 201.4

88.5 14.9 73.6 191.9 109.3 82.6 142.0 22.2 0.3 21.9

Japan 1995

210.1 677.8 -467.7 -37.2 79.8 -117.0 -225.8 -369.0 -269.6 -99.4

762.9 32.7 730.2 213.9 14.7 199.2 627.1 437.6 272.4 165.2

973.0 710.5 262.5 176.7 94.6 82.2 401.3 68.6 2.8 65.8

1999

-18.6 19.2 -37.8 -119.3 -0.1 -119.2 -61.0 -424.3 -269.3 -155.0

73.9 33.6 40.3 151.3 9.4 141.8 172.5 443.1 270.3 172.8

55.3 52.7 2.5 31.9 9.3 22.6 111.5 18.8 0.9 17.9

1990

-152.5 -33.7 -118.8 -431.0 18.7 -449.7 142.0 -1,104.6 -978.4 -126.3

421.3 169.8 251.5 705.5 107.5 598.0 534.3 1,221.5 983.0 238.5

268.8 136.1 132.8 274.5 126.2 148.3 676.3 116.9 4.6 112.2

East Asia 1995

452.3 996.3 -544.0 -318.0 19.6 -337.6 -510.1 -425.7 -402.4 -23.3

1,375.2 178.4 1,196.8 638.0 93.9 544.1 2,433.2 624.8 405.5 219.3

1,827.5 1,174.7 652.9 320.0 113.5 206.5 1,923.1 199.1 3.1 196.0

1999

-25.4 -14.2 -11.2 123.5 20.8 102.7 -12.1 -29.0 -19.9 -9.0

36.1 22.3 13.8 36.7 0.5 36.2 159.9 31.0 19.9 11.0

10.7 8.1 2.6 160.3 21.3 138.9 147.8 2.0 0.0 2.0

1990

26.5 49.6 -23.0 23.8 18.7 5.1 -5.4 -40.8 -61.3 20.4

86.6 42.4 44.3 379.6 7.4 372.2 445.1 81.4 61.3 20.1

113.2 91.9 21.3 403.4 26.2 377.3 439.7 40.6 0.0 40.6

NAFTA 1995

1,047.3 901.7 145.6 147.3 11.4 135.9 -1,157.9 9.7 -44.7 54.5

119.5 32.1 87.4 120.2 5.3 114.9 1,940.8 51.0 44.7 6.2

1,166.8 933.8 233.0 267.5 16.6 250.8 782.9 60.7 0.0 60.7

1999

-14.2 -12.0 -2.2 -43.3 3.3 -46.7 43.9 -20.3 -13.7 -6.5

16.6 12.6 4.1 73.3 0.2 73.1 64.5 21.0 13.7 7.3

2.4 0.6 1.8 29.9 3.5 26.4 108.4 0.7 0.0 0.7

17.7 21.7 -4.0 -103.7 33.4 -137.1 264.6 1.3 -36.5 37.9

21.3 12.9 8.4 199.0 0.6 198.4 143.2 52.5 36.5 16.0

39.0 34.6 4.4 95.2 34.0 61.3 407.8 53.8 0.0 53.8

European Union-15 1990 1995

1999

68.3 20.7 47.6 260.4 0.4 260.0 269.0 24.9 20.0 5.0

1,135.8 1,010.3 125.5 99.6 23.4 76.2 1,279.4 152.1 0.0 152.1

1,067.5 989.7 77.9 -160.8 23.0 -183.8 1,010.4 127.2 -20.0 147.1

Asia

2,644.0 2,954.4 -310.4 -306.7 74.0 -380.7 -659.5 -277.0 -469.3 192.3

1,570.9 234.7 1,336.2 1,054.4 100.0 954.4 4,659.6 705.5 472.6 232.9

4,214.9 3,189.1 1,025.8 747.7 174.0 573.8 4,000.0 428.5 3.3 425.2

1999

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

Trade and Foreign Direct Investment in East 267

Thailand

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

5,689.4 3,345.7 2,343.6 3,019.5 1,489.2 1,530.3 2,933.4 237.7 98.5 139.2

2,979.0 808.7 2,170.3 2,395.4 416.6 1,978.8 4,993.6 4,830.3 1,808.7 3,021.6

2,710.4 2,537.1 173.3 624.1 1,072.6 -448.5 -2,060.3 -4,592.6 -1,710.2 -2,882.4

1,114.4 231.9 882.5 993.5 186.4 807.1 1,312.6 2,170.3 602.6 1,567.7

446.3 167.2 279.1 58.6 365.5 -306.9 -412.0 -2,097.7 -557.7 -1,540.0

World 1995

1,560.7 399.0 1,161.6 1,052.1 551.9 500.3 900.7 72.6 44.9 27.7

1990

5,644.1 1,749.1 3,895.0 1,740.7 1,180.4 560.3 -1,897.0 377.3 758.1 -380.7

2,567.7 429.7 2,138.1 1,256.3 161.5 1,094.8 5,928.1 1,241.5 517.1 724.4

8,211.8 2,178.7 6,033.0 2,997.1 1,341.9 1,655.2 4,031.1 1,618.9 1,275.2 343.7

1999

213.1 8.2 204.8 -3.9 -3.3 -0.7 12.0 7.2 12.0 -4.8

385.9 7.6 378.3 103.2 29.3 73.9 205.6 13.7 2.7 11.0

598.9 15.8 583.2 99.2 26.0 73.2 217.6 21.0 14.8 6.2

1990

1,285.1 1,404.7 -119.5 228.1 68.8 159.4 34.0 -14.2 19.5 -33.7

1,158.9 104.6 1,054.2 420.9 134.6 286.3 988.1 82.8 4.3 78.4

2,444.0 1,509.3 934.7 649.0 203.3 445.7 1,022.1 68.5 23.8 44.8

ASEAN-10 1995

1,596.6 25.6 1,571.0 84.8 30.3 54.5 -600.3 -6.2 11.3 -17.5

778.3 101.6 676.7 294.6 54.8 239.8 1,395.7 100.1 41.0 59.1

2,374.9 127.2 2,247.7 379.4 85.1 294.3 795.3 93.9 52.2 41.7

1999

156.6 7.3 149.2 -109.3 -30.4 -78.8 -18.1 -2.7 -0.8 -1.9

472.1 46.0 426.0 225.5 58.5 167.1 302.5 7.7 1.0 6.7

628.7 53.4 575.3 116.3 28.0 88.2 284.4 5.1 0.2 4.9

1990

1,859.9 1,372.7 487.2 190.6 126.6 64.0 68.6 -86.5 -105.3 18.8

618.6 188.6 430.0 436.0 106.2 329.8 1,220.4 129.4 116.5 12.9

2,478.4 1,561.2 917.2 626.6 232.8 393.8 1,289.0 42.9 11.2 31.7

NIE-4 1995

2,125.8 108.6 2,017.2 116.9 60.4 56.5 -148.3 11.4 13.8 -2.4

385.0 99.1 285.9 220.9 25.6 195.2 1,478.5 21.3 10.4 10.9

2,510.9 207.7 2,303.2 337.8 86.0 251.7 1,330.2 32.6 24.1 8.5

1999

-151.8 -42.1 -109.7 -368.9 -70.8 -298.2 -212.4 -1,788.5 -379.4 -1,409.1

293.4 67.2 226.2 484.2 89.6 394.5 242.0 1,790.7 379.5 1,411.1

141.6 25.1 116.5 115.2 18.9 96.4 29.5 2.2 0.2 2.0

1990

-23.9 19.5 -43.5 106.4 297.7 -191.3 -1,082.2 -3,612.0 -852.1 -2,759.9

522.6 152.5 370.1 571.4 132.9 438.5 1,567.1 3,625.5 854.4 2,771.1

498.6 172.0 326.6 677.8 430.6 247.2 484.9 13.6 2.3 11.2

Japan 1995

300.3 187.9 112.4 202.1 165.0 37.1 -1,102.6 -840.5 -356.3 -484.2

321.0 64.4 256.6 243.9 40.0 203.9 1,691.0 947.9 359.6 588.3

621.3 252.3 369.0 446.0 205.0 241.0 588.4 107.4 3.3 104.1

1999

39.1 -34.9 74.0 -520.9 -128.6 -392.2 -203.7 -1,792.2 -369.6 -1,422.6

786.4 114.1 672.3 763.6 177.4 586.2 581.0 1,816.0 384.6 1,431.4

825.5 79.3 746.2 242.7 48.8 193.9 377.3 23.8 15.0 8.8

1990

1,120.7 1,349.8 -229.1 136.8 287.1 -150.3 -1,260.7 -3,749.2 -948.2 -2,801.0

2,018.6 399.9 1,618.7 1,331.1 385.3 945.8 3,191.2 3,840.1 974.9 2,865.2

3,139.2 1,749.7 1,389.6 1,467.9 672.4 795.5 1,930.5 90.9 26.7 64.2

East Asia 1995

2,399.2 233.8 2,165.4 205.0 151.3 53.8 -1,568.9 -851.3 -350.3 -501.0

1,698.2 248.0 1,450.2 778.3 153.5 624.8 4,008.5 1,069.9 410.8 659.1

4,097.4 481.8 3,615.6 983.3 304.8 678.6 2,439.6 218.7 60.5 158.1

1999

242.9 141.3 101.6 389.7 319.8 69.9 -235.6 8.7 21.0 -12.3

266.0 65.5 200.5 88.9 2.1 86.8 618.9 29.1 7.6 21.5

508.9 206.8 302.1 478.6 321.9 156.7 383.3 37.8 28.6 9.2

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

585.7 491.1 94.7 415.3 512.3 -97.1 -817.9 -40.4 -49.0 8.6

716.7 304.6 412.1 499.5 12.7 486.8 1,460.0 68.3 49.6 18.8

1,302.4 795.7 506.7 914.8 525.0 389.8 642.1 27.9 0.6 27.3

NAFTA 1995

1,764.8 933.6 831.1 980.2 556.2 423.9 -498.2 10.4 -33.4 43.8

589.5 140.1 449.4 138.3 3.8 134.5 1,415.9 59.9 36.8 23.1

2,354.3 1,073.7 1,280.5 1,118.5 560.0 558.4 917.7 70.3 3.4 66.9

1999

164.8 66.1 98.7 161.8 147.7 14.1 33.7 -316.6 -208.6 -107.9

45.7 36.9 8.8 132.2 6.2 126.0 100.2 320.6 208.8 111.8

210.5 102.9 107.6 294.0 153.9 140.1 133.9 4.0 0.1 3.9

923.2 666.5 256.8 -55.8 157.9 -213.7 21.8 -816.1 -702.9 -113.2

189.6 70.1 119.5 488.0 12.1 476.0 304.1 887.9 753.6 134.3

1,112.8 736.5 376.3 432.2 169.9 262.3 326.0 71.8 50.7 21.1

European Union-15 1990 1995

Masahiro Kawai and Shujiro Urata 1,387.2 509.4 877.7 364.8 360.0 4.8 219.6 512.9 485.5 27.3

183.5 26.0 157.4 308.4 3.0 305.4 417.9 87.4 50.9 36.5

1,570.6 535.4 1,035.2 673.2 363.0 310.2 637.5 600.3 536.4 63.9

1999

268

Japan

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

37,452.4 21,102.9 16,349.4 28,311.3 10,098.9 18,212.5 40,847.0 72,107.7 52,451.3 19,656.3

16,273.4 10,968.2 5,305.2 9,144.1 3,330.2 5,813.9 12,260.4 11,660.1 10,205.6 1,454.5

21,178.9 10,134.7 11,044.2 19,167.2 6,768.7 12,398.5 28,586.6 60,447.6 42,245.7 18,201.9

5,332.6 3,161.4 2,171.2 2,615.9 634.4 1,981.5 3,310.4 7,155.1 6,378.1 776.9

19,481.3 12,888.3 6,593.0 26,229.8 13,050.3 13,179.5 10,037.1 54,651.0 44,139.4 10,511.5

World 1995

24,813.9 16,049.7 8,764.2 28,845.7 13,684.7 15,161.0 13,347.4 61,806.0 50,517.6 11,288.5

1990

361.3 250.6 110.7 2,147.9 974.2 1,173.7 2,255.4 4,228.4 2,490.9 1,737.5

618.1 368.1 250.1 423.2 175.8 247.4 245.3 21.7 0.8 20.9

979.5 618.7 360.8 2,571.0 1,150.0 1,421.1 2,500.7 4,250.1 2,491.7 1,758.4

1990

-2,136.1 -2,553.7 417.6 846.8 -1,100.1 1,946.8 10,883.9 8,130.0 4,348.3 3,781.8

5,045.2 3,799.3 1,245.9 3,197.7 1,983.2 1,214.5 1,635.4 82.5 3.5 79.0

2,909.1 1,245.6 1,663.5 4,044.5 883.1 3,161.4 12,519.3 8,212.5 4,351.7 3,860.8

ASEAN-10 1995

-3,000.9 -3,526.9 526.1 -964.9 -1,408.9 444.0 7,395.5 2,719.9 1,535.8 1,184.2

6,395.3 4,527.7 1,867.6 2,901.7 1,858.1 1,043.6 3,261.5 226.9 8.1 218.8

3,394.4 1,000.8 2,393.7 1,936.8 449.2 1,487.6 10,657.0 2,946.8 1,543.8 1,402.9

1999

1,729.9 1,307.8 422.1 3,540.1 1,943.6 1,596.5 4,649.6 2,228.1 1,224.7 1,003.4

781.7 391.2 390.5 1,123.4 438.8 684.6 775.4 84.5 9.0 75.5

2,511.7 1,699.0 812.7 4,663.5 2,382.4 2,281.1 5,425.0 2,312.6 1,233.7 1,078.9

1990

-674.9 -1,710.9 1,036.0 4,043.9 1,528.7 2,515.2 11,971.4 3,772.4 1,759.9 2,012.5

5,896.1 4,262.0 1,634.1 1,963.5 974.0 989.5 5,275.7 175.5 2.9 172.6

5,221.2 2,551.1 2,670.1 6,007.4 2,502.6 3,504.7 17,247.1 3,947.9 1,762.8 2,185.1

NIE-4 1995

-2,012.2 -3,045.0 1,032.8 2,014.5 783.1 1,231.4 8,271.9 2,422.8 1,326.6 1,096.2

7,280.0 5,260.7 2,019.3 1,467.8 620.6 847.2 5,004.7 227.0 7.0 220.0

5,267.8 2,215.7 3,052.1 3,482.3 1,403.6 2,078.7 13,276.6 2,649.8 1,333.6 1,316.2

1999

– – – – – – – – – –

– – – – – – – – – –

– – – – – – – – – –

1990

– – – – – – – – – –

– – – – – – – – – –

– – – – – – – – – –

Japan 1995

– – – – – – – – – –

– – – – – – – – – –

– – – – – – – – – –

1999

1,843.6 1,387.2 456.4 4,869.1 2,561.6 2,307.5 5,876.1 6,173.0 3,534.2 2,638.7

1,151.8 558.3 593.5 1,506.4 580.8 925.5 947.5 109.0 9.7 99.3

2,995.5 1,945.5 1,050.0 6,375.5 3,142.5 3,233.0 6,823.6 6,282.0 3,543.9 2,738.1

1990

-1,982.9 -3,237.0 1,254.1 3,755.9 244.2 3,511.7 18,542.9 11,887.1 6,063.3 5,823.8

8,952.8 6,127.8 2,825.0 5,939.3 3,165.0 2,774.3 6,255.0 298.6 6.9 291.7

6,969.9 2,890.8 4,079.1 9,695.2 3,409.2 6,286.0 24,797.9 12,185.6 6,070.2 6,115.5

East Asia 1995

-5,540.8 -6,406.6 865.8 -597.0 -1,776.1 1,179.2 14,248.6 5,206.6 2,825.8 2,380.8

13,576.0 9,065.2 4,510.8 6,231.2 3,333.1 2,898.0 7,764.5 556.5 15.8 540.7

8,035.2 2,658.6 5,376.6 5,634.2 1,557.0 4,077.2 22,013.1 5,763.0 2,841.5 2,921.5

1999

8,796.5 5,379.4 3,417.1 9,187.1 4,724.4 4,462.7 1,867.2 31,250.2 25,360.1 5,890.1

3,718.4 2,269.7 1,448.8 965.4 21.3 944.1 2,049.2 959.7 701.0 258.7

12,514.9 7,649.0 4,865.8 10,152.4 4,745.7 5,406.7 3,916.3 32,209.9 26,061.2 6,148.7

1990

12,685.0 6,966.4 5,718.6 7,426.1 3,465.3 3,960.8 5,519.9 28,877.2 20,377.0 8,500.2

5,185.1 3,319.8 1,865.3 2,178.0 127.3 2,050.7 5,558.0 3,811.3 3,227.7 583.6

17,870.1 10,286.2 7,583.9 9,604.1 3,592.6 6,011.5 11,077.9 32,688.5 23,604.8 9,083.7

NAFTA 1995

9,316.3 6,235.2 3,081.1 8,878.4 5,871.8 3,006.5 1,786.9 38,595.3 31,511.5 7,083.8

4,850.0 2,399.7 2,450.3 2,725.2 120.2 2,605.0 4,861.2 1,758.8 1,220.1 538.7

14,166.3 8,634.9 5,531.4 11,603.5 5,992.0 5,611.5 6,648.1 40,354.2 32,731.6 7,622.6

1999

7,661.2 5,210.3 2,450.9 8,528.3 3,618.0 4,910.3 1,900.0 6,189.1 5,430.1 759.1

336.6 226.0 110.5 128.1 28.3 99.8 309.2 6,001.9 5,639.2 362.7

9,172.8 5,459.9 3,712.8 5,147.0 2,100.5 3,046.5 4,080.4 4,620.0 2,717.7 1,902.3

1,923.0 1,352.5 570.5 985.5 32.9 952.5 433.5 7,421.0 6,913.8 507.2

11,095.8 6,812.5 4,283.3 6,132.5 2,133.4 3,999.1 4,513.9 12,041.0 9,631.5 2,409.5

1,551.5 1,231.7 319.8 1,166.9 34.5 1,132.4 753.2 5,588.9 5,074.4 514.6

9,982.5 6,187.0 3,795.5 6,156.3 3,633.9 2,522.4 3,581.3 14,241.7 12,147.8 2,094.0

European Union-15 1995 1999 7,997.8 5,436.4 2,561.4 8,656.4 3,646.2 5,010.1 2,209.3 12,191.1 11,069.3 1,121.8

1990

8,431.0 4,955.3 3,475.7 4,989.3 3,599.4 1,389.9 2,828.1 8,652.8 7,073.4 1,579.4

Asia

12,817.1 5,194.5 7,622.6 15,243.1 8,647.9 6,595.2 19,251.5 68,712.0 55,846.3 12,865.8

20,391.8 13,011.0 7,380.8 10,193.8 3,492.1 6,701.7 13,474.3 7,976.2 6,345.0 1,631.2

33,208.9 18,205.5 15,003.4 25,436.9 12,140.0 13,296.9 32,725.9 76,688.2 62,191.3 14,496.9

1999

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

Trade and Foreign Direct Investment in East 269

United States

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

36,405.4 20,699.9 15,705.5 18,972.8 1,995.9 16,976.9 24,858.3 45,723.9 22,444.6 23,279.3

63,962.7 40,008.9 23,953.8 35,007.7 16,360.4 18,647.4 40,956.5 99,714.5 78,558.5 21,156.0

-27,557.3 -19,308.9 -8,248.4 -16,034.9 -14,364.4 -1,670.5 -16,098.3 -53,990.5 -56,113.8 2,123.3

27,498.8 18,510.4 8,988.4 22,727.4 10,887.3 11,840.1 13,139.1 73,617.3 57,013.2 16,604.1

-2,773.2 -3,915.0 1,141.7 -13,613.2 -9,660.5 -3,952.7 -1,737.7 -45,176.2 -43,326.7 -1,849.5

World 1995

24,725.5 14,595.4 10,130.1 9,114.2 1,226.8 7,887.4 11,401.4 28,441.0 13,686.5 14,754.5

1990

-45,368.1 -30,899.7 -14,468.4 -27,594.9 -20,082.8 -7,512.1 341.1 -92,936.3 -94,751.5 1,815.2

86,033.0 53,564.6 32,468.4 51,941.1 22,311.3 29,629.8 38,866.2 144,757.8 117,967.2 26,790.6

40,664.9 22,664.9 18,000.0 24,346.1 2,228.4 22,117.7 39,207.3 51,821.5 23,215.7 28,605.8

1999

-4,015.6 -3,561.6 -454.0 -2,859.2 -1,856.7 -1,002.5 -128.7 142.6 89.9 52.8

5,249.1 4,129.1 1,120.0 3,263.5 1,877.3 1,386.3 3,769.5 60.7 0.0 60.7

1,233.5 567.5 666.0 404.3 20.5 383.8 3,640.8 203.3 89.9 113.4

1990

-14,666.5 -12,038.2 -2,628.3 -6,362.4 -5,131.0 -1,231.3 -2,284.4 255.9 204.0 51.9

17,592.1 13,381.4 4,210.6 7,789.0 5,183.9 2,605.0 11,068.9 99.6 0.3 99.3

2,925.5 1,343.2 1,582.4 1,426.6 52.9 1,373.7 8,784.5 355.5 204.3 151.2

ASEAN-10 1995

-22,443.9 -15,743.4 -6,700.5 -6,522.7 -4,477.8 -2,044.9 -631.3 1.0 95.9 -94.9

25,193.8 17,026.9 8,167.0 7,255.5 4,504.8 2,750.8 12,869.2 216.6 3.3 213.3

2,749.9 1,283.4 1,466.4 732.8 27.0 705.8 12,237.9 217.7 99.3 118.4

1999

-7,545.3 -6,093.5 -1,451.8 -3,869.7 -2,372.3 -1,497.5 -697.2 -530.1 -336.0 -194.1

9,832.9 7,330.8 2,502.0 5,055.6 2,481.0 2,574.6 3,988.6 1,673.7 1,228.3 445.4

2,287.6 1,237.4 1,050.2 1,185.9 108.8 1,077.1 3,291.4 1,143.6 892.3 251.3

1990

-19,321.7 -11,869.1 -7,452.5 -1,714.8 -1,632.8 -82.0 -7,077.3 -402.8 -400.1 -2.7

23,711.1 14,308.7 9,402.4 4,432.5 1,879.8 2,552.7 14,210.3 2,309.1 1,730.1 579.0

4,389.4 2,439.6 1,949.8 2,717.7 247.0 2,470.7 7,133.0 1,906.3 1,330.0 576.4

NIE-4 1995

-22,452.8 -15,100.0 -7,352.8 -3,898.8 -1,286.0 -2,612.8 -1,057.5 -3,408.5 -2,875.0 -533.6

27,312.5 17,908.6 9,403.9 6,081.9 1,391.8 4,690.1 13,692.0 4,067.1 3,097.9 969.2

4,859.7 2,808.6 2,051.1 2,183.1 105.8 2,077.3 12,634.5 658.6 223.0 435.6

1999

-7,905.3 -5,787.5 -2,117.8 -8,677.9 -4,448.0 -4,229.9 -2,732.7 -27,591.3 -22,222.4 -5,368.9

11,257.7 7,716.4 3,541.3 9,584.5 4,491.0 5,093.4 3,819.0 28,914.8 23,045.6 5,869.2

3,352.4 1,928.9 1,423.5 906.5 43.0 863.5 1,086.3 1,323.5 823.1 500.3

1990

-14,361.5 -10,186.1 -4,175.4 -6,897.4 -3,119.9 -3,777.5 -9,394.3 -27,491.7 -20,884.4 -6,607.3

18,635.2 12,717.1 5,918.1 8,897.5 3,198.5 5,699.0 11,527.8 31,342.1 23,918.1 7,424.0

4,273.7 2,531.0 1,742.7 2,000.1 78.6 1,921.6 2,133.4 3,850.4 3,033.7 816.7

Japan 1995

-12,200.6 -8,704.6 -3,496.0 -7,753.3 -5,377.2 -2,376.2 -4,215.1 -35,096.9 -29,747.1 -5,349.8

15,996.6 10,724.0 5,272.6 10,058.6 5,442.5 4,616.1 7,074.0 36,963.3 30,588.3 6,375.0

3,796.0 2,019.4 1,776.6 2,305.2 65.3 2,239.9 2,858.9 1,866.4 841.2 1,025.2

1999

-15,935.3 -12,363.6 -3,571.7 -15,415.0 -8,793.9 -6,621.1 -3,445.3 -28,030.3 -22,474.7 -5,555.7

22,030.7 15,823.1 6,207.5 17,798.8 8,958.7 8,840.1 10,429.0 30,643.6 24,274.0 6,369.6

6,095.4 3,459.6 2,635.8 2,383.9 164.8 2,219.0 6,983.8 2,613.3 1,799.3 814.0

1995

-41,385.2 -28,104.2 -13,281.1 -18,087.6 -11,881.1 -6,206.6 -18,427.4 -27,745.0 -21,010.5 -6,734.5

51,486.8 33,813.6 17,673.1 24,552.5 12,238.7 12,313.8 34,196.9 33,868.0 25,648.4 8,219.6

10,101.5 5,709.5 4,392.1 6,464.9 357.6 6,107.3 15,769.5 6,122.9 4,637.9 1,485.0

East Asia 1990

-55,153.8 -36,621.0 -18,532.8 -25,180.6 -15,125.5 -10,055.2 -6,451.1 -38,723.0 -32,529.7 -6,193.2

65,601.0 42,362.7 23,238.3 30,612.0 15,314.4 15,297.7 32,329.7 41,538.4 33,692.0 7,846.4

10,447.2 5,741.8 4,705.5 5,431.4 188.9 5,242.5 25,878.6 2,815.4 1,162.2 1,653.2

1999

1,658.3 1,732.4 -74.1 -1,019.8 -1,078.5 58.7 483.0 -9,700.7 -14,420.8 4,720.1

2,631.0 990.4 1,640.5 3,760.3 1,777.2 1,983.1 1,513.8 29,965.9 22,942.4 7,023.5

4,289.3 2,722.8 1,566.5 2,740.5 698.7 2,041.8 1,996.7 20,265.2 8,521.6 11,743.6

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

-7.4 1,596.0 -1,603.4 -4,176.8 -3,014.6 -1,162.2 2,190.0 -21,831.9 -29,770.5 7,938.6

6,478.9 2,591.2 3,887.7 8,394.6 3,875.5 4,519.1 2,743.6 50,670.5 41,619.3 9,051.1

6,471.5 4,187.2 2,284.3 4,217.9 860.9 3,356.9 4,933.6 28,838.5 11,848.8 16,989.7

NAFTA 1995

-2,279.9 -816.2 -1,463.7 -9,979.5 -5,014.8 -4,964.7 4,585.2 -36,988.0 -45,637.1 8,649.2

10,515.7 6,151.8 4,363.9 17,281.6 6,441.1 10,840.5 3,317.7 76,145.7 62,557.6 13,588.1

8,235.8 5,335.6 2,900.2 7,302.1 1,426.3 5,875.7 7,902.9 39,157.7 16,920.5 22,237.3

1999

8,593.7 4,781.5 3,812.2 1,313.9 45.3 1,268.6 939.3 -9,475.4 -8,004.0 -1,471.4

2,531.2 1,544.1 987.1 930.8 119.3 811.5 1,012.8 12,132.6 9,464.1 2,668.5

11,124.8 6,325.6 4,799.2 2,244.7 164.6 2,080.1 1,952.2 2,657.2 1,460.1 1,197.1

8,364.3 3,885.8 4,478.5 2,207.9 3.7 2,204.2 -415.4 -9,442.7 -9,469.8 27.1

5,382.9 3,284.7 2,098.2 1,425.4 152.1 1,273.3 3,710.1 14,221.0 11,246.9 2,974.1

13,747.1 7,170.5 6,576.7 3,633.3 155.8 3,477.5 3,294.7 4,778.3 1,777.2 3,001.1

1999

Masahiro Kawai and Shujiro Urata 8,468.4 4,091.2 4,377.2 2,603.1 -0.8 2,604.0 1,500.6 -19,485.5 -18,629.2 -856.3

6,444.5 3,405.5 3,039.0 2,633.1 222.2 2,410.9 2,502.9 25,345.2 21,392.1 3,953.1

14,912.9 7,496.7 7,416.2 5,236.2 221.4 5,014.8 4,003.6 5,859.7 2,762.9 3,096.8

European Union-15 1990 1995

270

European Union-15

75,676.7 51,057.7 24,619.0 52,369.4 12,322.1 40,047.3 32,352.1 213,918.4 155,329.3 58,589.1

98,594.5 65,030.2 33,564.3 51,889.3 19,115.6 32,773.6 37,991.7 175,751.8 123,597.3 52,154.5

-22,917.8 -13,972.5 -8,945.3 480.2 -6,793.5 7,273.7 -5,639.5 38,166.6 31,732.0 6,434.6

68,368.3 44,840.2 23,528.1 39,668.4 19,351.1 20,317.3 18,780.0 133,200.3 99,671.0 33,529.2

-20,484.4 -15,310.1 -5,174.3 -9,870.0 -8,452.1 -1,417.9 -4,962.9 25,347.4 16,148.7 9,198.7

World 1995

47,883.9 29,530.1 18,353.8 29,798.4 10,899.0 18,899.4 13,817.1 158,547.7 115,819.7 42,728.0

1990

Source: World Bank Trade Database

EXPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components IMPORTS Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components TRADE BALANCE Office and Data Processing Machines Finished products Parts and components Electronic Appliances Finished products Parts and components Semiconductors Automobiles Finished products Parts and components

-35,230.0 -18,285.6 -16,944.5 5,419.1 -9,066.0 14,485.2 -4,335.3 17,441.8 13,702.6 3,739.2

127,965.7 81,078.4 46,887.3 73,884.6 20,203.2 53,681.4 41,644.9 200,981.0 148,743.3 52,237.7

92,735.6 62,792.8 29,942.8 79,303.7 11,137.2 68,166.5 37,309.6 218,422.8 162,445.9 55,976.8

1999

-1,821.5 -1,497.4 -324.1 -1,783.4 -2,027.3 243.9 -834.3 1,386.5 797.0 589.5

2,244.2 1,764.6 479.6 2,531.6 2,068.1 463.6 2,013.5 97.4 76.4 20.9

422.7 267.2 155.5 748.3 40.8 707.4 1,179.3 1,483.8 873.4 610.4

1990

-8,463.9 -6,673.9 -1,790.1 -1,783.4 -2,633.1 849.6 -993.5 2,854.9 2,217.8 637.1

9,486.1 7,282.8 2,203.3 4,337.1 2,688.3 1,648.8 4,210.7 201.3 159.6 41.6

1,022.2 608.9 413.2 2,553.7 55.2 2,498.4 3,217.3 3,056.2 2,377.4 678.8

ASEAN-10 1995

-13,420.5 -9,529.9 -3,890.6 -2,562.0 -1,737.8 -824.2 -1,213.2 84.7 -122.5 207.2

14,731.1 10,088.8 4,642.3 4,239.7 1,779.0 2,460.7 5,893.0 679.2 622.3 56.9

1,310.5 558.9 751.7 1,677.8 41.2 1,636.5 4,679.8 763.9 499.8 264.1

1999

-5,883.9 -4,786.2 -1,097.7 -4,271.6 -3,265.1 -1,006.4 -791.5 1,619.2 1,142.3 477.0

6,459.7 5,129.3 1,330.4 4,876.0 3,327.9 1,548.1 1,997.5 164.8 100.8 64.0

575.8 343.0 232.7 604.4 62.8 541.6 1,205.9 1,784.0 1,243.1 540.9

1990

-12,900.3 -8,814.6 -4,085.8 -2,539.3 -1,933.1 -606.2 -1,431.1 1,754.9 928.2 826.7

14,280.9 9,600.1 4,680.9 4,691.0 2,015.3 2,675.7 4,594.7 2,042.6 1,857.8 184.7

1,380.6 785.5 595.1 2,151.7 82.2 2,069.5 3,163.6 3,797.4 2,786.0 1,011.4

NIE-4 1995

-18,795.4 -11,376.5 -7,418.9 -2,711.2 -1,522.7 -1,188.4 -1,894.5 -2,182.9 -2,479.8 296.9

20,629.5 12,263.0 8,366.5 5,681.9 1,600.1 4,081.8 6,290.4 3,677.9 3,441.6 236.3

1,834.1 886.6 947.5 2,970.7 77.4 2,893.3 4,395.9 1,495.0 961.8 533.2

1999

-8,955.9 -6,513.5 -2,442.4 -9,697.2 -4,194.2 -5,502.9 -2,568.4 -8,649.3 -7,459.6 -1,189.8

9,289.2 6,690.1 2,599.1 9,836.0 4,225.4 5,610.5 2,767.2 14,084.2 12,441.3 1,642.9

333.3 176.7 156.7 138.8 31.2 107.6 198.8 5,434.9 4,981.7 453.1

1990

-9,529.4 -6,570.6 -2,958.8 -6,007.2 -2,464.8 -3,542.4 -4,711.2 -6,693.1 -4,407.7 -2,285.4

11,324.3 7,445.4 3,878.9 6,998.6 2,490.7 4,507.9 5,070.3 13,776.9 10,736.8 3,040.1

1,794.9 874.7 920.1 991.4 25.8 965.5 359.1 7,083.8 6,329.1 754.7

Japan 1995

-9,571.9 -6,021.0 -3,550.9 -5,218.2 -3,638.7 -1,579.4 -3,664.6 -10,166.7 -8,754.4 -1,412.3

10,952.4 6,913.8 4,038.6 6,288.7 3,673.5 2,615.2 4,303.9 15,339.7 13,324.9 2,014.8

1,380.5 892.8 487.7 1,070.5 34.8 1,035.8 639.4 5,173.0 4,570.6 602.5

1999

-14,967.0 -11,413.1 -3,553.9 -15,263.1 -9,254.0 -6,009.1 -4,053.7 -5,782.7 -5,643.7 -139.0

16,081.0 12,087.9 3,993.1 16,886.3 9,366.5 7,519.8 6,063.9 14,343.8 12,617.8 1,726.0

1,114.0 674.9 439.1 1,623.2 112.5 1,510.7 2,010.2 8,561.0 6,974.1 1,587.0

1995

-27,131.1 -18,910.9 -8,220.2 -9,613.8 -7,820.7 -1,793.1 -6,924.0 -1,211.3 -1,136.7 -74.6

30,782.2 20,853.6 9,928.6 17,074.2 7,961.5 9,112.6 12,582.2 16,022.5 12,748.8 3,273.7

3,651.1 1,942.7 1,708.4 7,460.4 140.8 7,319.6 5,658.2 14,811.2 11,612.1 3,199.1

East Asia 1990

-39,922.2 -25,275.1 -14,647.1 -10,682.5 -8,283.9 -2,398.6 -6,181.1 -12,290.2 -11,403.3 -886.9

44,047.7 27,412.3 16,635.3 18,485.0 8,421.4 10,063.6 14,464.7 19,759.2 17,375.3 2,383.9

4,125.4 2,137.2 1,988.3 7,802.4 137.5 7,664.9 8,283.6 7,469.0 5,972.0 1,497.0

1999

-12,563.2 -8,435.3 -4,127.9 -732.2 -15.5 -716.7 -1,840.6 12,080.3 9,320.6 2,759.7

16,375.9 10,294.3 6,081.6 2,620.7 180.5 2,440.2 2,912.3 2,595.8 1,698.8 897.0

3,812.8 1,859.0 1,953.7 1,888.5 165.1 1,723.4 1,071.7 14,676.1 11,019.4 3,656.7

1990

TABLE 9 (continued ) East Asia’s Trade in Electronic Products and Automobiles (millions US$)

-13,110.7 -7,822.9 -5,287.8 -3,187.9 4.4 -3,192.3 -3,621.6 11,487.3 9,221.0 2,266.2

20,278.4 11,088.4 9,189.9 5,469.4 169.2 5,300.1 7,425.5 4,278.5 2,138.1 2,140.4

7,167.7 3,265.5 3,902.2 2,281.5 173.6 2,107.9 3,803.9 15,765.8 11,359.1 4,406.6

NAFTA 1995

-11,763.4 -6,672.6 -5,090.8 -4,959.9 -97.4 -4,862.5 -4,391.3 19,070.0 16,494.2 2,575.8

18,741.7 9,434.8 9,306.8 10,007.1 338.1 9,669.0 7,850.0 5,924.3 3,290.6 2,633.6

6,978.2 2,762.2 4,216.0 5,047.2 240.7 4,806.5 3,458.8 24,994.3 19,784.9 5,209.4

1999

3,267.1 1,726.5 1,540.6 989.9 143.8 846.1 61.2 3,785.1 2,143.2 1,641.9

34,238.8 21,369.8 12,869.0 18,628.3 9,264.9 9,363.4 8,581.9 112,296.8 82,568.4 29,728.4

37,505.8 23,096.3 14,409.6 19,618.2 9,408.7 10,209.5 8,643.1 116,081.8 84,711.6 31,370.3

10,331.0 8,169.2 2,161.8 3,251.5 70.1 3,181.3 2,914.3 237.4 2,926.0 -2,688.6

45,191.8 31,620.3 13,571.5 26,553.7 10,277.8 16,275.9 14,452.0 149,531.0 104,971.8 44,559.2

55,522.8 39,789.6 15,733.2 29,805.2 10,347.9 19,457.2 17,366.3 149,768.4 107,897.8 41,870.6

1999

59,131.9 40,479.4 18,652.5 38,845.9 8,607.2 30,238.7 13,937.7 161,324.8 118,405.1 42,919.7

67,246.0 48,234.7 19,011.3 47,100.0 8,824.7 38,275.3 16,874.9 154,738.1 115,213.2 39,524.9

European Union-15 1990 1995

Trade and Foreign Direct Investment in East 8,114.1 7,755.3 358.8 8,254.1 217.5 8,036.6 2,937.2 -6,586.7 -3,191.9 -3,394.8

Asia 271

272

Masahiro Kawai and Shujiro Urata

balance in parts and components was particularly large for ASEAN’s trade with Japan. By contrast to the pattern observed for semiconductors, and parts and components for electronic appliances, the trade balance in finished products tends to be in surplus. This reflects the fact that final electronic products produced or assembled with imported parts and companies are exported and the value of such exports exceed the value of imports of finished products. As discussed later, multinational companies play an important role in setting up such a production network. Intra-industry Trade The increase in intra-industry trade is often regarded as the phenomena resulting from industrialization. As a country industrializes, it acquires technologies for the production of a variety of manufactured products. Coupled with its impact on supply-side factors, industrialization enhances demand for a variety of products with an increase in income of the population. Through these supply-side and demand-side factors industrialization tends to promote intra-industry trade. With this observation in mind, the patterns of intra-industry trade for emerging East Asian economies are examined. Table 10 presents the results of the computation of the Grubel-Lloyd intra-industry trade index. The index is computed at 3-digit SITC level, and the computed values are then aggregated for the categories listed in the table by using simple average. The results for manufactured products for emerging East Asia show that the levels of intra-industry index increased over time, with the exception of Hong Kong SAR and Singapore from 1995 to 1999. This observation tends to support the argument that industrialization enhances intra-industry trade. Related to this point, it is interesting to observe that the levels of intra-industry trade roughly correspond to the levels of economic developments. Specifically, Singapore had the highest value at 0.69 in 1999. This is followed by Malaysia (0.55), Korea (0.54), Taiwan POC (0.53), China (0.46), Thailand (0.46) and Indonesia (0.37 in 1998 — not reported in the table). The Philippines and Hong Kong SAR had the lowest value at 0.29 and 0.14 respectively. One should note that intra-industry trade index is lower for the trade with developed countries than for the trade with other developing counties. This observation can be

1999 0.335 0.378 0.242 0.312 0.237 0.317 0.401 0.462 0.431 0.478 0.488 0.453 0.381 0.459 0.461 0.604 0.420 0.360 0.633 0.101 0.484 0.289

1999 0.071 0.062 0.090 0.157 0.250 0.044 0.124 0.141 0.020 0.069 0.059 0.095 0.029 0.108 0.112 0.106 0.000 0.142 0.153 0.706 0.278 0.217

World 1995 0.310 0.329 0.269 0.357 0.283 0.382 0.427 0.460 0.494 0.484 0.561 0.404 0.340 0.284 0.511 0.641 0.338 0.446 0.607 0.105 0.468 0.387

World 1995 0.094 0.099 0.084 0.095 0.158 0.058 0.058 0.190 0.048 0.083 0.169 0.134 0.030 0.162 0.219 0.213 0.000 0.041 0.195 0.734 0.333 0.188

1990 0.269 0.253 0.303 0.308 0.272 0.247 0.400 0.447 0.565 0.496 0.513 0.391 0.169 0.335 0.534 0.641 0.361 0.308 0.527 0.013 0.482 0.190

1990 0.127 0.108 0.170 0.089 0.144 0.000 0.094 0.297 0.054 0.121 0.281 0.262 0.072 0.228 0.542 0.452 0.003 0.119 0.363 0.828 0.504 0.236

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Hong Kong SAR

China

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.088 0.070 0.131 0.132 0.174 0.000 0.157 0.335 0.206 0.182 0.290 0.303 0.012 0.429 0.311 0.504 0.005 0.198 0.511 0.725 0.482 0.185

1990 0.253 0.307 0.135 0.261 0.165 0.309 0.351 0.299 0.116 0.307 0.336 0.373 0.106 0.421 0.389 0.406 0.343 0.430 0.185 0.005 0.316 0.180 ASEAN-10 1995 0.062 0.058 0.072 0.095 0.055 0.000 0.177 0.281 0.052 0.139 0.293 0.227 0.018 0.332 0.212 0.378 0.002 0.157 0.441 0.696 0.418 0.165

ASEAN-10 1995 0.292 0.254 0.374 0.255 0.214 0.303 0.269 0.354 0.134 0.404 0.320 0.480 0.373 0.617 0.510 0.514 0.138 0.356 0.297 0.043 0.280 0.422

1999 0.037 0.049 0.008 0.120 0.146 0.000 0.156 0.157 0.006 0.095 0.099 0.122 0.021 0.175 0.090 0.153 0.000 0.165 0.364 0.277 0.302 0.115

1999 0.296 0.338 0.200 0.270 0.310 0.217 0.265 0.370 0.310 0.338 0.321 0.472 0.419 0.603 0.457 0.668 0.176 0.184 0.368 0.101 0.363 0.033

1990 0.126 0.122 0.135 0.132 0.170 0.000 0.155 0.183 0.021 0.077 0.174 0.142 0.025 0.124 0.242 0.276 0.004 0.112 0.188 0.655 0.319 0.200

1990 0.203 0.207 0.194 0.232 0.166 0.216 0.329 0.471 0.338 0.432 0.515 0.541 0.502 0.438 0.613 0.711 0.759 0.434 0.490 0.026 0.512 0.085 NIE-4 1995 0.076 0.096 0.035 0.036 0.066 0.000 0.022 0.152 0.010 0.075 0.172 0.093 0.007 0.103 0.165 0.147 0.001 0.053 0.074 0.596 0.279 0.262

NIE-4 1995 0.267 0.219 0.371 0.405 0.445 0.205 0.529 0.510 0.603 0.453 0.615 0.486 0.403 0.344 0.541 0.711 0.505 0.623 0.558 0.180 0.553 0.119

1999 0.049 0.058 0.032 0.082 0.164 0.000 0.042 0.102 0.000 0.070 0.069 0.059 0.037 0.090 0.052 0.084 0.000 0.024 0.027 0.498 0.211 0.167

1999 0.243 0.184 0.371 0.331 0.305 0.274 0.411 0.483 0.489 0.443 0.524 0.509 0.543 0.459 0.438 0.692 0.807 0.330 0.552 0.233 0.476 0.227

1990 0.136 0.131 0.144 0.067 0.015 0.000 0.133 0.138 0.103 0.072 0.149 0.049 0.034 0.029 0.079 0.096 0.000 0.058 0.227 0.434 0.270 0.238

1990 0.102 0.142 0.016 0.203 0.269 0.073 0.223 0.256 0.168 0.376 0.351 0.153 0.201 0.072 0.192 0.243 0.158 0.181 0.533 0.005 0.218 0.026 Japan 1995 0.113 0.123 0.089 0.067 0.138 0.000 0.013 0.106 0.002 0.029 0.142 0.040 0.006 0.013 0.112 0.057 0.000 0.054 0.079 0.390 0.252 0.065

Japan 1995 0.214 0.238 0.162 0.269 0.186 0.143 0.467 0.373 0.235 0.403 0.498 0.291 0.325 0.087 0.511 0.627 0.091 0.315 0.374 0.127 0.491 0.085

1999 0.048 0.053 0.035 0.080 0.182 0.000 0.009 0.076 0.000 0.015 0.042 0.025 0.002 0.011 0.090 0.027 0.000 0.008 0.023 0.664 0.159 0.080

1999 0.168 0.201 0.099 0.270 0.250 0.199 0.357 0.366 0.210 0.380 0.448 0.331 0.497 0.207 0.508 0.506 0.149 0.235 0.311 0.094 0.498 0.217

1990 0.094 0.110 0.060 0.085 0.135 0.000 0.092 0.220 0.069 0.182 0.243 0.199 0.059 0.282 0.252 0.277 0.002 0.081 0.260 0.277 0.312 0.199

1990 0.228 0.233 0.219 0.269 0.269 0.173 0.345 0.473 0.287 0.501 0.568 0.495 0.486 0.411 0.602 0.697 0.330 0.492 0.502 0.019 0.493 0.059

TABLE 10 Intra-industry Trade for East Asian Economies

East Asia 1995 0.132 0.116 0.168 0.125 0.199 0.058 0.095 0.160 0.062 0.136 0.187 0.139 0.035 0.223 0.143 0.167 0.000 0.058 0.151 0.251 0.211 0.185

East Asia 1995 0.275 0.250 0.331 0.377 0.326 0.356 0.456 0.516 0.598 0.500 0.589 0.496 0.613 0.298 0.616 0.748 0.421 0.568 0.556 0.158 0.556 0.180

1999 0.088 0.091 0.082 0.134 0.183 0.045 0.136 0.109 0.024 0.127 0.058 0.089 0.027 0.129 0.063 0.090 0.000 0.125 0.112 0.325 0.153 0.201

1999 0.250 0.242 0.267 0.355 0.292 0.407 0.392 0.467 0.425 0.445 0.510 0.448 0.529 0.372 0.512 0.634 0.340 0.383 0.567 0.163 0.555 0.202

1990 0.175 0.211 0.094 0.039 0.000 0.000 0.098 0.270 0.011 0.021 0.402 0.308 0.145 0.207 0.587 0.521 0.077 0.280 0.383 0.061 0.456 0.317

1990 0.181 0.217 0.100 0.186 0.148 0.209 0.211 0.301 0.233 0.334 0.393 0.278 0.194 0.316 0.286 0.349 0.262 0.178 0.350 0.001 0.299 0.624 NAFTA 1995 0.093 0.126 0.009 0.011 0.001 0.000 0.026 0.171 0.010 0.006 0.193 0.153 0.045 0.074 0.294 0.392 0.001 0.130 0.263 0.132 0.413 0.152

NAFTA 1995 0.224 0.233 0.203 0.229 0.180 0.187 0.322 0.339 0.437 0.392 0.407 0.319 0.271 0.337 0.401 0.448 0.153 0.187 0.405 0.015 0.278 0.331

1999 0.073 0.101 0.003 0.022 0.007 0.001 0.047 0.146 0.007 0.009 0.097 0.124 0.038 0.111 0.178 0.226 0.004 0.132 0.249 0.115 0.439 0.088

1999 0.283 0.273 0.304 0.294 0.291 0.235 0.343 0.354 0.313 0.397 0.364 0.392 0.263 0.533 0.375 0.391 0.247 0.242 0.457 0.007 0.298 0.386

European Union-15 1990 1995 1999 0.102 0.061 0.071 0.096 0.077 0.092 0.117 0.024 0.018 0.031 0.027 0.015 0.009 0.001 0.008 0.000 0.000 0.000 0.063 0.069 0.031 0.224 0.157 0.103 0.000 0.000 0.000 0.016 0.006 0.001 0.273 0.099 0.051 0.199 0.139 0.094 0.137 0.005 0.054 0.060 0.027 0.028 0.438 0.472 0.342 0.552 0.314 0.118 0.000 0.000 0.000 0.058 0.024 0.010 0.307 0.134 0.068 0.343 0.439 0.335 0.482 0.423 0.287 0.145 0.092 0.170

European Union-15 1990 1995 1999 0.187 0.198 0.280 0.199 0.224 0.306 0.159 0.140 0.224 0.214 0.279 0.292 0.271 0.379 0.341 0.179 0.257 0.223 0.164 0.183 0.283 0.278 0.307 0.349 0.286 0.365 0.330 0.449 0.467 0.490 0.375 0.418 0.449 0.149 0.158 0.247 0.033 0.128 0.224 0.136 0.106 0.223 0.123 0.218 0.278 0.265 0.411 0.484 0.144 0.024 0.091 0.201 0.076 0.158 0.324 0.433 0.512 0.005 0.013 0.023 0.300 0.323 0.318 0.318 0.299 0.315

Trade and Foreign Direct Investment in East Asia 273

1999 0.309 0.370 0.175 0.302 0.283 0.217 0.379 0.539 0.548 0.538 0.541 0.563 0.592 0.665 0.563 0.710 0.235 0.336 0.475 0.271 0.601 0.363

1999 0.594 0.569 0.650 0.500 0.462 0.411 0.602 0.692 0.444 0.753 0.635 0.703 0.505 0.750 0.848 0.852 0.391 0.610 0.681 0.841 0.718 0.685

World 1995 0.254 0.295 0.164 0.265 0.230 0.263 0.305 0.503 0.645 0.475 0.540 0.443 0.437 0.410 0.545 0.562 0.299 0.376 0.499 0.363 0.616 0.455

World 1995 0.660 0.638 0.708 0.522 0.500 0.450 0.596 0.705 0.549 0.779 0.667 0.687 0.590 0.705 0.778 0.864 0.517 0.536 0.729 0.806 0.717 0.620

1990 0.248 0.255 0.232 0.217 0.171 0.221 0.264 0.443 0.507 0.386 0.542 0.426 0.483 0.254 0.569 0.600 0.422 0.475 0.516 0.040 0.501 0.285

1990 0.613 0.634 0.569 0.442 0.370 0.375 0.592 0.641 0.408 0.721 0.610 0.649 0.448 0.669 0.766 0.754 0.357 0.646 0.600 0.627 0.679 0.643

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Singapore

Korea, rep. Of

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.496 0.527 0.429 0.305 0.319 0.056 0.471 0.506 0.491 0.351 0.613 0.490 0.476 0.369 0.590 0.737 0.210 0.586 0.581 0.263 0.647 0.188

1990 0.141 0.170 0.080 0.178 0.144 0.048 0.314 0.300 0.063 0.311 0.330 0.227 0.257 0.254 0.249 0.307 0.005 0.174 0.140 0.424 0.522 0.214 ASEAN-10 1995 0.467 0.552 0.270 0.367 0.450 0.114 0.443 0.459 0.387 0.299 0.634 0.412 0.415 0.279 0.652 0.672 0.149 0.362 0.439 0.393 0.594 0.384

ASEAN-10 1995 0.203 0.232 0.134 0.237 0.238 0.273 0.208 0.339 0.066 0.351 0.275 0.299 0.440 0.273 0.539 0.272 0.012 0.154 0.237 0.658 0.527 0.228

1999 0.470 0.508 0.384 0.420 0.434 0.305 0.490 0.521 0.783 0.334 0.591 0.512 0.621 0.360 0.688 0.719 0.497 0.395 0.647 0.317 0.593 0.268

1999 0.255 0.291 0.182 0.291 0.302 0.167 0.372 0.395 0.113 0.419 0.357 0.356 0.282 0.352 0.475 0.568 0.011 0.284 0.282 0.630 0.578 0.085

1990 0.327 0.309 0.367 0.357 0.401 0.047 0.541 0.531 0.415 0.515 0.572 0.621 0.632 0.705 0.733 0.479 0.621 0.382 0.351 0.192 0.542 0.468

1990 0.099 0.108 0.081 0.181 0.130 0.045 0.341 0.375 0.189 0.302 0.382 0.406 0.363 0.476 0.348 0.448 0.144 0.456 0.184 0.567 0.474 0.123 NIE-4 1995 0.286 0.293 0.273 0.288 0.278 0.045 0.453 0.516 0.558 0.423 0.593 0.596 0.487 0.682 0.597 0.589 0.551 0.492 0.294 0.192 0.545 0.483

NIE-4 1995 0.222 0.235 0.194 0.258 0.179 0.191 0.389 0.457 0.308 0.417 0.460 0.457 0.647 0.584 0.480 0.467 0.049 0.191 0.328 0.483 0.602 0.169

1999 0.343 0.382 0.238 0.317 0.265 0.133 0.497 0.507 0.509 0.328 0.609 0.613 0.416 0.668 0.755 0.756 0.456 0.406 0.276 0.155 0.578 0.509

1999 0.255 0.310 0.142 0.295 0.360 0.106 0.324 0.464 0.174 0.492 0.371 0.495 0.544 0.597 0.520 0.660 0.031 0.296 0.330 0.544 0.621 0.132

1990 0.223 0.266 0.115 0.211 0.147 0.108 0.348 0.292 0.159 0.329 0.285 0.227 0.271 0.164 0.331 0.236 0.011 0.317 0.255 0.550 0.377 0.522

1990 0.202 0.189 0.228 0.350 0.320 0.393 0.361 0.367 0.704 0.229 0.494 0.290 0.259 0.098 0.501 0.522 0.315 0.295 0.624 0.029 0.413 0.051 Japan 1995 0.246 0.307 0.118 0.260 0.303 0.309 0.182 0.309 0.073 0.366 0.270 0.264 0.330 0.120 0.546 0.392 0.010 0.261 0.227 0.480 0.452 0.394

Japan 1995 0.245 0.220 0.297 0.367 0.333 0.342 0.425 0.377 0.547 0.313 0.500 0.300 0.345 0.141 0.523 0.405 0.220 0.335 0.575 0.069 0.423 0.045

1999 0.217 0.254 0.133 0.221 0.145 0.193 0.311 0.341 0.039 0.421 0.247 0.330 0.426 0.183 0.550 0.494 0.047 0.377 0.269 0.480 0.478 0.278

1999 0.244 0.210 0.309 0.337 0.291 0.208 0.490 0.424 0.484 0.351 0.530 0.380 0.220 0.355 0.577 0.404 0.410 0.278 0.642 0.081 0.472 0.559

1990 0.545 0.578 0.472 0.468 0.420 0.228 0.714 0.654 0.549 0.733 0.660 0.697 0.585 0.826 0.581 0.653 0.548 0.719 0.598 0.222 0.670 0.659

1990 0.257 0.244 0.285 0.348 0.303 0.290 0.449 0.461 0.632 0.425 0.589 0.414 0.447 0.263 0.636 0.575 0.178 0.488 0.556 0.043 0.482 0.241

TABLE 10 (continued ) Intra-industry Trade for East Asian Economies

East Asia 1995 0.582 0.622 0.494 0.461 0.476 0.202 0.635 0.715 0.742 0.672 0.742 0.767 0.581 0.836 0.760 0.881 0.749 0.648 0.759 0.364 0.708 0.530

East Asia 1995 0.293 0.322 0.229 0.430 0.341 0.331 0.615 0.555 0.696 0.579 0.586 0.492 0.494 0.482 0.601 0.634 0.201 0.422 0.583 0.512 0.571 0.270

1999 0.531 0.542 0.507 0.463 0.382 0.359 0.642 0.641 0.585 0.574 0.613 0.723 0.674 0.799 0.721 0.893 0.352 0.638 0.679 0.294 0.703 0.614

1999 0.348 0.388 0.264 0.371 0.384 0.193 0.488 0.593 0.605 0.612 0.578 0.600 0.529 0.683 0.748 0.662 0.231 0.425 0.526 0.532 0.622 0.247

1990 0.189 0.194 0.177 0.108 0.119 0.151 0.066 0.332 0.140 0.184 0.393 0.340 0.237 0.370 0.353 0.489 0.135 0.281 0.388 0.267 0.487 0.472

1990 0.164 0.190 0.107 0.094 0.089 0.061 0.125 0.344 0.317 0.178 0.483 0.400 0.681 0.287 0.413 0.619 0.433 0.208 0.349 0.005 0.368 0.059 NAFTA 1995 0.162 0.184 0.109 0.141 0.250 0.111 0.048 0.307 0.043 0.204 0.309 0.313 0.173 0.247 0.453 0.562 0.083 0.327 0.220 0.345 0.541 0.416

NAFTA 1995 0.192 0.215 0.139 0.099 0.088 0.066 0.135 0.362 0.536 0.176 0.402 0.386 0.292 0.403 0.553 0.433 0.281 0.220 0.384 0.049 0.509 0.033

1999 0.173 0.191 0.127 0.190 0.162 0.168 0.232 0.330 0.053 0.241 0.327 0.366 0.274 0.340 0.481 0.620 0.161 0.244 0.347 0.273 0.480 0.309

1999 0.209 0.223 0.179 0.151 0.108 0.165 0.190 0.420 0.282 0.350 0.489 0.513 0.595 0.550 0.369 0.646 0.626 0.333 0.319 0.025 0.445 0.029

European Union-15 1990 1995 1999 0.180 0.134 0.175 0.143 0.111 0.147 0.254 0.178 0.238 0.098 0.080 0.156 0.037 0.037 0.147 0.171 0.175 0.100 0.120 0.063 0.204 0.287 0.368 0.393 0.455 0.322 0.408 0.187 0.247 0.333 0.297 0.376 0.477 0.215 0.296 0.378 0.119 0.222 0.369 0.095 0.191 0.359 0.257 0.379 0.270 0.493 0.451 0.747 0.262 0.416 0.400 0.253 0.288 0.197 0.452 0.531 0.375 0.116 0.592 0.351 0.466 0.531 0.406 0.101 0.347 0.164

274 European Union-15 1990 1995 1999 0.208 0.201 0.226 0.229 0.222 0.268 0.158 0.149 0.127 0.151 0.126 0.127 0.184 0.221 0.206 0.169 0.026 0.115 0.101 0.087 0.047 0.306 0.290 0.338 0.044 0.145 0.076 0.161 0.194 0.229 0.264 0.279 0.353 0.296 0.243 0.319 0.320 0.133 0.214 0.207 0.150 0.263 0.282 0.332 0.415 0.644 0.604 0.653 0.032 0.039 0.086 0.317 0.238 0.249 0.342 0.175 0.238 0.399 0.604 0.468 0.602 0.518 0.591 0.466 0.628 0.372

Masahiro Kawai and Shujiro Urata

1999 0.335 0.348 0.307 0.247 0.196 0.267 0.294 0.527 0.505 0.525 0.566 0.544 0.463 0.592 0.721 0.611 0.316 0.332 0.357 0.461 0.544 0.462

1999 na na na na na na na na na na na na na na na na na na na na na na

World 1995 0.317 0.324 0.301 0.255 0.305 0.268 0.190 0.510 0.455 0.472 0.594 0.527 0.554 0.633 0.538 0.587 0.300 0.296 0.397 0.431 0.513 0.180

World 1995 0.313 0.342 0.248 0.278 0.299 0.372 0.182 0.307 0.215 0.310 0.453 0.222 0.072 0.070 0.438 0.452 0.083 0.328 0.434 0.038 0.375 0.193

1990 0.284 0.266 0.322 0.188 0.111 0.130 0.313 0.441 0.437 0.400 0.538 0.494 0.406 0.641 0.464 0.585 0.262 0.276 0.353 0.143 0.398 0.256

1990 0.258 0.283 0.203 0.266 0.183 0.360 0.285 0.241 0.254 0.232 0.338 0.078 0.031 0.020 0.190 0.149 0.017 0.096 0.444 0.081 0.444 0.072

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Indonesia

Taiwan

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.214 0.223 0.192 0.192 0.162 0.156 0.270 0.320 0.454 0.346 0.348 0.226 0.048 0.128 0.266 0.313 0.270 0.467 0.297 0.132 0.477 0.032

1990 0.256 0.289 0.192 0.281 0.161 0.121 0.551 0.320 0.139 0.427 0.397 0.218 0.131 0.133 0.465 0.311 0.045 0.208 0.209 0.474 0.382 0.455 ASEAN-10 1995 0.273 0.284 0.249 0.306 0.224 0.315 0.381 0.418 0.521 0.414 0.525 0.407 0.362 0.409 0.305 0.745 0.157 0.404 0.245 0.245 0.408 0.061

ASEAN-10 1995 0.215 0.230 0.182 0.355 0.369 0.111 0.521 0.404 0.241 0.505 0.461 0.295 0.176 0.239 0.521 0.443 0.117 0.210 0.332 0.350 0.559 0.256

1999 na na na na na na na na na na na na na na na na na na na na na na

1999 0.242 0.282 0.159 0.416 0.523 0.263 0.409 0.475 0.281 0.671 0.453 0.416 0.383 0.379 0.566 0.529 0.305 0.284 0.378 0.287 0.568 0.357

1990 0.220 0.254 0.146 0.183 0.214 0.106 0.209 0.273 0.330 0.296 0.305 0.121 0.039 0.059 0.189 0.182 0.074 0.238 0.410 0.162 0.486 0.194

1990 0.275 0.320 0.181 0.275 0.190 0.242 0.391 0.414 0.497 0.423 0.455 0.389 0.271 0.249 0.624 0.514 0.390 0.419 0.241 0.547 0.403 0.161 NIE-4 1995 0.217 0.218 0.214 0.220 0.209 0.119 0.322 0.355 0.294 0.333 0.432 0.301 0.285 0.171 0.390 0.670 0.089 0.312 0.467 0.262 0.406 0.046

NIE-4 1995 0.290 0.324 0.224 0.374 0.336 0.300 0.468 0.357 0.434 0.415 0.318 0.316 0.088 0.278 0.548 0.451 0.324 0.158 0.130 0.406 0.479 0.528

1999 na na na na na na na na na na na na na na na na na na na na na na

1999 0.266 0.324 0.145 0.350 0.305 0.446 0.346 0.397 0.425 0.462 0.347 0.392 0.285 0.327 0.643 0.377 0.401 0.327 0.164 0.340 0.503 0.314

1990 0.230 0.206 0.282 0.177 0.243 0.287 0.030 0.167 0.198 0.173 0.277 0.043 0.020 0.017 0.109 0.107 0.002 0.006 0.449 0.024 0.211 0.000

1990 0.247 0.217 0.310 0.347 0.277 0.133 0.594 0.365 0.345 0.255 0.469 0.300 0.376 0.186 0.503 0.453 0.054 0.281 0.551 0.307 0.452 0.246 Japan 1995 0.188 0.183 0.198 0.213 0.320 0.177 0.105 0.233 0.189 0.181 0.336 0.162 0.033 0.028 0.380 0.370 0.009 0.229 0.527 0.016 0.281 0.233

Japan 1995 0.237 0.204 0.304 0.278 0.291 0.104 0.369 0.369 0.281 0.233 0.421 0.311 0.395 0.198 0.541 0.492 0.052 0.229 0.559 0.645 0.451 0.259

1999 na na na na na na na na na na na na na na na na na na na na na na

1999 0.244 0.240 0.254 0.225 0.269 0.108 0.243 0.397 0.313 0.280 0.432 0.328 0.249 0.226 0.728 0.460 0.064 0.178 0.758 0.606 0.448 0.243

1990 0.247 0.272 0.193 0.258 0.250 0.261 0.263 0.258 0.285 0.261 0.346 0.100 0.026 0.029 0.226 0.137 0.020 0.198 0.486 0.201 0.396 0.134

1990 0.329 0.321 0.346 0.330 0.262 0.118 0.574 0.548 0.483 0.574 0.644 0.564 0.451 0.651 0.840 0.635 0.100 0.298 0.362 0.504 0.484 0.286

TABLE 10 (continued ) Intra-industry Trade for East Asian Economies

East Asia 1995 0.319 0.323 0.309 0.300 0.339 0.310 0.242 0.350 0.274 0.342 0.486 0.275 0.135 0.113 0.504 0.507 0.146 0.372 0.458 0.143 0.408 0.123

East Asia 1995 0.400 0.427 0.342 0.396 0.501 0.217 0.398 0.570 0.571 0.647 0.637 0.554 0.556 0.637 0.621 0.702 0.291 0.270 0.339 0.545 0.535 0.234

1999 na na na na na na na na na na na na na na na na na na na na na na

1999 0.429 0.466 0.353 0.351 0.347 0.191 0.478 0.595 0.585 0.661 0.673 0.571 0.504 0.627 0.698 0.722 0.196 0.404 0.376 0.393 0.639 0.333

1990 0.159 0.179 0.113 0.067 0.033 0.076 0.099 0.173 0.136 0.113 0.235 0.098 0.131 0.019 0.150 0.277 0.119 0.018 0.386 0.010 0.307 0.002

1990 0.259 0.233 0.322 0.089 0.033 0.000 0.210 0.282 0.254 0.205 0.336 0.332 0.184 0.444 0.252 0.414 0.041 0.376 0.355 0.008 0.267 0.114 NAFTA 1995 0.131 0.129 0.137 0.089 0.123 0.091 0.054 0.230 0.187 0.126 0.321 0.221 0.009 0.121 0.359 0.566 0.187 0.158 0.348 0.004 0.303 0.256

NAFTA 1995 0.211 0.207 0.222 0.042 0.014 0.024 0.082 0.304 0.330 0.186 0.371 0.355 0.290 0.478 0.274 0.373 0.095 0.342 0.328 0.029 0.325 0.074

1999 na na na na na na na na na na na na na na na na na na na na na na

1999 0.234 0.229 0.247 0.117 0.042 0.017 0.287 0.295 0.152 0.219 0.387 0.350 0.184 0.511 0.261 0.396 0.128 0.277 0.314 0.027 0.290 0.251

European Union-15 1990 1995 1999 0.147 0.189 na 0.142 0.187 na 0.158 0.194 na 0.040 0.093 na 0.004 0.046 na 0.132 0.348 na 0.005 0.004 na 0.142 0.177 na 0.028 0.052 na 0.125 0.131 na 0.161 0.272 na 0.038 0.124 na 0.022 0.041 na 0.007 0.006 na 0.068 0.399 na 0.019 0.205 na 0.004 0.009 na 0.135 0.139 na 0.352 0.256 na 0.025 0.033 na 0.356 0.292 na 0.094 0.231 na

European Union-15 1990 1995 1999 0.249 0.164 0.194 0.200 0.140 0.150 0.345 0.214 0.299 0.110 0.093 0.213 0.020 0.044 0.048 0.024 0.008 0.204 0.264 0.201 0.403 0.319 0.370 0.371 0.247 0.250 0.355 0.256 0.213 0.191 0.438 0.450 0.392 0.296 0.321 0.383 0.291 0.210 0.107 0.331 0.323 0.387 0.177 0.313 0.425 0.540 0.572 0.636 0.144 0.199 0.318 0.224 0.252 0.335 0.342 0.573 0.581 0.301 0.547 0.446 0.321 0.462 0.425 0.087 0.180 0.353

Trade and Foreign Direct Investment in East Asia 275

1999 0.400 0.417 0.364 0.301 0.316 0.229 0.331 0.554 0.429 0.507 0.620 0.532 0.553 0.495 0.351 0.806 0.500 0.604 0.631 0.189 0.708 0.396

1999 0.220 0.234 0.186 0.223 0.208 0.240 0.227 0.289 0.145 0.191 0.319 0.318 0.144 0.128 0.644 0.536 0.187 0.402 0.357 0.208 0.361 0.329

World 1995 0.393 0.395 0.391 0.329 0.356 0.311 0.308 0.469 0.404 0.376 0.608 0.386 0.306 0.277 0.464 0.650 0.164 0.521 0.631 0.216 0.623 0.277

World 1995 0.229 0.246 0.187 0.253 0.237 0.235 0.282 0.266 0.328 0.215 0.289 0.229 0.014 0.055 0.626 0.501 0.225 0.071 0.396 0.188 0.326 0.304

1990 0.365 0.377 0.338 0.257 0.387 0.192 0.142 0.413 0.257 0.289 0.556 0.388 0.559 0.213 0.540 0.635 0.122 0.439 0.457 0.175 0.561 0.370

1990 0.220 0.205 0.258 0.265 0.332 0.286 0.166 0.244 0.183 0.262 0.293 0.202 0.004 0.041 0.494 0.551 0.057 0.157 0.257 0.172 0.293 0.336

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Philippines

Malaysia

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.190 0.226 0.084 0.115 0.159 0.039 0.129 0.257 0.049 0.303 0.375 0.203 0.002 0.199 0.417 0.315 0.118 0.008 0.301 0.340 0.221 0.188

1990 0.355 0.350 0.366 0.336 0.389 0.296 0.297 0.571 0.565 0.525 0.505 0.598 0.459 0.694 0.505 0.729 0.536 0.489 0.602 0.542 0.647 0.430 ASEAN-10 1995 0.243 0.248 0.231 0.136 0.062 0.123 0.219 0.263 0.135 0.233 0.243 0.198 0.011 0.130 0.439 0.468 0.106 0.007 0.385 0.452 0.396 0.121

ASEAN-10 1995 0.353 0.365 0.326 0.421 0.398 0.409 0.454 0.594 0.472 0.634 0.494 0.610 0.565 0.729 0.463 0.793 0.427 0.469 0.700 0.520 0.664 0.309

1999 0.242 0.281 0.136 0.204 0.139 0.221 0.263 0.295 0.151 0.163 0.238 0.315 0.133 0.285 0.495 0.419 0.099 0.349 0.421 0.652 0.360 0.081

1999 0.382 0.392 0.361 0.434 0.409 0.321 0.537 0.612 0.667 0.692 0.539 0.556 0.533 0.629 0.435 0.780 0.316 0.477 0.712 0.571 0.675 0.544

1990 0.228 0.279 0.093 0.179 0.284 0.160 0.063 0.218 0.114 0.305 0.277 0.106 0.001 0.045 0.261 0.236 0.057 0.044 0.118 0.280 0.347 0.322

1990 0.298 0.264 0.372 0.320 0.402 0.338 0.217 0.501 0.406 0.406 0.519 0.555 0.491 0.455 0.529 0.779 0.507 0.721 0.355 0.462 0.587 0.369 NIE-4 1995 0.250 0.297 0.136 0.206 0.223 0.162 0.219 0.232 0.210 0.169 0.221 0.160 0.004 0.067 0.425 0.295 0.136 0.067 0.283 0.461 0.386 0.190

NIE-4 1995 0.261 0.236 0.318 0.323 0.272 0.304 0.398 0.559 0.481 0.482 0.557 0.579 0.585 0.499 0.510 0.770 0.675 0.628 0.560 0.530 0.649 0.300

1999 0.296 0.371 0.123 0.267 0.346 0.196 0.224 0.253 0.087 0.166 0.281 0.244 0.100 0.130 0.566 0.273 0.229 0.221 0.308 0.453 0.313 0.184

1999 0.306 0.276 0.375 0.378 0.301 0.450 0.423 0.554 0.509 0.499 0.515 0.584 0.472 0.635 0.433 0.841 0.587 0.481 0.525 0.510 0.647 0.307

1990 0.124 0.148 0.071 0.098 0.137 0.115 0.039 0.139 0.020 0.140 0.217 0.105 0.016 0.007 0.167 0.355 0.021 0.165 0.227 0.051 0.157 0.406

1990 0.213 0.234 0.165 0.093 0.183 0.016 0.029 0.250 0.096 0.144 0.324 0.214 0.192 0.055 0.593 0.296 0.016 0.202 0.253 0.311 0.398 0.192 Japan 1995 0.131 0.090 0.229 0.185 0.153 0.116 0.274 0.176 0.139 0.143 0.219 0.165 0.039 0.056 0.442 0.366 0.051 0.066 0.236 0.030 0.221 0.211

Japan 1995 0.192 0.255 0.069 0.178 0.236 0.194 0.087 0.270 0.078 0.211 0.412 0.217 0.098 0.127 0.455 0.364 0.022 0.219 0.207 0.058 0.455 0.378

1999 0.176 0.140 0.253 0.208 0.268 0.135 0.186 0.232 0.050 0.121 0.337 0.248 0.208 0.149 0.494 0.409 0.158 0.117 0.184 0.127 0.322 0.237

1999 0.208 0.277 0.069 0.196 0.294 0.127 0.133 0.313 0.019 0.296 0.469 0.249 0.241 0.122 0.367 0.510 0.075 0.296 0.357 0.060 0.459 0.261

1990 0.247 0.255 0.226 0.178 0.267 0.184 0.062 0.236 0.222 0.333 0.267 0.146 0.012 0.045 0.299 0.406 0.056 0.118 0.239 0.364 0.238 0.264

1990 0.356 0.354 0.359 0.319 0.467 0.220 0.205 0.461 0.301 0.345 0.570 0.446 0.541 0.294 0.642 0.639 0.096 0.549 0.366 0.565 0.561 0.407

TABLE 10 (continued ) Intra-industry Trade for East Asian Economies

East Asia 1995 0.282 0.307 0.223 0.291 0.284 0.297 0.294 0.288 0.236 0.255 0.241 0.240 0.021 0.082 0.671 0.493 0.172 0.061 0.339 0.650 0.368 0.190

East Asia 1995 0.399 0.387 0.428 0.340 0.418 0.251 0.304 0.513 0.393 0.470 0.583 0.437 0.473 0.356 0.576 0.615 0.159 0.441 0.538 0.555 0.661 0.537

1999 0.277 0.291 0.241 0.282 0.344 0.284 0.203 0.292 0.108 0.180 0.235 0.301 0.171 0.179 0.597 0.485 0.246 0.196 0.293 0.796 0.376 0.233

1999 0.435 0.443 0.418 0.392 0.451 0.205 0.444 0.608 0.401 0.578 0.617 0.597 0.702 0.576 0.499 0.759 0.450 0.634 0.602 0.628 0.731 0.398

1990 0.137 0.134 0.147 0.042 0.058 0.000 0.045 0.195 0.098 0.157 0.233 0.174 0.000 0.054 0.357 0.346 0.077 0.292 0.439 0.025 0.234 0.244

1990 0.128 0.157 0.059 0.093 0.077 0.081 0.119 0.252 0.094 0.091 0.370 0.284 0.144 0.209 0.325 0.644 0.154 0.277 0.301 0.019 0.345 0.340 NAFTA 1995 0.157 0.163 0.140 0.057 0.046 0.000 0.103 0.199 0.113 0.112 0.257 0.201 0.005 0.046 0.639 0.379 0.166 0.037 0.333 0.032 0.256 0.312

NAFTA 1995 0.161 0.181 0.110 0.200 0.151 0.306 0.192 0.302 0.278 0.170 0.426 0.308 0.349 0.180 0.296 0.547 0.190 0.471 0.349 0.021 0.375 0.267

1999 0.172 0.186 0.133 0.184 0.342 0.048 0.112 0.216 0.134 0.129 0.312 0.192 0.043 0.073 0.428 0.318 0.047 0.288 0.411 0.024 0.263 0.279

1999 0.175 0.205 0.097 0.208 0.139 0.203 0.272 0.368 0.556 0.262 0.474 0.354 0.397 0.357 0.220 0.500 0.538 0.218 0.257 0.011 0.486 0.358

European Union-15 1990 1995 1999 0.162 0.226 0.187 0.153 0.235 0.208 0.182 0.206 0.136 0.077 0.181 0.172 0.073 0.088 0.206 0.018 0.363 0.144 0.121 0.164 0.155 0.232 0.261 0.365 0.057 0.093 0.281 0.118 0.173 0.201 0.267 0.319 0.405 0.241 0.234 0.412 0.356 0.077 0.359 0.040 0.094 0.211 0.440 0.340 0.360 0.410 0.637 0.815 0.200 0.158 0.635 0.274 0.245 0.514 0.259 0.363 0.443 0.039 0.060 0.060 0.427 0.440 0.508 0.237 0.277 0.522

276 European Union-15 1990 1995 1999 0.084 0.133 0.156 0.085 0.159 0.139 0.081 0.073 0.200 0.047 0.064 0.146 0.062 0.100 0.183 0.000 0.000 0.000 0.048 0.065 0.191 0.140 0.199 0.172 0.036 0.059 0.067 0.048 0.091 0.099 0.185 0.220 0.191 0.110 0.145 0.163 0.000 0.000 0.000 0.006 0.017 0.024 0.337 0.359 0.305 0.263 0.382 0.488 0.045 0.115 0.016 0.070 0.109 0.252 0.351 0.350 0.322 0.092 0.130 0.121 0.221 0.426 0.247 0.134 0.376 0.077

Masahiro Kawai and Shujiro Urata

1999 0.372 0.377 0.363 0.278 0.275 0.335 0.245 0.457 0.474 0.444 0.526 0.453 0.446 0.442 0.464 0.655 0.304 0.372 0.631 0.071 0.440 0.475

1999 0.142 0.143 0.140 0.302 0.189 0.238 0.471 0.486 0.382 0.633 0.533 0.452 0.507 0.410 0.612 0.652 0.118 0.330 0.508 0.087 0.491 0.500

World 1995 0.356 0.352 0.365 0.225 0.303 0.060 0.268 0.394 0.256 0.338 0.540 0.354 0.217 0.205 0.537 0.643 0.178 0.453 0.605 0.054 0.439 0.433

World 1995 0.124 0.128 0.115 0.251 0.222 0.213 0.310 0.464 0.416 0.624 0.495 0.406 0.448 0.349 0.512 0.580 0.149 0.380 0.521 0.080 0.480 0.311

1990 0.239 0.217 0.288 0.216 0.264 0.136 0.216 0.326 0.193 0.193 0.496 0.270 0.049 0.156 0.676 0.442 0.087 0.169 0.603 0.055 0.417 0.316

1990 0.139 0.158 0.099 0.199 0.160 0.128 0.294 0.445 0.412 0.662 0.470 0.326 0.294 0.421 0.240 0.431 0.115 0.247 0.543 0.153 0.480 0.300

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Japan

Thailand

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.181 0.224 0.090 0.212 0.211 0.038 0.346 0.257 0.139 0.316 0.267 0.173 0.091 0.073 0.450 0.352 0.006 0.070 0.418 0.127 0.375 0.359

1990 0.202 0.207 0.191 0.088 0.091 0.043 0.119 0.458 0.329 0.388 0.483 0.565 0.516 0.629 0.718 0.702 0.435 0.183 0.401 0.102 0.467 0.383 ASEAN-10 1995 0.177 0.188 0.155 0.192 0.136 0.096 0.334 0.292 0.232 0.314 0.317 0.250 0.149 0.096 0.575 0.436 0.011 0.283 0.340 0.042 0.411 0.320

ASEAN-10 1995 0.275 0.276 0.274 0.258 0.261 0.057 0.404 0.466 0.489 0.364 0.490 0.586 0.604 0.653 0.547 0.802 0.523 0.272 0.374 0.029 0.477 0.562

1999 0.240 0.286 0.142 0.224 0.214 0.091 0.336 0.358 0.200 0.434 0.463 0.312 0.207 0.209 0.553 0.520 0.093 0.289 0.288 0.034 0.435 0.204

1999 0.306 0.317 0.279 0.343 0.322 0.304 0.399 0.484 0.509 0.502 0.560 0.475 0.194 0.550 0.642 0.650 0.436 0.137 0.350 0.194 0.535 0.270

1990 0.311 0.322 0.286 0.382 0.325 0.351 0.464 0.349 0.583 0.303 0.474 0.234 0.248 0.119 0.412 0.391 0.041 0.261 0.472 0.109 0.433 0.750

1990 0.176 0.166 0.198 0.212 0.254 0.081 0.252 0.404 0.222 0.429 0.426 0.378 0.419 0.238 0.726 0.460 0.279 0.245 0.398 0.238 0.528 0.255 NIE-4 1995 0.326 0.358 0.256 0.472 0.442 0.395 0.558 0.369 0.490 0.317 0.468 0.278 0.204 0.114 0.580 0.396 0.039 0.416 0.526 0.156 0.463 0.612

NIE-4 1995 0.211 0.154 0.338 0.303 0.417 0.049 0.333 0.452 0.489 0.433 0.456 0.452 0.285 0.387 0.578 0.678 0.269 0.496 0.511 0.142 0.534 0.170

1999 0.342 0.403 0.205 0.313 0.385 0.187 0.319 0.413 0.432 0.355 0.523 0.341 0.248 0.220 0.636 0.428 0.078 0.434 0.506 0.307 0.486 0.503

1999 0.198 0.173 0.258 0.228 0.299 0.181 0.185 0.471 0.536 0.550 0.428 0.455 0.205 0.391 0.651 0.729 0.388 0.340 0.456 0.366 0.482 0.188

1990 – – – – – – – – – – – – – – – – – – – – – –

1990 0.168 0.143 0.220 0.215 0.450 0.005 0.080 0.186 0.158 0.104 0.192 0.174 0.032 0.114 0.418 0.381 0.001 0.032 0.368 0.030 0.286 0.187 Japan 1995 – – – – – – – – – – – – – – – – – – – – – –

Japan 1995 0.155 0.171 0.121 0.178 0.223 0.062 0.194 0.239 0.127 0.181 0.203 0.241 0.112 0.138 0.616 0.443 0.009 0.078 0.320 0.043 0.423 0.451

1999 – – – – – – – – – – – – – – – – – – – – – –

1999 0.163 0.186 0.120 0.275 0.214 0.359 0.291 0.318 0.220 0.238 0.330 0.372 0.358 0.267 0.643 0.599 0.123 0.241 0.348 0.055 0.394 0.196

1990 0.221 0.240 0.181 0.300 0.245 0.182 0.441 0.351 0.477 0.435 0.422 0.226 0.192 0.097 0.443 0.404 0.021 0.269 0.518 0.073 0.407 0.562

1990 0.220 0.194 0.275 0.197 0.325 0.038 0.170 0.332 0.184 0.301 0.444 0.266 0.085 0.196 0.598 0.439 0.067 0.120 0.391 0.200 0.450 0.219

TABLE 10 (continued ) Intra-industry Trade for East Asian Economies

East Asia 1995 0.211 0.231 0.168 0.376 0.342 0.373 0.421 0.386 0.418 0.461 0.464 0.305 0.181 0.109 0.699 0.496 0.024 0.405 0.460 0.052 0.443 0.599

East Asia 1995 0.317 0.303 0.348 0.272 0.436 0.048 0.238 0.413 0.268 0.386 0.546 0.364 0.212 0.279 0.631 0.571 0.064 0.351 0.496 0.121 0.503 0.437

1999 0.235 0.266 0.167 0.342 0.277 0.198 0.532 0.422 0.438 0.492 0.504 0.370 0.298 0.235 0.660 0.539 0.093 0.419 0.416 0.042 0.471 0.413

1999 0.349 0.336 0.377 0.379 0.488 0.293 0.293 0.505 0.378 0.493 0.530 0.536 0.474 0.493 0.704 0.669 0.373 0.452 0.518 0.320 0.526 0.211

1990 0.169 0.147 0.223 0.149 0.090 0.023 0.304 0.439 0.241 0.576 0.471 0.336 0.298 0.411 0.262 0.469 0.148 0.257 0.544 0.399 0.503 0.302

1990 0.197 0.224 0.126 0.098 0.061 0.000 0.200 0.223 0.140 0.106 0.381 0.201 0.033 0.109 0.464 0.401 0.152 0.068 0.322 0.012 0.276 0.264 NAFTA 1995 0.118 0.120 0.114 0.179 0.076 0.059 0.373 0.450 0.253 0.588 0.407 0.446 0.615 0.427 0.315 0.641 0.325 0.419 0.463 0.259 0.480 0.185

NAFTA 1995 0.204 0.221 0.163 0.050 0.106 0.010 0.024 0.285 0.307 0.163 0.361 0.273 0.130 0.197 0.482 0.495 0.232 0.118 0.543 0.019 0.329 0.454

1999 0.160 0.159 0.164 0.229 0.106 0.166 0.407 0.444 0.164 0.630 0.433 0.408 0.417 0.427 0.363 0.598 0.114 0.414 0.487 0.341 0.439 0.282

1999 0.255 0.250 0.267 0.234 0.333 0.125 0.207 0.318 0.370 0.174 0.424 0.362 0.297 0.435 0.268 0.423 0.321 0.312 0.417 0.011 0.307 0.149

European Union-15 1990 1995 1999 0.163 0.162 0.132 0.121 0.130 0.120 0.258 0.232 0.159 0.303 0.281 0.302 0.196 0.140 0.190 0.321 0.271 0.303 0.411 0.443 0.415 0.471 0.434 0.425 0.438 0.443 0.446 0.600 0.552 0.563 0.456 0.397 0.412 0.485 0.426 0.397 0.707 0.619 0.472 0.667 0.594 0.515 0.072 0.168 0.204 0.443 0.426 0.490 0.587 0.464 0.426 0.341 0.138 0.168 0.531 0.472 0.481 0.148 0.124 0.179 0.399 0.438 0.388 0.172 0.191 0.168

European Union-15 1990 1995 1999 0.187 0.233 0.262 0.201 0.216 0.237 0.157 0.272 0.318 0.127 0.121 0.169 0.212 0.230 0.268 0.006 0.006 0.173 0.119 0.075 0.068 0.231 0.270 0.337 0.082 0.114 0.403 0.056 0.083 0.256 0.437 0.421 0.452 0.201 0.270 0.333 0.026 0.269 0.338 0.097 0.093 0.296 0.422 0.401 0.318 0.441 0.614 0.586 0.017 0.210 0.194 0.211 0.263 0.289 0.348 0.360 0.416 0.019 0.069 0.050 0.327 0.396 0.339 0.293 0.304 0.250

Trade and Foreign Direct Investment in East Asia 277

1999 0.517 0.513 0.527 0.507 0.632 0.381 0.453 0.654 0.509 0.751 0.630 0.720 0.760 0.836 0.518 0.736 0.599 0.709 0.740 0.293 0.567 0.565

1999 0.759 0.802 0.663 0.659 0.607 0.610 0.762 0.854 0.836 0.873 0.892 0.826 0.783 0.782 0.811 0.929 0.932 0.823 0.827 0.785 0.883 0.785

World 1995 0.471 0.492 0.423 0.492 0.614 0.306 0.488 0.665 0.535 0.750 0.657 0.722 0.694 0.809 0.528 0.801 0.695 0.714 0.757 0.317 0.576 0.646

World 1995 0.754 0.776 0.707 0.643 0.612 0.613 0.706 0.857 0.819 0.905 0.887 0.807 0.781 0.750 0.847 0.908 0.893 0.767 0.866 0.804 0.900 0.744

1990 0.455 0.454 0.456 0.495 0.505 0.440 0.526 0.660 0.533 0.734 0.629 0.744 0.800 0.833 0.590 0.842 0.683 0.611 0.712 0.214 0.607 0.668

1990 0.748 0.777 0.683 0.712 0.665 0.652 0.817 0.880 0.825 0.916 0.919 0.838 0.789 0.831 0.783 0.940 0.909 0.824 0.924 0.810 0.901 0.804

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

Source: World Bank Trade Database

European Union-15

United States

1. Agricultural products 1-1 Food 1-2 Raw materials 2. Mining products 2-1 Ores and other minerals 2-2 Fuels 2-3 Non-ferrous metals 3. Manufactures 3-1 Iron and steel 3-2 Chemicals 3-3 Other semi-manufactures 3-4 Machinery and transport equipment (1) Power generating machinery (2) Other non-electrical machinery (3) Office machines and telecommunications equipment (4) Electrical machinery and apparatus (5) Automotive products (6) Other transport equipment 3-5 Textiles 3-6 Clothing 3-7 Other consumer goods 4. Others

1990 0.269 0.261 0.288 0.110 0.053 0.186 0.130 0.299 0.062 0.194 0.342 0.242 0.202 0.099 0.356 0.609 0.074 0.250 0.337 0.113 0.629 0.406

1990 0.228 0.234 0.215 0.213 0.199 0.254 0.200 0.337 0.405 0.219 0.413 0.287 0.228 0.235 0.336 0.537 0.175 0.237 0.665 0.035 0.426 0.220 ASEAN-10 1995 0.294 0.250 0.390 0.178 0.147 0.346 0.119 0.316 0.105 0.245 0.354 0.250 0.253 0.097 0.347 0.704 0.157 0.132 0.355 0.140 0.616 0.412

ASEAN-10 1995 0.220 0.231 0.193 0.159 0.063 0.258 0.199 0.354 0.447 0.273 0.427 0.312 0.234 0.223 0.325 0.576 0.200 0.408 0.548 0.025 0.441 0.378

1999 0.290 0.246 0.394 0.128 0.151 0.123 0.106 0.394 0.345 0.328 0.471 0.359 0.391 0.261 0.356 0.723 0.348 0.244 0.446 0.066 0.559 0.358

1999 0.272 0.296 0.219 0.206 0.170 0.174 0.269 0.360 0.345 0.354 0.430 0.313 0.396 0.302 0.259 0.497 0.210 0.234 0.595 0.014 0.404 0.397

1990 0.308 0.271 0.388 0.248 0.230 0.312 0.224 0.359 0.358 0.214 0.399 0.288 0.265 0.244 0.262 0.593 0.104 0.279 0.578 0.219 0.584 0.535

1990 0.272 0.272 0.273 0.162 0.074 0.118 0.288 0.374 0.473 0.273 0.418 0.441 0.287 0.564 0.349 0.490 0.386 0.352 0.412 0.016 0.363 0.319 NIE-4 1995 0.364 0.345 0.408 0.178 0.227 0.164 0.133 0.412 0.267 0.259 0.463 0.338 0.255 0.241 0.353 0.624 0.407 0.312 0.580 0.446 0.666 0.472

NIE-4 1995 0.248 0.262 0.217 0.214 0.128 0.264 0.267 0.384 0.620 0.232 0.412 0.437 0.237 0.488 0.432 0.603 0.462 0.290 0.353 0.050 0.449 0.402

1999 0.322 0.315 0.337 0.261 0.173 0.224 0.383 0.454 0.556 0.304 0.486 0.441 0.391 0.424 0.376 0.695 0.483 0.334 0.573 0.259 0.595 0.714

1999 0.256 0.242 0.287 0.253 0.131 0.278 0.372 0.428 0.395 0.332 0.473 0.510 0.447 0.687 0.376 0.589 0.403 0.264 0.404 0.024 0.466 0.520

1990 0.222 0.172 0.332 0.374 0.378 0.383 0.365 0.465 0.393 0.629 0.439 0.447 0.602 0.662 0.055 0.445 0.505 0.232 0.588 0.237 0.391 0.614

1990 0.218 0.210 0.236 0.195 0.060 0.062 0.420 0.444 0.336 0.611 0.430 0.330 0.355 0.418 0.240 0.339 0.134 0.315 0.569 0.376 0.517 0.258 Japan 1995 0.186 0.172 0.216 0.296 0.236 0.225 0.408 0.443 0.525 0.599 0.372 0.428 0.555 0.631 0.152 0.389 0.356 0.234 0.460 0.184 0.429 0.457

Japan 1995 0.176 0.163 0.204 0.244 0.101 0.093 0.504 0.435 0.319 0.597 0.368 0.360 0.427 0.399 0.233 0.498 0.163 0.363 0.481 0.310 0.550 0.221

1999 0.184 0.163 0.232 0.325 0.244 0.298 0.430 0.450 0.512 0.613 0.388 0.424 0.566 0.545 0.175 0.413 0.490 0.281 0.481 0.266 0.413 0.286

1999 0.199 0.184 0.234 0.320 0.126 0.273 0.567 0.451 0.236 0.619 0.432 0.387 0.497 0.415 0.286 0.519 0.174 0.365 0.496 0.401 0.490 0.191

1990 0.313 0.269 0.409 0.299 0.317 0.359 0.236 0.506 0.577 0.501 0.489 0.487 0.338 0.623 0.167 0.721 0.592 0.374 0.656 0.336 0.541 0.562

1990 0.287 0.274 0.315 0.256 0.184 0.173 0.399 0.435 0.374 0.461 0.427 0.505 0.432 0.771 0.305 0.461 0.167 0.392 0.490 0.062 0.392 0.408

TABLE 10 (continued ) Intra-industry Trade for East Asian Economies

East Asia 1995 0.307 0.254 0.425 0.252 0.222 0.258 0.285 0.522 0.450 0.530 0.494 0.499 0.512 0.511 0.288 0.733 0.691 0.378 0.687 0.393 0.594 0.512

East Asia 1995 0.273 0.268 0.285 0.305 0.335 0.209 0.334 0.467 0.538 0.542 0.430 0.498 0.377 0.689 0.300 0.498 0.264 0.511 0.502 0.129 0.427 0.448

1999 0.328 0.306 0.378 0.264 0.241 0.123 0.399 0.530 0.555 0.579 0.527 0.540 0.615 0.684 0.286 0.642 0.470 0.377 0.565 0.231 0.528 0.563

1999 0.292 0.294 0.289 0.376 0.289 0.442 0.428 0.435 0.271 0.641 0.411 0.462 0.431 0.685 0.273 0.442 0.216 0.326 0.363 0.055 0.384 0.515

1990 0.347 0.312 0.425 0.403 0.243 0.435 0.577 0.645 0.300 0.773 0.579 0.682 0.747 0.680 0.668 0.810 0.423 0.693 0.703 0.470 0.663 0.476

1990 0.503 0.531 0.441 0.496 0.566 0.509 0.401 0.629 0.747 0.508 0.679 0.644 0.768 0.519 0.704 0.744 0.659 0.684 0.534 0.745 0.635 0.564 NAFTA 1995 0.335 0.305 0.400 0.381 0.314 0.261 0.542 0.678 0.408 0.795 0.614 0.709 0.805 0.659 0.731 0.829 0.481 0.762 0.687 0.577 0.686 0.540

NAFTA 1995 0.544 0.559 0.511 0.438 0.539 0.383 0.370 0.676 0.768 0.582 0.684 0.709 0.768 0.674 0.703 0.826 0.579 0.732 0.685 0.646 0.681 0.513

1999 0.385 0.337 0.492 0.418 0.313 0.277 0.656 0.652 0.384 0.736 0.619 0.692 0.704 0.653 0.699 0.877 0.462 0.748 0.597 0.421 0.711 0.581

1999 0.534 0.562 0.473 0.510 0.609 0.427 0.466 0.666 0.754 0.558 0.668 0.717 0.842 0.667 0.689 0.796 0.552 0.812 0.648 0.594 0.683 0.539

European Union-15 1990 1995 1999 0.969 0.950 0.923 0.967 0.964 0.940 0.971 0.919 0.885 0.887 0.854 0.856 0.825 0.839 0.874 0.947 0.875 0.840 0.918 0.856 0.846 0.970 0.932 0.913 0.975 0.902 0.903 0.931 0.935 0.904 0.982 0.952 0.938 0.975 0.931 0.912 0.952 0.905 0.864 0.988 0.953 0.926 0.972 0.928 0.919 0.986 0.930 0.918 0.982 0.950 0.949 0.950 0.889 0.873 0.989 0.940 0.932 0.975 0.901 0.868 0.980 0.926 0.905 0.844 0.723 0.836

European Union-15 1990 1995 1999 0.385 0.352 0.384 0.361 0.357 0.325 0.437 0.342 0.515 0.377 0.369 0.433 0.275 0.304 0.337 0.316 0.143 0.221 0.543 0.592 0.692 0.620 0.630 0.620 0.276 0.298 0.256 0.743 0.746 0.738 0.546 0.540 0.557 0.675 0.701 0.704 0.748 0.844 0.705 0.675 0.641 0.664 0.647 0.701 0.746 0.846 0.830 0.842 0.504 0.596 0.545 0.590 0.684 0.725 0.698 0.673 0.560 0.417 0.451 0.286 0.613 0.622 0.652 0.498 0.549 0.598

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explained by the fact that the countries with similar levels of economic development tend to have similar tastes and similar technological levels, leading to greater intra-industry trade. Among different commodity categories, electric machinery and apparatus tends to register relatively high intra-industry trade for the ASEAN-5, probably reflecting high degrees of differentiation among these products. By contrast, clothing exhibits very low intra-industry trade for all the countries except for Singapore. This observation may be explained by the fact that many ASEAN countries except Singapore have a distinctive comparative advantage in the production of clothing.

Changing Patterns of Foreign Direct Investment in East Asia The levels as well as the growth rates of FDI inflows differ substantially among East Asian economies. The most spectacular is the level and the growth rate of FDI inflows to China. In the early 1980s, FDI inflows to China were marginally small, because of restrictive policies toward FDI inflows. FDI inflows to China increased throughout the 1980s, due to the open door policy adopted during the period. However, the increase during the 1980s was gradual, while the increase in the 1990s has been much more rapid. In 1992 FDI inflows more than doubled from 1991 and the rapid increase continued through 1997. The investment attractiveness of China improved as a result of active measures to promote FDI, such as the introduction of special economic zones, where foreign firms were given preferential treatment including tax and tariff exemptions. In addition, a potentially huge market with a population over 1.1 billion has been a crucial factor in making China very attractive for FDI. FDI inflows to China started to decline in 1997, and the decline continued through 1999. At least two factors have contributed to this decline. One was the decline in the growth rate of the Chinese economy. The Chinese economy was growing in excess of 10 per cent in the first half of the 1990s, but this rate declined to below 10 per cent in 1996 and then continued downward through the latter half of the 1990s. Second, inconsistency or frequent shifts in FDI-related policies in terms of preference or restriction, reduced

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the attractiveness of China as an investment destination. Despite this, China is still by far the largest FDI recipient in East Asia and among the developing economies. China remains one of the most sought after FDI host economies in light of its accession to the WTO and high growth potential.3 Indeed, the results of a questionnaire survey conducted by the Japan Bank for International Cooperation in 1999 found that China was the top FDI destination for 299 responding Japanese firms.4 The FDI inflows to the NIEs continued to rise from the mid1980s through the 1990s with substantial year-to-year fluctuations. It is interesting to note that FDI continued to increase from 1995 to 1999 without a decline during the crisis period. The patterns of FDI inflows to the NIEs as a total described above, however, masked considerable variations among these economies. Hong Kong SAR and Korea had a continuous increase in their FDI inflows with a remarkable increase in 1999. A large increase in FDI inflows to Hong Kong was partly due to the recovery of investor confidence in Hong Kong, which was affected by its return to China in 1997 and the severe recession during the crisis period. In Korea the recent liberalization of FDI policies and public sector reforms, which were pursued to deal with the economic difficulties caused by the crisis, led to M&A-driven increases in FDI after the crisis. FDI inflows to Korea reached a record high level in 1999, where the rapid increase in M&As was remarkable. Indeed, as much as 87.6 per cent of FDI to Korea in 1999 was undertaken in the form of M&As, compared to 14 per cent in 1995 (Table 11). FDI inflows to Taiwan regained the growth momentum in 1999 after experiencing a substantial drop in 1998. Similarly for the case of Korea, active M&As contributed significantly to the growth of FDI to Taiwan. While Hong Kong SAR, Korea, and Taiwan showed substantial increases in FDI inflows after the crisis, Singapore, which was the largest FDI recipient in East Asia in the early 1990s, has not yet regained its highest level of FDI inflows, as recorded in the pre-crisis period. Some of the other ASEAN member countries (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) had successfully attracted FDI until the financial crisis in 1997–98. FDI inflows to these ASEAN countries increased by 200 per cent from US$2 billion in 1980 to US$6

(a) M&As (millions of US dollars)

1987 74,509 1,704 256 0 181 0 21 0 29 0 25 0 0

1988 73.0 9.7 10.3 0.0 39.1 0.0 7.2 4.0 17.4 2.8 4.8 0.0 0.0

(c) Share of M&A in Total FDI inflows (%) 1987 56.0 6.8 2.3 0.0 5.5 0.0 0.7 0.0 7.5 0.0 8.1 0.0 --

Source: United Nations, World Investment Report 2000

1989 70.0 17.7 14.1 0.0 76.8 9.0 3.9 0.6 22.0 42.0 28.6 0.0 0.0

1989 100.0 3.6 1.4 0.0 0.6 0.0 0.1 0.0 0.1 0.5 0.1 0.0 0.0

1989 140,389 5,057 2,029 0 826 68 114 9 150 701 161 0 0

1990 73.9 47.6 20.5 0.2 151.6 0.0 20.5 0.8 0.0 3.7 2.8 2.9 0.0

1990 100.0 10.7 2.6 0.0 1.7 0.0 0.8 0.0 0.0 0.1 0.0 0.0 0.0

1990 150,576 16,052 3,953 8 2,620 0 1,143 11 0 86 15 70 0

1991 50.8 14.0 9.9 2.9 105.6 57.0 4.8 0.0 10.1 3.2 11.6 3.9 0.0

1991 100.0 7.2 2.5 0.2 0.7 0.8 0.3 0.0 0.2 0.2 0.1 0.1 0.0

1991 80,713 5,838 2,022 125 568 673 237 0 149 128 63 79 0

1992 45.1 15.9 12.6 2.0 81.6 0.0 12.5 0.3 13.1 0.9 177.2 23.6 0.0

1992 100.0 10.2 4.2 0.3 2.1 0.0 0.3 0.0 0.3 0.1 0.5 0.6 0.0

1992 79,280 8,119 3,355 221 1,674 0 276 3 233 46 404 498 0

1993 37.9 16.2 15.3 2.0 281.4 0.3 7.7 1.7 8.4 10.3 11.0 2.3 0.0

1993 100.0 15.4 8.6 0.7 6.4 0.0 0.4 0.0 0.2 0.6 0.2 0.1 0.0

1993 83,064 12,782 7,114 561 5,308 2 362 16 169 518 136 42 0

1994 49.7 14.2 6.6 2.1 20.5 0.1 4.2 1.2 9.8 9.7 52.0 6.6 0.1

1994 100.0 11.7 3.3 0.6 1.3 0.0 0.3 0.0 0.2 0.3 0.7 0.1 0.0

1994 127,110 14,928 4,257 715 1,602 1 355 16 206 443 828 89 2

1995 56.2 14.3 8.6 1.1 27.4 14.1 17.2 2.7 18.6 1.7 82.8 8.1 0.0

1995 100.0 8.6 3.1 0.2 0.9 0.1 0.7 0.0 0.4 0.1 0.6 0.1 0.0

1995 186,593 15,966 5,855 403 1,703 192 1,238 42 809 98 1,208 161 1

1996 60.1 23.9 10.0 4.7 31.2 24.4 6.6 2.7 8.6 10.5 30.4 9.7 0.2

1996 100.0 15.3 3.7 0.8 1.4 0.2 0.3 0.0 0.2 0.3 0.2 0.1 0.0

1996 227,023 34,700 8,380 1,906 3,267 564 593 50 530 768 462 234 6

1997 64.4 36.1 18.7 4.2 64.5 27.1 3.6 26.7 7.1 5.4 332.8 17.0 2.3

1997 100.0 21.2 5.4 0.6 2.4 0.3 0.1 0.2 0.1 0.1 1.4 0.2 0.0

1997 304,848 64,573 16,453 1,856 7,330 836 294 601 332 351 4,157 633 63

1998 78.2 45.0 15.8 1.8 6.3 76.2 8.5 10.8 -191.9 40.6 108.7 43.1 0.0

1998 100.0 15.2 2.5 0.2 0.2 0.7 0.1 0.0 0.1 0.2 0.4 0.6 0.0

1998 531,648 80,755 13,094 798 938 3,973 468 24 683 1,096 1,905 3,209 0

1999 83.2 31.1 26.2 5.3 13.7 87.6 29.5 70.7 -34.0 31.2 222.1 29.8 3.2

1999 100.0 9.0 3.4 0.3 0.4 1.3 0.3 0.3 0.2 0.2 0.2 0.3 0.0

1999 720,109 64,550 24,208 2,155 3,152 9,057 2,060 2,070 1,112 1,101 1,637 1,812 52

Asia

World Developing countries Emerging East Asia China Hong Kong SAR Korea Singapore Taiwan Indonesia Malaysia Philippines Thailand Vietnam

World Developing countries Emerging East Asia China Hong Kong SAR Korea Singapore Taiwan Indonesia Malaysia Philippines Thailand Vietnam

1988 100.0 2.5 1.3 0.0 0.9 0.0 0.2 0.0 0.1 0.0 0.0 0.0 0.0

1988 115,623 2,875 1,511 0 1,046 0 262 38 100 20 45 0 0

1987 100.0 2.3 0.3 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

(b) Regional Composition of M&As (%)

World Developing countries Emerging East Asia China Hong Kong SAR Korea Singapore Taiwan Indonesia Malaysia Philippines Thailand Vietnam

TABLE 11 Cross-Border Mergers and Acquisitions (M&As) in East Asia

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billion in 1994 before recording a significant drop to a mere US$0.6 billion in 1999. In particular, in the early 1990s ASEAN countries had been receiving more FDI than the NIEs or China. Although FDI inflows to ASEAN countries continued to increase through the mid-1990s, they experienced a setback in 1997. The declining trend of FDI inflows to ASEAN have not yet reversed. As a result, ASEAN’s share of world FDI in world FDI inflows declined from a peak of 5.5 per cent in 1992 to a mere 1.0 per cent in 1999, in great contrast with China’s (see Figure 3). FDI inflows to individual ASEAN countries bear closer examination. FDI inflows to Malaysia began to increase sharply in the early 1990s, while FDI inflows to Indonesia registered a remarkable increase in the mid-1990s. After experiencing a setback in 1998, FDI inflows to Malaysia continued to decline in 1999. Even more strikingly, FDI inflows to Indonesia continued to decline sharply after the crisis. Indeed, withdrawals were greater than gross FDI inflows in 1998 and 1999, resulting in divestment. This serious situation in Indonesia was due to an unfavourable FDI environment, which resulted from economic and political turmoil. FDI inflows to Thailand steadily increased until 1998, when a sharp increase was recorded. This sharp increase was mainly a response to the financial crisis. As a result of a steep depreciation of the Thai baht and asset price declines, foreign investors found Thai assets cheap to purchase and extremely attractive. Foreign firms with joint ventures in Thailand also injected equity money or swapped debt for equity to keep the venture operations going. In addition, further liberalization of FDI policy to overcome the investment slump contributed to the rapid FDI expansion. FDI inflows to the Philippines also registered a steady increase through 1998 albeit at a relatively low growth rate. Vietnam experienced a remarkable increase in its FDI inflows in the 1990s, as FDI inflows increased from a low level of US$2 million in 1988 to US$0.8 billion 1996, before declining in subsequent years. The favourable performance of ASEAN countries in attracting FDI in the 1990s was attributable to various factors including liberalization in FDI and international trade regimes, and rapid economic growth. Realizing that the Asian NIEs achieved high economic growth by pursuing outward-oriented policies, including liberalization in FDI

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

ASEAN-10 China

Asia

Source: Authors

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FIGURE 3 FDI Inflows to China and ASEAN-10 (mllions US$)

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and foreign trade regimes, ASEAN countries shifted their FDI and foreign trade regimes from inward-oriented to outward-oriented ones. The newly adopted outward-oriented policies attracted export-oriented FDI. Specifically, a large number of foreign firms in electronics, apparel, and footwear industries invested in ASEAN countries to use these countries as an export base for their products by taking advantage of low-wage but well-disciplined workers. Rapid economic growth attracted investment aimed also at producing for the host countries’ domestic markets. Foreign investors in various nontradeable services such as retail and communications fall under this category of FDI. One notable characteristic of FDI to East Asia before the crisis was a large share of greenfield FDI. After the crisis, however, M&As have increased significantly, though the share of M&As in total FDI inflows in East Asia was still low at 26.2 per cent in 1999, compared to 83.2 per cent for world FDI inflows. The rise in M&As in East Asia after the crisis was attributable to the liberalization of FDI policies, which were adopted to attract FDI with an expectation on the part of crisis-affected East Asian governments that this would contribute to economic recovery. Furthermore, the drastic decline in asset prices, especially in dollar terms, as a result of the currency and financial crisis, increased their attractiveness to foreign investors and thereby contributed to the rapid expansion of M&As. Rapid expansion of FDI inflows to East Asia from the mid-1980s to the mid-1990s was accompanied by an increase in intra-regional FDI. As has already been shown in Table 5, the share of FDI inflows originating from East Asia in FDI inflows to East Asia increased from 42 per cent in 1980 to 54 per cent in 1994. However, the economic crisis reversed the trend of increasing intra-regional interdependence in FDI in East Asia. Table 12 shows the changes in the sources of FDI inflows to Thailand before and after the crisis.5 For 1995 and 1996, the pre-crisis period, more than 80 per cent of FDI inflows to Thailand originated in East Asia, while approximately 20 per cent came from the United States and the European Union combined. These shares changed dramatically in the post-crisis period, as the share of FDI inflows from East Asia declined significantly to 35 per cent, while the corresponding share of FDI inflows from

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Asia

the US and the EU increased sharply to 58 per cent in 1998 and 1999. The dramatic shift of FDI sources for East Asia from within the region, mainly from Japan and the NIEs, to the US and the EU was attributable mainly to the differences in economic performance of the two groups of countries in the post-crisis period. On the one hand, the US economy was booming, registering the longest economic expansion in its history, and the European economy was also growing strongly. US and EU multinationals had strong financial positions and, therefore, they could actively undertake FDI. On the

TABLE 12 Sources of FDI Inflows to Thailand (%) 1995

1996

1997

1998

1999

Total World United States European Union-15 Japan Other East Asia

100.0 15.8 3.8 48.1 34.3

100.0 19.8 13.2 44.0 42.1

100.0 29.4 15.5 48.8 28.5

100.0 7.3 51.0 21.2 13.5

100.0 34.1 23.6 19.9 16.5

Food & Textiles World United States European Union-15 Japan Other East Asia

100.0 12.6 2.6 3.6 62.1

100.0 17.4 10.3 20.2 44.7

100.0 11.4 11.4 3.4 61.8

100.0 6.8 35.8 10.9 39.6

100.0 0.6 18.6 18.5 38.3

Woods, Pulp and Chemicals World United States European Union-15 Japan Other East Asia

100.0 5.7 3.3 30.2 28.2

100.0 10.1 9.9 24.5 57.2

100.0 36.3 6.0 46.8 38.7

100.0 7.3 19.9 6.1 15.3

100.0 11.7 1.1 7.7 9.6

Primary Metals, General and Transportation Machinery World 100.0 100.0 United States 32.2 43.1 European Union-15 2.9 3.4 Japan 85.4 46.8 Other East Asia 6.0 10.7

100.0 5.6 5.5 73.3 18.4

100.0 7.9 15.6 52.4 23.8

100.0 27.7 23.4 37.5 26.3

Electric Machinery World United States European Union-15 Japan Other East Asia

100.0 25.9 10.6 60.5 41.3

100.0 17.8 18.0 54.2 25.2

100.0 62.4 33.5 26.5 9.9

100.0 14.8 5.7 64.4 28.1

100.0 28.1 25.6 29.9 36.7

Source: Office of the Board of Investment, Thailand

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TABLE 13 Sectoral Distribution of FDI Inflows to Thailand by Different Source Regions/Countries (%) Source Regions/Countries

1995

1996

1997

1998

1999

100.0

100.0

100.0

100.0

100.0

1.8

1.2

1.8

3.8

6.3

Wood, pulp and chemicals

41.8

27.2

44.7

18.2

26.5

Primary metals, general and transportation machinery

11.4

13.6

9.4

3.7

9.2

9.7

21.4

9.9

23.3

42.0

35.2

36.7

34.2

51.1

16.0

100.0

100.0

100.0

100.0

100.0

1.5

1.0

0.7

3.5

0.1

Wood, pulp and chemicals

15.2

13.9

55.1

18.2

9.1

Primary metals, general and transportation machinery

21.5

32.3

1.6

3.9

10.1

World Total Food & textiles

Electric machinery Others

United States Total Food & textiles

Electric machinery

9.1

30.3

8.8

56.7

77.0

52.8

22.4

33.9

17.8

3.8

100.0

100.0

100.0

100.0

100.0

1.3

0.9

1.3

2.7

4.9

Wood, pulp and chemicals

36.5

20.4

17.4

7.1

1.3

Primary metals, general and transportation machinery

10.1

3.7

3.0

0.6

14.5

Electric machinery

14.8

41.5

6.8

8.2

59.7

Others

37.4

33.4

71.5

81.4

19.6

100.0

100.0

100.0

100.0

100.0

0.1

0.5

0.1

2.0

5.8

26.2

15.1

42.8

5.2

10.3

Others

European Union-15 Total Food & textiles

Japan Total Food & textiles Wood, pulp and chemicals Primary metals, general and transportation machinery

20.7

13.7

15.3

10.2

15.9

Electric machinery

13.0

14.5

12.3

59.4

56.0

Others

39.9

56.1

29.4

23.3

12.0

100.0

100.0

100.0

100.0

100.0

3.3

1.3

3.9

11.2

14.6

34.4

36.9

60.7

20.6

15.5 13.8

Other East Asia Total Food & textiles Wood, pulp and chemicals Primary metals, general and transportation machinery

1.8

3.0

4.8

5.2

Electric machinery

8.0

18.6

14.4

43.4

25.2

52.4

40.2

16.2

19.6

30.9

Others

Source: Office of the Board of Investment, Thailand

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other hand, in East Asia, the Japanese economy was in the middle of a long recession and many other economies in the region were still suffering from the aftermath of the crisis. Multinationals from Japan and the Asian NIEs with weak financial capacity were discouraged from undertaking FDI. The decline in intra-regional FDI interdependence in East Asia was also detected by observing a declining share of Japan’s FDI outflows destined to East Asia in its total FDI. The share of East Asia in Japan’s overall FDI outflows continued to increase from around 12 per cent in the early 1990s to 24 per cent in 1996, but it then started to decline until it registered 10 per cent in 1999. Unlike the case for Japan, the share of East Asia in total US FDI outflows increased in 1999 from a drop in 1998. This probably reflected the active FDI strategy of US firms by taking advantage of weak financial conditions of FDI competitors from Japan and other Asian NIEs. The impact of the crisis on FDI inflows differed greatly among different sectors. It is interesting to find that electric and electronic multinationals from the US and the EU expanded their FDI substantially in 1999. Active FDI by electric and electronic multinationals from the US and the EU is likely to increase East Asia’s ties with their respective home markets, because these industries have a strong tradeorientation. In the case of Thailand, for example, the share of electric machinery in total FDI inflows increased sharply from an average of 16 per cent in 1995–96 to 33 per cent in 1998–99 (Table 13). In contrast, FDI in wood, pulp and chemicals declined substantially. The increase in FDI in electronics may be explained by its strong export orientation. Because of currency depreciation, the crisis improved international price competitiveness of such export-oriented sectors. To take advantage of the increased opportunity for export expansion, multinationals in these sectors actively undertook FDI.

The Trade and Investment Nexus: The Gravity Model Approach In the previous section, foreign trade and FDI were analysed separately. However, in reality, foreign trade and FDI have a close relationship. For example, an increasing proportion of world trade is conducted by

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multinational enterprises, which are active in undertaking FDI on global scale. A multinational corporation may export capital goods and intermediate goods from its home office to its overseas affiliates to assist them in the production of finished products and may import products from them as well to serve its home market. Such activities promote the linkage between FDI and foreign trade, particularly within industries. In this section the link between foreign trade and FDI in East Asia is empirically examined. Multinational Firms as Promoters of Intra-Asian Trade The literature has demonstrated that FDI has played an important role in promoting the trade of host countries. The contribution of FDI to export expansion has been particularly large for the “second-tier” exporting economies, such as some ASEAN members and China, in contrast to the experiences of the “first-tier” exporting economies, such as Hong Kong SAR, Korea, Singapore and Taiwan POC. Specifically, around 1990, shares of foreign affiliates in total manufactured exports were approximately 20 per cent for the first-tier economies, while the corresponding shares for the second-tier exporters were significantly higher (30–90 per cent).6 Foreign firms’ contributions can be explained by their FDI strategy, which in turn are strongly influenced by trade and FDI regimes of the host economies. Foreign firms seeking for efficient production in order to export their products are attracted to East Asia’s outward-oriented policies. Among these, the establishment of export processing zones has contributed much to the creation of the FDI-trade nexus. In addition, an abundance of disciplined and low-wage labour attracted export-oriented, efficiency-seeking FDI, leading to export expansion driven by foreign firms. This section looks at the contribution of multinational firms to expanding trade in East Asian economies, in particular, intra-regional trade in Asia. To examine this issue in a comprehensive way, detailed information on trade by multinationals in East Asia is needed. However, necessary data to carry out such an analysis are not available for foreign firms of all origins in East Asia. In this study, information on Japanese multinationals were used to examine this issue. Although limited in its coverage, the data on Japanese multinationals provides useful information on foreign firms’ trading patterns in East Asia, because Japanese multinationals account for a large portion of multinationals operating in

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Asia

289

East Asia. Tables 14a and 14b presents the procurement and sales patterns of Japanese manufacturing multinationals in Asia in 1992 and 1997 respectively. One observes that for the Asian affiliates of Japanese firms, the total share of local procurements and sales declined and the share of foreign trade increased from 1992 to 1997. Specifically, the shares of imports in total procurements and the shares of exports in total sales for the Japanese affiliates in Asia increased from 52 and 34 per cent in 1992 to 56 and 50 per cent in 1997, respectively. The corresponding figures for the Japanese affiliates in North America changed from 49 and 8 per cent to 48 and 12 per cent, while the figures for Europe declined from 71 and 44 per cent to 59 and 40 per cent. These data indicate that the Japanese affiliates in Asia recorded a greater trade-orientation when compared with those in North America, but they recorded a smaller tradeorientation than those in Europe. In essence, the Japanese affiliates in Asia and Europe have achieved a remarkable increase in exportorientation. An examination of the regional composition of foreign trade for the Japanese affiliates reveals the increasing importance of intra-regional trade in Asia. For imports by the affiliates in Asia, the share of Asia (including Japan and other Asia) in total procurements increased from 47 per cent in 1992 to 53 per cent in 1997. Albeit at a lesser extent, the corresponding shares for exports in total sales increased from 27 to 42 per cent. It is interesting to observe that for procurements by the affiliates, in Asia, dependence on other Asian economies increased from 1992 to 1997, while that on Japan declined, possibly reflecting a shift from Japan to other economies in Asia as a source of imports. By contrast, for sales by the affiliates in Asia, dependence on both Japan and the rest of Asia increased at the expense of other regions’ exporters. The rapid expansion of foreign trade in Asia by Japanese multinationals was attributable to the rapid expansion of intra-firm trade, that is foreign trade between the Japanese parent and foreign affiliates, or between the share of foreign trade by the affiliates in Asia in their trade with Japan. For the affiliates in Asia, in 1997 as much as 96 per cent of their exports to Japan were destined for their parent companies in Japan (Tables 15a and 15b). Although dependence on intra-firm trade was less for their imports, as much as 83 per cent of the imports by the affiliates in Asia from Japan came from parent companies. The importance of intra-firm trade was smaller for the trade between the affiliates in Asia,

Local

4.4

0.8

1.7

38.3

2.7

1.8

3.3

5.1

0.4

2.1

3.0

11.1

6.6

2.4

2.7

America

North

1.8

2.0

0.7

0.4

6.1

2.1

12.2

0.8

10.1

2.4

10.4

2.8

3.6

Asia

6.2

2.0

0.8

2.5

9.2

1.7

5.0

7.6

1.5

0.1

9.8

7.0

5.2

Asia

Exports to

WORLD

1.7

0.9

0.9

1.3

1.1

2.1

0.4

0.0

2.5

1.8

4.0

0.1

1.3

America

North

Imports from

WORLD

1.1

0.8

3.7

1.9

19.9

15.3

1.4

0.1

15.4

4.1

9.9

3.5

9.9

Europe

5.5

0.0

17.4

1.1

9.3

5.1

1.2

0.0

3.2

1.2

6.1

0.2

5.0

Europe

Local

78.6

55.9

36.9

92.6

45.7

53.0

63.3

85.5

64.7

50.2

56.1

46.0

66.1

Sales

Local

58.6

92.6

34.2

52.9

36.6

49.0

64.8

29.0

71.4

83.7

40.7

72.0

48.5

ments

Procure-

9.4

0.0

51.8

1.7

27.2

23.6

21.4

2.1

4.9

47.2

14.2

26.5

15.8

Japan

27.5

3.8

60.2

43.8

46.7

47.8

9.2

47.3

16.9

13.2

22.4

4.5

37.9

Japan

2.6

43.9

5.2

3.9

5.3

2.1

0.1

3.0

0.4

2.4

7.2

3.1

3.7

America

North

8.9

5.6

0.2

1.9

1.0

19.0

11.3

14.9

8.6

28.6

0.3

12.3

4.9

11.2

Asia

6.2

2.5

3.7

1.1

15.4

1.1

6.2

22.3

3.5

0.3

12.1

22.9

Exports to

ASIA

4.0

1.1

1.9

1.8

1.2

1.7

0.4

0.0

3.7

0.9

4.7

0.3

1.8

America

Asia

Imports from

ASIA

North

2.8

0.0

3.8

0.5

2.2

9.8

0.0

0.9

0.2

0.0

6.7

2.0

2.0

Europe

2.1

0.0

0.0

0.4

0.1

0.4

0.4

0.0

1.3

1.9

1.4

0.1

0.5

Europe

Local

94.8

68.9

94.7

96.4

89.2

86.1

89.4

98.0

80.1

49.0

99.0

78.7

91.9

Sales

Local

64.1

63.6

28.8

57.3

25.0

48.6

73.8

99.4

70.3

93.0

81.7

86.1

51.5

ments

Procure-

2.8

7.1

3.6

1.1

2.6

0.8

5.1

0.6

5.4

33.9

1.0

18.5

2.8

Japan

30.3

36.4

67.1

36.3

65.6

44.1

12.8

0.6

28.1

5.9

18.3

9.2

41.7

Japan

1.1

0.0

0.5

1.0

2.8

7.5

0.1

1.1

3.5

10.2

0.0

0.1

2.2

America

North

0.1

16.8

0.2

0.2

1.4

0.4

3.5

0.0

1.9

2.8

0.0

0.6

0.6

Asia

4.0

0.0

2.8

3.8

7.4

2.3

0.9

0.0

0.0

0.1

0.0

1.3

4.0

Asia

Exports to

NORTH AMERICA

0.7

0.0

0.0

1.4

1.4

2.6

0.4

0.0

0.5

1.0

0.0

0.0

1.3

America

North

Imports from

NORTH AMERICA

1.2

7.2

0.7

0.9

2.9

4.0

1.8

0.0

7.6

1.3

0.0

2.1

1.9

Europe

0.9

0.0

1.2

0.1

0.6

2.4

4.0

0.0

1.0

0.0

0.0

0.2

0.6

Europe

Local

61.4

–

92.6

82.3

45.0

57.2

27.3

100.0

45.3

72.2

53.4

84.2

55.7

Sales

Local

63.7

–

9.4

45.0

15.6

32.1

69.0

–

41.8

58.8

11.1

99.7

28.8

ments

Procure-

0.9

–

1.1

0.5

1.2

0.5

3.1

0.0

1.4

0.0

3.0

14.8

1.2

Japan

11.2

–

51.7

41.8

50.3

52.3

19.1

–

46.0

23.1

27.0

0.1

44.6

Japan

0.7

–

1.4

0.2

2.5

1.7

13.5

0.0

4.7

1.5

6.9

0.0

2.1

America

North

0.5

–

0.0

0.0

0.6

0.0

0.1

0.0

0.1

0.0

5.0

0.0

0.5

Asia

9.1

–

0.0

0.2

5.3

0.9

8.2

–

0.0

0.0

0.0

0.0

3.8

Asia

Exports to

EUROPE

0.3

–

1.8

0.3

0.7

1.2

3.1

–

2.7

8.2

0.0

0.2

0.8

America

North

Imports from

EUROPE

Note: A hypen “-” means that the data are not disclosed. Source: Ministry of International Trade and Industry, Kaigai Jigyo Katsudo Kihon Chosa (Comprehensive Survey of Overseas Activities of Japanese Firms), No. 5, 1994.

80.7

Other Manufacturing

21.3

71.4

58.1

Precision Instruments

1.4

Coal and Petroleum Products

4.2

9.3

72.3

60.6

94.1

Electric Machinery

Transport Machinery

General Machinery

18.1

67.7

Nonmetallic Products

0.8

4.9

95.8

Iron and Steel

32.5

47.7

64.5

Wood and Pulp

Chemical Products

11.3

58.5

Textiles

20.8

6.3

63.7

76.7

Japan

24.2

10.3

58.3

39.3

9.9

16.4

26.2

7.8

Food

Manufacturing Total

Sales

Local

61.8

Other Manufacturing

Sales

86.8

Coal and Petroleum Products

53.8

26.6

55.1

22.7

67.0

43.4

Nonmetallic Products

General Machinery

Electric Machinery

75.5

Iron and Steel

Precision Instruments

64.9

Chemical Products

Transport Machinery

47.6

89.1

Wood and Pulp

6.1

44.4

20.8

84.8

40.9

Japan

Textiles

46.5

ments

Procure-

Food

Manufacturing Total

Procurements

TABLE 14a Procurements and Sales of Foreign Affiliates of Japanese Firms: 1992 (Percentage of Total Procurements or Sales)

34.4

–

4.8

16.3

49.8

40.5

56.0

0.0

47.6

26.3

31.4

1.0

39.7

Europe

15.7

–

37.1

12.7

28.0

13.5

0.6

–

9.1

9.9

61.9

0.0

21.9

Europe

290 Masahiro Kawai and Shujiro Urata

8.4

Nonmetallic Products

0.0

4.3

Coal and Petroleum Products

Other Manufacturing

50.4

16.2

2.3

9.2

Chemical Products

95.1

62.0

100.0

22.5

10.0

15.2

90.3

62.6

78.7

28.3

0.0

39.2

67.8

49.5

61.6

73.5

3.2

52.3

0.0

1.1

27.2

47.5

America

North

1.0

0.0

4.6

0.0

31.5

54.3

58.9

Asia

51.4

90.1

74.1

75.0

52.7

52.8

53.0

0.0

9.5

0.0

20.9

17.2

43.9

Asia

Exports to

WORLD

5.9

100.0

93.4

72.2

69.0

32.5

7.3

0.0

31.8

0.0

3.2

33.8

52.6

America

North

Imports from

WORLD

28.6

100.0

42.2

42.9

34.8

75.2

18.9

0.0

30.8

0.0

21.2

18.6

37.8

Europe

46.4

0.0

98.4

19.0

77.3

60.1

78.3

0.0

50.8

0.0

2.7

0.9

68.6

Europe

6.3

0.0

32.4

7.2

8.0

3.0

0.8

0.0

2.4

0.0

4.3

7.6

6.3

Sales

Local

7.3

0.0

17.5

0.6

2.0

4.5

0.0

5.2

18.0

0.1

19.5

0.2

4.2

ments

Procure-

Local

67.0

0.0

96.5

73.9

90.0

96.7

82.6

29.0

49.0

57.9

36.1

85.4

84.2

Japan

64.1

100.0

85.6

81.7

84.6

93.9

26.0

1.1

57.5

79.4

34.2

75.8

78.0

Japan

61.8

10.0

100.0

34.6

59.8

84.8

25.3

0.0

51.1

71.2

82.6

54.3

0.0

23.3

11.5

0.0

1.1

51.9

62.4

America

North

0.0

0.0

4.3

0.0

31.5

48.8

50.2

Asia

49.8

0.0

77.9

57.9

53.7

55.6

55.1

0.0

3.2

0.0

23.0

26.3

44.4

Asia

Exports to

ASIA

0.7

100.0

0.0

76.2

86.6

80.3

0.0

0.0

7.7

0.0

3.3

14.3

47.7

America

North

Imports from

ASIA

18.4

0.0

50.8

28.3

58.0

93.9

0.0

0.0

17.6

0.0

0.9

50.1

47.6

Europe

11.8

0.0

0.0

86.2

98.1

23.9

0.0

0.0

17.1

0.0

14.3

0.0

35.8

Europe

4.7

0.0

3.4

34.0

21.5

22.9

29.8

0.0

14.0

2.8

0.0

5.7

24.4

Sales

Local

5.2

0.0

0.0

4.8

30.3

45.0

39.0

0.0

11.7

8.2

0.0

8.3

12.6

ments

Procure-

Local

41.7

100.0

68.2

44.9

79.3

44.5

93.0

5.0

71.5

92.6

100.0

91.6

73.5

Japan

78.4

100.0

57.4

92.9

80.5

87.6

82.7

40.6

84.7

36.1

7.6

98.6

86.4

Japan

37.8

0.0

0.0

55.8

18.8

58.5

37.6

0.0

54.1

0.0

0.0

0.0

39.0

America

North

19.7

100.0

0.0

96.9

64.5

29.2

19.9

0.0

93.9

0.0

0.0

2.2

60.7

Asia

6.8

0.0

0.0

98.3

62.8

75.9

13.9

0.0

100.0

0.0

0.0

100.0

74.8

Asia

Exports to

NORTH AMERICA

3.9

0.0

0.0

76.4

46.2

24.2

0.0

0.0

10.4

0.0

0.0

0.0

52.9

America

North

Imports from

NORTH AMERICA

13.0

100.0

21.6

73.2

34.5

20.1

70.4

0.0

32.3

0.0

0.0

29.9

39.6

Europe

90.4

0.0

0.0

66.5

43.3

7.6

100.0

0.0

36.2

0.0

0.0

1.6

38.1

Europe

7.1

–

0.2

25.6

15.6

15.2

0.0

0.0

4.0

–

0.0

0.0

15.0

Sales

Local

0.4

–

0.2

1.0

23.4

10.9

0.0

–

10.5

0.0

69.6

6.2

9.6

ments

Procure-

Local

87.4

–

79.7

44.9

30.6

96.1

100.0

0.0

93.8

–

85.0

39.3

48.5

Japan

96.0

–

76.7

100.0

63.5

93.1

100.0

–

95.4

0.0

100.0

100.0

92.1

Japan

North

61.9

–

9.8

42.5

12.6

94.5

100.0

0.0

65.5

–

0.0

0.0

30.0

America

84.8

–

83.3

0.0

108.0

100.0

0.0

0.0

87.7

–

0.0

0.0

18.2

Asia

2.1

–

0.0

100.0

71.7

89.0

26.7

–

0.0

0.0

0.0

0.0

56.4

Asia

Exports to

EUROPE

100.0

–

100.0

100.0

86.9

33.7

100.0

–

91.7

0.0

0.0

100.0

79.0

America

North

Imports from

EUROPE

28.0

–

38.2

26.8

34.0

83.7

1.6

0.0

33.1

–

46.9

0.0

37.5

Europe

51.5

–

100.0

10.7

78.8

79.7

0.0

–

64.4

0.0

0.0

0.0

72.7

Europe

Asia

Note: A hypen “-” means that the data are not disclosed. Source: Ministry of International Trade and Industry, Kaigai Jigyo Katsudo Kihon Chosa (Comprehensive Survey of Overseas Activities of Japanese Firms), No. 5, 1994.

7.5

0.0

5.5

Precision Instruments

Coal and Petroleum Products

86.2

49.0

17.2

24.5

Electric Machinery

Transport Machinery

Other Manufacturing

91.2

82.6

0.0

7.8

18.3

Iron and Steel

Nonmetallic Products

General Machinery

80.9

40.1

3.1

Textiles

Wood and Pulp

78.3

84.6

17.4

Japan

72.2

100.0

74.9

5.2

Food

Manufacturing Total

Sales

Local

9.9

Precision Instruments

Sales

90.8

76.0

3.3

98.6

28.7

16.6

Electric Machinery

2.0

Transport Machinery

General Machinery

67.6

0.7

Iron and Steel

30.1

81.7

6.3

13.5

Wood and Pulp

Chemical Products

37.1

15.1

Textiles

93.1

84.3

Japan

5.4

9.0

ments

Procure-

Local

Food

Manufacturing Total

Procurements

TABLE 15a Intra-firm Transactions in Procurements and Sales of Foreign Affiliates of Japanese Firms: 1992 (Percentage Share in Each Procurements or Sale)

Trade and Foreign Direct Investment in East 291

Local

92.1

74.3

4.2

16.5

Wood and Pulp

Chemical Products

78.6

5.8

94.0

98.4

6.2

10.7

Other Manufacturing

35.3

41.1

0.0

50.0

45.6

49.1

90.8

13.9

42.2

37.5

35.3

62.0

18.6

50.6

America

North

9.4

34.3

82.0

59.6

79.7

39.5

100.0

77.9

0.0

52.7

44.0

59.9

Asia

31.3

0.0

21.8

59.9

64.1

81.5

32.3

29.1

27.2

20.5

52.6

55.8

56.7

Asia

Exports to

WORLD

38.3

0.0

13.3

35.3

39.1

41.7

10.4

0.0

71.7

20.6

49.6

56.1

39.8

America

North

Imports from

WORLD

46.1

0.0

54.0

21.4

53.1

69.8

5.7

90.9

23.1

0.0

48.0

9.5

40.5

Europe

77.6

0.0

94.4

16.3

51.4

76.6

16.0

0.0

47.7

0.0

48.9

9.1

40.7

Europe

8.1

6.9

58.3

11.5

20.5

10.8

14.8

3.1

12.0

16.3

11.2

26.1

16.1

Sales

Local

6.1

74.6

39.1

13.4

8.6

3.9

20.3

42.6

17.6

3.5

22.1

3.9

11.3

ments

Procure-

Local

94.3

91.3

98.4

96.9

96.3

98.5

99.3

95.4

91.3

76.6

83.4

85.7

95.7

Japan

81.2

1.7

95.5

86.7

80.8

93.5

78.9

85.3

76.8

53.8

85.1

94.4

83.2

Japan

57.3

62.7

0.0

24.2

98.6

55.3

95.0

98.9

74.0

42.5

30.4

60.0

15.9

66.4

America

North

9.4

28.3

66.2

58.8

89.7

37.9

39.9

79.5

0.0

54.8

71.7

58.5

Asia

32.7

0.0

19.1

56.7

66.4

94.4

32.8

34.6

25.4

42.4

52.2

73.3

58.9

Asia

Exports to

ASIA

48.0

0.0

0.0

100.0

32.8

21.2

58.1

0.0

85.4

20.6

40.5

48.8

72.5

America

North

Imports from

ASIA

29.4

0.0

49.6

94.7

66.1

99.2

94.4

33.5

38.3

0.0

66.5

18.0

66.1

Europe

34.2

0.0

99.5

62.5

10.8

0.0

1.4

0.0

82.6

0.0

14.2

15.1

45.3

Europe

11.8

0.0

5.8

41.6

10.0

11.5

43.9

1.3

18.4

0.3

0.2

7.8

21.8

Sales

Local

28.8

0.0

10.6

38.1

40.9

15.1

0.0

8.6

17.3

45.4

1.4

13.2

33.6

ments

Procure-

Local

70.7

100.0

90.7

84.2

99.0

91.9

76.6

91.2

91.9

95.6

0.0

65.2

88.0

Japan

95.7

0.0

99.9

92.6

99.1

94.2

100.0

82.0

85.1

100.0

100.0

100.0

95.8

Japan

41.8

11.4

0.0

31.3

15.0

24.9

89.5

0.0

36.7

0.0

28.0

100.0

0.0

26.7

America

North

0.0

96.4

33.7

68.5

89.0

96.4

41.3

3.0

0.0

100.0

63.3

67.5

Asia

17.4

0.0

16.6

87.1

21.5

61.2

11.1

0.5

32.0

0.0

0.0

0.6

29.9

Asia

Exports to

NORTH AMERICA

9.2

0.0

0.0

46.1

32.1

75.7

0.0

0.0

0.0

0.0

100.0

55.6

43.6

America

North

Imports from

NORTH AMERICA

37.7

0.0

63.1

35.3

17.8

76.0

12.7

57.3

33.3

0.0

0.0

11.5

27.5

Europe

90.0

0.0

25.0

51.4

92.6

14.0

100.0

0.0

30.0

0.0

100.0

0.0

44.1

Europe

11.5

–

0.0

29.5

28.5

10.0

0.0

0.0

19.8

–

3.9

19.8

23.5

Sales

Local

1.1

–

0.9

11.2

14.1

6.4

0.0

0.0

17.4

–

0.0

0.0

11.5

ments

Procure-

Local

90.0

–

98.6

89.0

96.9

94.8

100.0

0.0

95.1

–

99.9

100.0

95.8

Japan

98.2

–

91.1

99.5

93.8

96.4

100.0

100.0

96.5

–

89.6

86.6

96.8

Japan

North

44.8

0.0

65.6

America

69.5

–

74.9

1.9

71.3

80.6

100.0

0.0

59.2

–

Asia

4.1

–

90.3

86.7

34.3

33.4

0.0

0.0

42.1

–

91.8

0.0

40.2

Asia

2.4

–

81.0

90.7

46.5

29.6

0.0

100.0

82.1

–

40.3

20.3

56.0

Exports to

EUROPE

93.6

–

100.0

4.2

74.1

39.2

100.0

0.0

73.3

–

99.2

0.0

14.8

America

North

Imports from

EUROPE

Note: A hypen “-” means that the data are not disclosed. Source: Ministry of Economy, Trade and Industry, Kaigai Jigyo Katsudo Kihon Chosa (Comprehensive Survey of Overseas Activities of Japanese Firms), No. 7, 2001.

92.1

90.8

33.8

24.6

Precision Instruments

Coal and Petroleum Products

Transport Machinery

96.5

16.0

Electric Machinery

98.1

90.4

1.5

35.4

11.3

Iron and Steel

Nonmetallic Products

General Machinery

87.3

84.2

10.7

94.6

Japan

Textiles

20.4

Sales

90.6

2.0

95.7

94.4

83.2

85.6

Food

Manufacturing Total

Sales

59.5

13.7

Coal and Petroleum Products

Other Manufacturing

95.1

29.8

28.9

Transport Machinery

8.9

Precision Instruments

91.2

29.3

19.2

Nonmetallic Products

General Machinery

Electric Machinery

60.5

13.6

86.5

37.4

16.9

Wood and Pulp

Chemical Products

Iron and Steel

87.0

13.1

Textiles

93.3

92.3

Japan

13.6

22.2

ments

Procure-

Local

Food

Manufacturing Total

Procurements

TABLE 15b Intra-firm Transactions in Procurements and Sales of Foreign Affiliates of Japanese Firms: 1997 (Percentage Share in Each Procurements or Sale)

48.8

–

49.1

19.0

60.5

65.7

0.0

100.0

17.5

–

35.4

0.0

40.3

Europe

78.4

–

75.6

13.0

52.4

92.9

0.0

0.0

45.3

–

53.6

0.0

40.5

Europe

292 Masahiro Kawai and Shujiro Urata

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when compared with the case for the trade between the affiliates and the parents. Two interesting observations may be made from the findings on procurement and sales patterns of Japanese multinational firms. First, Japanese multinationals have contributed to the promotion of foreign trade in Asia, in particular intra-regional trade. Second, Japanese multinationals have become more active in pursuing intra-regional, interprocess division of labour, probably contributing to the efficient use of factors of production in Asia. A large number of multinationals in East Asia have been found to be efficiency-seeking types, not market-seeking types. As such, these multinationals locate themselves in an economy where they can perform their operations most efficiently or at the lowest cost. Japanese multinationals in machinery sectors such as electronics, which account for a large part of Japanese multinational activity in East Asia, break up their production process into several sub-processes, and locate each sub-process in an economy where that particular sub-process may be carried out most efficiently. For example, some TV-producing Japanese multinationals break up the production process into sub-processes such as parts production and assembly operation, and they locate these sub-processes in economies where the required factor inputs are relatively abundant, for example high-skilled workers for parts production and low-wage labour for assembly operation. The TV manufacturers export parts to an economy where the final products are assembled, and export the assembled TVs to other economies. US firms also have been active in setting up production networks in East Asia. Unlike the more or less closed production system in Japanese firms, production networks constructed by US firms are said to be more open to firms from other nationalities such as those from Korea, Singapore, and Taiwan POC. Indeed, the basic strategy of US firms is to link up with the most efficient producers regardless of their nationality.7 Many firms from the Asian NIEs also set up production networks in various parts of the world, particularly in East Asia. One of the industries that have actively pursued such a globalization strategy is the textiles industry. All these production systems and networks clearly have contributed to greater intra-regional trade interdependence in East Asia.8

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The Gravity Model Approach The gravity model has been applied extensively to investigate the determinants of bilateral trade flows. In its basic formulation, the geographic distance between two economies and their economic size are included to explain bilateral trade flows. It is postulated that the shorter the distance is between the two economies and the larger the size of their economies, the greater the bilateral trade flows between them will be. Indeed, many empirical studies have found such a relationship. For example, Frankel (1993) finds in his study of bilateral trade flows among 63 countries for 1980, 1985, and 1990 that economic size (GNP) and geographic distance have positive and negative effects on bilateral trade flows, respectively. In addition to these two basic variables, several other factors have been introduced in the gravity equation that would influence bilateral trade flows. Frankel (1993) adds per capita GNP and regional dummies. Per capita GNP is included to capture the factors associated with the level of economic development, thus affecting flows of intra-industry trade.9 Regional dummies are included to test the existence of special regional bias in some regions such as East Asia and the European Community. Frankel finds a positive effect of per capita GNP, as expected, and positive and statistically significant regional dummies for the Western Hemisphere, the European Community, and East Asia, indicating the presence of regional bias in bilateral trade. He also finds that the regional bias in East Asia declined as the estimated coefficients on the East Asia dummy became smaller over time. To examine the link between FDI and foreign trade in East Asia, a series of papers by Kawai and Urata (Kawai 1997; Kawai and Urata 1996, 1998; Urata 1999) have modified the basic gravity equation by introducing an FDI variable as one of the explanatory variables. They assume that FDI causes foreign trade, but the causation may go the other way as well. The justification for this specification is that the FDI stock represents the accumulated value of past FDI activities and, in some sense represents the accumulation of business knowledge, information and transactions with the country or the particular sector. Although a number of studies have suggested the existence of a link between FDI and trade, very few studies have examined this link empirically. FDI flows can also be regressed against the basic gravity variables and trade flows.

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The empirical results generally support the gravity model in the sense that economic size, distance, and per capita income have the expected signs.10 They also support the hypothesis that FDI does promote foreign trade, as expected, and foreign trade tends to promote FDI flows. For the trade equation the East Asian dummy often confirms the presence of intra-regional bias in foreign trade in East Asia, as in the case of the previous study by Frankel (1993).

Conclusions Emerging East Asian economies had been outperforming the rest of the world for several decades when they were struck by a financial crisis in 1997–98. Their economic performance was particularly remarkable from the mid-1980s until 1996. According to the World Bank (1993), various factors such as sound fundamentals, including stable macroeconomic environment, human capital, and limited price distortions, explain East Asia’s high economic growth during the miracle years. In addition to these factors, a large amount of FDI inflows played a key role in the second half of the 1980s and the 1990s. Expansion of FDI inflows to East Asia, together with foreign trade, contributed to the region’s rapid economic growth. Economic growth in turn generated trade and attracted FDI inflows. Indeed, in East Asia a virtuous cycle of rapid economic growth and trade-FDI expansion was behind the remarkable economic performance in the 1990s. The analysis in this paper demonstrates that foreign trade and FDI in East Asia expanded rapidly in the 1980s and 1990s largely due to unilateral liberalization of trade and FDI regimes and to the region’s rapid economic growth. Intra-regional economic interdependence increased in East Asia through foreign trade and FDI, mainly as a result of market forces rather than any discriminatory measures against other regions. Moreover, an FDI-trade nexus emerged, partly as a result of regional production networks created by multinationals. Indeed, some multinationals intensively and extensively pursued a strategy of intra-regional division of labour by forming regional production networks. The regional production and trade networks established by multinationals contributed to economic growth by enabling multinationals and regional economies to improve their technical efficiency and achieve greater division of labour.

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The upward trend of FDI inflows for many East Asian countries was reversed in 1998 and/or 1999 mainly because of depressed economic activities caused by the Asian financial crisis. The crisis had a negative impact on FDI inflows, which declined after the crisis. However, the impacts varied significantly among East Asian economies. Severe impacts were felt in ASEAN countries, largely because of the depth of the crisis. Although their magnitude was still limited compared to the case in other regions, M&As have increased importance in FDI inflows to East Asia. FDI inflows appear to have contributed significantly to economic receovery in East Asia by mitigating the impact of the crisis on countries in the region. In response to the crisis in East Asia, some observers have cast doubt on the desirability of deepening the intra-regional trade-FDI nexus. They argue that the intensified intra-regional trade-FDI relations transmitted harmful impacts among the East Asian economies, creating a vicious cycle of unfavourable economic repercussions. Policymakers sympathetic to this view advocated a shift from outward-oriented policies to inwardoriented policies in order to insulate the economy from negative external impacts. Such a policy was clearly undesirable, once one realized that the inward-oriented protectionist policies adopted by a number of countries with the aim of protecting their own markets have repeatedly encountered failure. The application of inward-oriented policies acted not only as a beggar thy neighbour policy but also as a beggar thyself policy. The good news is that without exceptions, emerging economies in East Asia have maintained the liberalization policy on trade and FDI regimes. Indeed, many crisis-affected economies liberalized their FDI regimes in an effort to boost economic recovery and growth. As a result, FDI inflows in East Asia have remained strong, despite a decline in the intra-regional FDI flows, due to increases in inflows from outside the region, thus diversifying the sources. Globalization of economic activities is expected to gain momentum mainly through progress in information and communications technologies. Under these circumstances, emerging East Asian economies should try to increase FDI and foreign trade to achieve economic growth, as they did in the past. To stimulate FDI and foreign trade, emerging East Asian economies have to overcome a number of challenges. They have to lower and remove the barriers to trade and FDI not only by pursuing liberalization but also by strengthening regional and trans-

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regional liberalization schemes such as AFTA and APEC and multilateral liberalization under the World Trade Organization. Diversification of FDI sources taking place after the crisis is likely to lead East Asia to greater involvement in multilateral globalization. In addition to liberalization, East Asian countries will have to overcome other structural obstacles such as the impediments to transform into knowledge-based economies, the underdevelopment of infrastructure — both hard infrastructure such as transportation and communication facilities and soft infrastructure such as the legal and governance system — and the shortage of skilled human resources. Furthermore, one cannot overemphasize the importance of maintaining a stable macroeconomic environment with low inflation, sound fiscal policy, and stable exchange rates. FDI-host economies will have to assimilate foreign technologies transferred via FDI or other means in order to achieve sustainable economic growth. The efficient assimilation of foreign technologies has become more important in recent years because M&As rather than greenfield operations have become an increasingly important modality of FDI. M&As do not increase physical productive capacity but are expected to improve technical and managerial efficiency. However, their impacts have not yet been clearly identified empirically, and thus they remain an important future research agenda. To improve the quality of infrastructure and educational and technical capabilities, East Asian governments should play an important role by shifting resources into these areas and by using economic and technical assistance obtained from international development agencies and donor economies.

Notes 1

2

In this paper, East Asia includes China, Japan, four newly industrialized economies (Hong Kong SAR, Korea, Singapore and Taiwan Province of China), and other ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam). Emerging East Asia excludes Japan. In the following, the ASEAN-4 refers to Indonesia, Malaysia, the Philippines, and Thailand, and the ASEAN-5 includes Singapore. United Nations (2000) discusses the possible impact of China’s accession to the WTO on FDI inflows to the country.

298 3 4

5

6

7 8 9

10

11

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Japan Bank for International Cooperation (2000). One should examine the changes in the patterns of FDI sources for other East Asian economies to identify the impact of the crisis. However, the limited availability of FDI data with FDI sources precludes us from conducting such an examination. One may argue that industrial countries tend to specialize in production, leading to greater dependence on foreign trade. Furthermore, the residents of high-income countries tend to desire greater variety in their consumption, leading to greater dependence on trade, particularly intra-industry trade. However, the gravity model in general works better for trade flows than for FDI flows. Table 3 in Hill and Athukorala (1998). See Borrus (1998) for the case of US electronics firms in East Asia. Gereffi (1999) presents an interesting analysis of apparel commodity chain developed by firms from the NIEs. One may argue that industrial countries tend to specialize in production, leading to greater dependence on foreign trade. Furthermore, the residents of high-income countries tend to desire greater variety in their consumption, leading to greater dependence on trade, particularly intra-industry trade. However, the gravity model in general works better for trade flows than for FDI flows.

References Borrus, Michael. “Exploiting Asia to Beat Japan.” In Japanese Multinationals in Asia, edited by D. Encarnation. New York: Oxford University Press, 1999. Frankel, Jefferey, A. “Is Japan Creating a Yen Bloc in East Asia and the Pacific?” In Regionalism and Rivalry: Japan and the United States in Pacific Asia, edited by Jefferey A. Frankel and Miles Kahler. Chicago: University of Chicago Press, 1993. Gereffi, Gary. “International Trade and Industrial Upgrading in the Apparel Commodity Chain”. Journal of International Economics 48 (1999): 37–70. Hill, Hal and Prema-Chandra Athukorala. “Foreign Direct Investment in East Asia: A Survey”. Asia-Pacific Economic Literature 12 (November 1998): 23–50. International Monetary Fund. International Financial Statistics. CD-ROM. Washington DC: IMF, various years. ———. Direction of Trade Statistics. Washington DC: IMF., various years. Japan Bank for International Cooperation (JBIC). “JBIC FY1999 Survey: The Outlook of Japanese Foreign Direct Investment”. Journal of Research Institute for Development and Finance, no. 1, January 2000 (in Japanese).

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Kawai, Masahiro. “Japan’s Trade and Investment in East Asia”. In East Asian Trade after the Uruguay Round, edited by David Robertson, pp. 209–26. Cambridge: Cambridge University Press. Kawai, Masahiro and Shujiro Urata. “Trade Imbalances and Japanese Foreign Direct Investment: Bilateral and Trilateral Issues”. In Asia-Pacific Economic Cooperation: Current Issues and Agenda for the Future, edited by Ku-Hyun Jung and Jang-Hee Yoo. East and West Studies Series 39, Institute of East and West Studies, Yonsei University, October 1996, pp. 61–87. ———. “Are Trade and Direct Investment Substitutes or Complements? An Empirical Analysis of Japanese Manufacturing Industries”. In Economic Development and Cooperation in the Pacific Basin: Trade, Investment, and Environmental Issues, edited by Hiro Lee and David W. Roland-Holst. Cambridge, UK: Cambridge University Press, 1998. Japan Ministry of International Trade and Industry. Kaigai Jigyo Katsudo Kihon Chosa [Comprehensive Survey of Overseas Activities of Japanese Firm], no 5. Tokyo, Japan: MITI, 1994. Japan Ministry of Economy, Trade and Industry. Kaigai Jigyo Katsudo Kihon Chosa [Comprehensive Survey of Overseas Activities of Japanese Firm], no 7. Tokyo: MITE, 2001. Petri, Peter A. 1993. “The East Asian Trading Bloc: An Analytical History”. In Regionalism and Rivalry: Japan and the United States in Pacific Asia, edited by Jefferey A. Frankel and Miles Kahler. Chicago: University of Chicago Press, 1993. United Nations. World Investment Report 2000, New York and Geneva: United Nations, 2000. ———. World Investment Report 1999, New York and Geneva: United Nations, 1999. Urata, Shujiro. “The East Asian Economic Crisis and Japanese Foreign Direct Investment in Asia”. Paper presented at ASEM Regional Economists’ Workshop From Recovery to Sustainable Development, Bali, September 1999. ———. “Emergence of an FDI-Trade Nexus and Economic Growth in East Asia”. In Rethinking the East Asian Miracle, edited by Joseph Stiglitz and Shahid Yusuf. Washington, DC.: World Bank, 2001. World Bank. The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press, 1993. ———. East Asia: Recovery and Beyond. New York: Oxford University Press, 2000. Yeats, Alexander. “The East Asian Economic Crisis: Was the Region’s Export Performance a Factor?” Paper presented at ASEM Regional Economists’ Workshop, From Recovery to Sustainable Development, Bali, September 1999.

Contributors

301

Contributors Deepak Bhattasali is Lead Economist, World Bank Resident Mission, Beijing Christopher Findlay is Professor of Economics, Asia Pacific School of Economics and Government, Australian National University, Canberra Fernando Gonzalez-Vigil is Director, APEC Study Centre, Universidad del Pacifico, Lima Denis Hew is a Fellow at the Institute of Southeast Asian Studies, Singapore Chen-Sheng Ho is Associate Research Fellow, APEC Study Centre, Taiwan Institute of Economic Research, Taipei Masahiro Kawai is Professor of Economics, Institute of Social Science, University of Tokyo Medhi Krongkaew is Professor, School of Development Economics, National Institute of Development Administration, Bangkok Riyana Miranti was a Research Associate at the Institute of Southeast Asian Studies, Singapore Mari Pangestu is a Board Member of the Centre for Strategic and International Studies, Jakarta

302

Contributors

Mohd Haflah Piei is Deputy Director of the Malaysian Institute of Economic Research, Kuala Lumpur Ramkishen S. Rajan is Senior Lecturer, School of Economics and Research Associate at the Centre for International Economic Studies (CIES), University of Adelaide Shujiro Urata is Professor of Economics, School of Social Sciences, Waseda University, Tokyo Ippei Yamazawa is President, Institute of Developing Economies, Tokyo