Wip30'j POLICY RESEARCH WORKING PAPER 3 084 Major Trade Trends in East Asia What are their Implications for Regional Cooperation and Growth? Francis Ng Alexander Yeats The World Bank Development Research Group Trade June 2003 | POLICY RESEARCH WORKING PAPER 3084 Abstract This study's empirical findings have positive implications based on intra-industry trade ratios or statistics on for further efforts to expand East Asian regional trade international production sharing show economic linkages and cooperation initiatives. Since the mid-1980s regional and the interdependence of East Asian economies have intra-trade has grown at a rate roughly double that of considerably strengthened over the past two decades. On world trade, and at a rate far higher than the intra-trade a global scale, East Asia (excluding Japan) IIow originates of the North America Free Trade Agreement (NAFTA) 19 percent of world trade, which is approximately the member countries or the European Union. Evidence same share as the NAFTA member countries. This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to study regional trade and growth prospects. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Paulina Flewitt, room MC3-333, telephone 202-473-2724, fax 202-522-1159, email address pflewitt@worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. Francis Ng may be contacted at fng@worldbank.org. June 2003. (93 pages) The Policy Research Working Paper Series disseutinates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the viewv of the WVorld Bank, its Executive Directors, or the countries they represent. Produced by Partnerships, Capacity Building, and Outreach MAJOR TRADE TRENDS IN EAST ASIA What are Their Implications for Regional Cooperation and Growth? Francis Ng and Alexander Yeats MIember, World Bank Trade Team and Consultant on Trade Issues For the World Bank MAJO]R TRADE TRENDS IN EAST ASIA What are Their I?nplications for Regional Cooperation and Growth? Francis Ng and Alexander Yeats' INTRODUCTION During the last decade major changes occurred in global markets that have important implications for East Asian countries' export and growth prospects. The North American Free Trade Agreement (NAFTA) liberalized barriers to the intra-trade of Canada, Mexico, and the United States, while similar regional arrangements expanded in both Latin America and Europe. The Uruguay Round agreement significantly altered conditions under which international trade is conducted. Among the Round's achievements were an average 40 percent reduction in industrial countries' tariffs, an agreement on the phase-out of the Multifibre Accord (MFA), non-tariff barriers on agricultural products were converted to tariffs and lowered, "voluntary" export restraints were abolished, and some progress was made in the liberalization of barriers to trade in services. Major changes also occurred within East Asia including a remarkable increase in the relative importance of machinery and electronics products in intra-regional trade, and a rapid expansion of international production sharing as reflected in trade in parts and components. While many of these developments have positive implications for East Asia, there are some potentially negative aspects. Regional trade arrangements (RTAs) like NAFTA, MERCOSUR, or the extended European Union give member countries preferential (discriminatory) access to each other's markets, which may displace East Asian and other nonmembers' exports. Similarly, the Uruguay Round's reduction of most-favored-nation (MFN) tariffs lowered, or eliminated, preferences some East Asian exporters received under some industrial countries' GSP programs. The phase-out of the MFA may have negative implications if East Asian countries are not fully competitive in what promises to be a drastically altered trading environment for textile and clothing products. Recognizing that improved export opportunities can make a significant contribution to regional economic growth, this investigation analyzes the economic implications of major trends in East Asia's trade. A primary objective is to supplement recent analyses, both within and outside the World Bank, which examined prospects for strengthening and extending East Asian regional cooperation and preferential trade arrangements (Asian Development Bank 2002). This study proceeds as follows. First, the importance and growth in East Asian intra-trade is compared to that for other major country groups, the major origins and destinations of East Asian regional trade are identified, and the product composition of this exchange is analyzed. Next, measures such as the "revealed" comparative advantage (RCA) index, trade intensity and complementarity indices, measures of trade diversification and competitiveness are employed to help assess East Asia's export performance and prospects for further cooperative efforts such as regional production sharing, or joint efforts to upgrade the quality of exports. These analyses often focus on the economic implications of regional trade in parts and components which has greatly increased economic linkages and the interdependence of East Asian countries. * The authors are, respectively, a member of the World Bank's trade team and consultant to the World Bank on international trade issues. This paper was prepared as part of a larger World Bank initiative to analyze prospects for regional cooperation initiatives in East Asia. We would like to thank Milan Brahmbhatt and Kathie Krumm for comments and suggestions. Trade Trends I Global Implications of East Asian Trade Changes Kea Point From 1975 to 2001, East Asia's share of global exports expanded more than three-fold (to just under 19 percent), and doubledfrom 1985 to 2001. The region presently originates about the same share of global exports as NAFTA. Intra-regional exports, expressed as a share of world trade, experienced an even sharper expansion rising more than six-fold during 1975-2001. A question of considerable interest is how has the importance of emerging East Asian countries' global or regional trade changed relative to world trade, or to the trade of other major countries.' If East Asian intra-trade expanded at a relatively faster pace than world trade this could have positive implications for initiatives to negotiate regional trade arrangements (RTAs), like MERCOSUR or the North American Free Trade Agreement, in East Asia. The potential importance of this point was underscored in a recent Asian Development Bank (2002, pp. 157-196) report that argued Asian RTAs could have important beneficial economic effects including increased levels of trade and welfare, as well as positive scale effects associated with increased market size. Also, regional trade arrangements continue to proliferate elsewhere. In the mid-1990s, approximately one-half of global trade in manufactured goods occurred within regional trade arrangements (Primo Braga and Yeats 1995), and the recent extensions of the European Union and other RTAs increased this share. Table .I provides summary statistics bearing on these points. Shown here are East Asian global exports for selected years over 1975 to 2001, along with corresponding information on the share of this exchange in world trade. For comparison, similar statistics are shown for several major comparator country groups, like the European Union (15), NAFTA, Latin America and the Caribbean, or South Asia. The memo item provides statistics on the value and global share of East Asian intra-trade, as well as on the region's trade with Japan, China, and all non-regional countries as a group.2 Two key points emerge from these statistics, * The relative change in East Asian trade was far greater than that for any other comparator group. This is clearly the case whether comparisons are made over the full 1975-2001 interval, or for the more recent 1985-2001 period. From 1975 to 2001, East Asia's share of global trade expanded more than three-fold (to just under 19 percent), and doubled from 1985 to 2001. In contrast, the global trade shares of NAFTA rose by about one percentage point while the EU (15) was steadily declining in relative importance. 'Following the lead of Kawai and Urata (2002) emerging East Asia (hereafter just referred to as East Asia) includes; Brunei, Cambodia, China, Hong Kong, Indonesia, Korea, Lao PDR, Malaysia, Mongolia, Philippines, Singapore, Taiwan (China), Thailand and Vietnam. Where Japan plays a pivotal role in regional trade, as in the exchange of parts and components, it may be included in some of the analyses that follow in order to better illustrate factors underlying East Asian trade trends. 2 Statistics on East Asian countries' trade were tabulated from the reported imports of their trading partners. One reason for this approach is the transshipment of a high share of China's exports through Hong Kong. As a result, China often is unable to accurately identify the final destinations of its exports in its own trade statistics. However, evidence suggests importing countries are better equipped to identify goods of Chinese origin that are transshipped through Hong Kong, or some other entrepot center. See Appendix 1 for a discussion of this, and other related technical problems, in East Asian trade statistics. 3 * East Asia's intra-regional exports, expressed as a share of world trade, experienced an even greater expansion rising more than six-fold during 1975-2001. The 16 percent annual growth rate for this exchange far exceeded that for any other group listed in Table 1.1. These statistics clearly have positive implications for the formation of RTAs in East Asia since these countries have rapidly increased the relative importance of their mutual trade contacts. Table 1. 1 The Relative ]importance of East Asia and Other Regions in World Trade Total Expo s ($billio Share of Wor d Trade Group 1975 1985 1995 2001 1975 1985 1995 2001 Australia/ New Zealand 14.7 32.6 70.1 84.6 1.8 1.6 1.4 1.3 East Asia' 44.5 186.2 839.0 1,194.4 5.4 9.4 16.3 18.7 ASEAN 22.0 72.0 307.8 403.8 2.7 3.6 6.0 6.3 European Union (15) 325.3 711.6 1,893.4 2,194.8 39.2 36.0 36.9 34.3 Japan 49.1 190.3 476.1 448.6 5.9 9.6 9.3 7.0 Latin America 45.3 115.8 245.3 382.1 5.5 5.9 4.8 6.0 Middle East 84.7 109.1 155.1 247.8 10.2 5.5 3.0 3.9 NAFTA 143.9 351.9 922.4 1,214.7 18.0 17.8 18.0 19.0 North Africa 13.4 29.4 33.9 49.3 1.6 1.5 0.7 0.8 Other Europe-Cent. Asia2 40.5 128.7 244.7 340.7 4.9 6.5 4.8 5.3 South Asia 6.2 16.5 52.0 70.3 0.7 0.8 1.0 1.1 Sub-Saharan Africa 28.9 52.8 74.7 101.2 3.5 2.7 1.5 1.6 MEMO ITEM East Asian Intra-Trade 8.0 44.1 314.5 418.0 1.0 2.2 6.1 6.5 East Asia-Japan Trade 11.3 35.3 118.7 144.9 1.4 1.8 2.3 2.3 East Asia- China Trade3 0.4 5.9 43.5 83.5 .. 0.3 0.8 1.3 East Asia-Rest of World 36.5 142.1 524.5 776.4 4.4 7.2 10.2 12.1 NAFTA Intra-Trade 55.6 159.5 396.0 646.5 6.7 8.1 7.7 10.1 EU (15) Intra-Trade 200.2 416.9 1,168.5. 1,296.6 24.1 21.1 22.7 20.2 MERCOSUR Intra-Trade 1.0 2.0 14.5 16.6 0.1 0.1 0.3 0.3 ASEAN Intra-Trade 2.5 11.3 64.6 74.2 0.3 0.6 1.3 1.2 WORLD EXPORTS 829.2 1 ,975.9 5,137.3 6,403.1 100 100 100 100 East Asia is defined here as consisting of: Brunei, Cambodia, China, Republic of Korea, Hong Kong, Indonesia, Lao PDR, Malaysia, Mongolia, Philippines, Singapore, Taiwan (China), Thailand, and Vietnam. 2 The totals for this group exclude Western Europe. 3The totals are based on 1978 Chinese trade data since 1975 statistics were not available from IMF records. Source: International Monetary Fund Direction of Trade Statistics Table 1.2 examines the data from a somewhat different perspective and focuses on the strongest relative gainers, and strongest relative losers, in world trade during the two longer-term periods, that is, 1975-2001 and 1985-2001. East Asia figures prominently among the former. In terms of both annual growth rates and global trade share changes, East Asia is involved in the three most buoyant directional trade flows with NAFTA intra-trade in a relatively distant fourth place. East Asian intra-trade, for 4 example, grew at an annual rate of 16 percent since 1975, which was about 6 percentage points higher than the intra-trade of NAFTA.3 Sub-Saharan Africa and the Middle East registered the lowest annual growth rates for exports, and highest losses of global trade shares over 1975-2001. The Middle East poor performance is partially due to the OPEC price increases in the early 1970s, and the subsequent erosion of energy prices over the last two decades, while the marginalization of Africa is part of a long-term trend dating back to the 1950s. Table 1.2 The Strongest Relative Gainers and Losers in Global Trade; 1975 to 2001 Share of World Exports % Annual Growth Actual Value (%) Share Change Rate (%) 1985 - 1975 - 1985 - 1975 - Directional Trade Flow 1975 1985 2001 2001 2001 2001 2001 Strong Relative Gainers East Asian Intra-Trade 1.0 2.2 6.5 4.3 5.5 15.1 16.4 East Asian Global Trade 5.4 9.4 18.7 9.3 13.3 12.3 13.5 East Asia - Rest of World 4.4 7.2 12.1 4.9 7.7 11.2 12.5 NAFTAIntra-Trade 6.7 8.1 10.1 2.0 3.4 9.1 9.9 Strong Relative Losers EU (15) Intra-Trade 24.1 21.1 20.2 -0.9 -3.9 7.4 7.5 Sub-Sahara Africa Global Trade 3.5 2.7 1.6 -1.1 -1.9 4.2 5.0 Middle East Global Trade 10.2 5.5 3.9 -1.6 -6.3 5.2 4.2 WORLD EXPORTS 100.0 100.0 100.0 7.6 8.2 Source: International Monetary Fund Direction of Trade Statistics. 3 In the recent 1995-2001 period, East Asian exports to China almost doubled and experienced the fastest rate of growth of any trade flow reported in Table 1.1. In part, this was due to several counter-cyclical monetary and fiscal policies adopted by China during the period of the financial crisis that increased, or stabilized, demand for other East Asian countries' exports. 5 Trade Trends 2 What are the Geographic Destinations of East Asian Exports? Key Point Over 1985-2001, the shar-e of East Asia's exports to the region rose from 24 to 35 percent with Indonesia, Taiwan (China), Korea, and the Philippines experiencing significantly higher directional trade changes. This shift was, in part, due to the fact that global import demand in East Asia was more buoyant than in any other major market. An important question concerning East Asian countries' trade is whether significant changes in the direction of this exchange occurred and, if so, what factors were responsible.4 Specifically, statistics in Table 1.1 show East Asian global exports expanded during 1985-2001 at an annual rate almost 5 percentage points above that for world trade. Were shifts in the direction of East Asian trade toward newer (faster growing) geographic markets responsible for these above average growth rates? Second, has there been a general relative shift in East Asian exports toward the region, or do the high intra-regional trade growth statistics in Table 1.1 largely reflect the experience of a few bigger countries? Table 2.1 examines 1985-2001 changes in the geographic direction of individual East Asian country's exports. The table reports the global value of this exchange in 1985, 1995 and 2001, and also shows the share destined for major markets like the European Union (15), North American Free Trade Agreement (NAFTA), or South Asia. To help analyze this information, Table 2.1 also presents similar statistics for the combined exports of all 14 East Asian countries. Finally, the table's memo item provides two summary measures relating to the regional trade changes. The first is the 1985-2001 change in the share of East Asia's exports destined for each major market, while the second is the annual growth rate of that market's global imports. Ideally, an East Asian country would want to see its exports shifting toward destinations that are experiencing above average import growth rates. Table 2.1 indicates significant changes occurred in the general direction of East Asia's exports. Over 1985-2001, the share of exports going to other East Asian countries rose by over 11 percentage points (from 23.7 to 35 percent), while East Asia had the highest annual global import growth rate (11.6 percent). Although the relatively high import demand contributed to the strengthening of intra-regional trade, East Asia generally increased its import shares for most major traded products (see Trade Trends 8 that follows). Among the larger East Asian exporters, China, Indonesia, Republic of Korea, Philippines, and Taiwan (China) experienced major competitive share gains in regional markets Two additional developments relating to Asia should be noted. First, ASEAN appears to have played a relatively minor role in the expansion of East Asian intra-trade trade. This is reflected in the fact the share of all regional countries' exports to ASEAN increased by little more than a percentage point. Second, a sizeable decline (almost 7 percentage points) occurred in the share of East Asia's exports going to Japan. The latter's longer-term economic and financial problems were, no doubt, contributing factors. 4 On strategic grounds there are reasons why a country should be concerned about the direction of its trade. For example, prior to World War II the United States, initiated studies to determine how an outbreak of hostilities might affect imports of strategic materials 'from geographically remote areas. More recent investigations stress the need for' countries to diversify the origins and destinations of their trade to avoid unfavorable monopoly effects associated with excessive concentration (see, among others, Hufbauer and O'Neill 1966, or Yeats (1990)). Geographic diversification has also been advised as a means of mitigating effects of unfavorable economic developments within a single major market. Countries whose recent trade was strongly oriented toward Gernany or Japan probably were negatively affected by the persistent depressed economic conditions in these markets. 6 Table 2. 1 The Geographic Destinations of East Asian Exports; 1985, 1995, 2000 Global Share of Total Exports Destined For (%) Exports East Of which: Australia/ South Sub-Sahara Rest of East Asian Country Year ($ Million) Asia* China ASEAN Japan EU (15) NAFTA New Zealand Asia Africa World Brunei 1985 2,864 32.2 0.0 20.7 66.6 1.2 0.1 0.0 0.0 0.0 0.0 1995 2,573 37.0 0.0 20.4 52.2 8.2 1.7 0.7 0.0 0.1 0.2 2001 3,632 32.8 4.1 16.3 46.7 1.5 11.7 7.0 0.1 0.0 0.2 Carnbodia 1985 8 44.8 7.8 37.0 2.6 0.0 3.9 0.0 0.1 0.0 48.5 1995 393 70.1 1.5 63.1 1.9 14.5 1.6 0.1 7.7 0.1 4.0. 2001 1,719 10.6 2.0 6.8 3.8 24.1 60.1 0.2 0.0 0.3 0.9 China 1985 31,356 34.7 0.0 10.5 20.8 10.0 14.7 1.2 1.4 1.2 15.9 1995 232,623 39.0 0.0 4.5 15.4 13.9 22.7 1.6 0.9 0.5 6.0 2001 415,879 30.7 0.0 5.0 13.9 15.3 29.5 1.6 0.9 1.1 6.9 Hong Kong 1985 24,071 27.6 19.8 4.6 3.2 18.1 40.4 2.5 0.9 0.6 6.8 1995 55,742 35.9 15.4 15.7 4.9 24.1 21.5 1.8 2.1 1.7 8.1 2001 59,682 35.2 15.8 14.2 2.4 26.3 19.2 1.5 4.0 1.6 9.8 Indonesia 1985 19,684 9.9 1.7 2.0 51.8 7.5 25.5 1.5 0.6 0.0 3.1 1995 47,885 25.1 4.3 5.9 29.7 16.9 18.0 2.6 1.4 0.4 5.9 2001 63,149 27.2 6.2 7.6 23.6 15.6 19.2 3.7 2.9 1.3 6.7 Korea 1985 25,207 10.2 0.0 5.2 16.4 11.5 47.7 1.7 1.8 0.6 10.1 1995 117,907 34.2 8.7 13.8 14.7 12.7 24.2 1.8 1.6 1.5 9.4 2001 163,645 34.1 14.3 10.0 10.5 12.0 26.7 1.8 1.7 2.0 11.2 Laos 1985 22 76.6 43.8 30.0 5.5 5.1 3.2 4.7 0.3 0.7 3.9 1995 345 55.1 1.9 47.7 8.6 29.6 3.9 0.0 0.0 0.0 2.7 2001 364 60.3 2.0 56.9 1.9 32.7 1.7 0.3 0.1 0.0 3.0 Malaysia 1985 17,947 38.1 1.1 26.5 24.2 13.1 14.1 1.6 4.1 0.5 4.2 1995 86,288 43.6 2.4 30.6 12.2 13.1 22.8 1.8 2.4 0.3 3.8 2001 111,429 42.0 5.6 24.4 11.5 12.9 23.9 2.4 2.3 0.5 4.6 Mongolia 1985 94 4.1 2.1 1.9 8.1 15.0 4.0 0.0 0.1 0.8 68.0 1995 380 29.2 26.5 0.0 23.8 10.1 6.7 0.0 0.1 0.0 30.2 2001 489 49.6 49.0 0.1 2.2 8.1 31.2 0.0 0.3 0.2 8.5 Table 2.1 Continued. Global Share of Total Exports Destined For (%/6) Exports East Of which: Australia/ South Sub-Sahara Rest of East Asian Country Year ($ Million) Asia* China ASEAN Japan EU (15) NAFTA New Zealand Asia Africa World Philippines 1985 6,112 17.5 1.6 8.4 20.5 16.5 39.6 1.9 0.5 0.0 3.4 1995 19,780 23.5 1.4 11.4 17.7 15.5 39.6 1.1 0.2 0.0 2.4 2001 42,870 34.4 4.5 13.4 15.0 16.1 31.2 0.8 0.2 0.1 2.2 Singapore 1985 17,199 35.1 1.4 22.1 9.3 10.8 26.8 5.0 4.7 0.5 7.7 1995 88,629 44.0 3.8 23.0 7.7 14.8 22.9 2.4 2.3 0.9 5.0 2001 93,268 44.8 5.5 22.4 5.8 14.7 18.6 2.7 5.1 1.2 7.1 Taiwan, China 1985 33,610 14.9 0.0 5.9 10.2 10.2 55.9 2.9 0.5 0.5 5.0 1995 122,940 39.9 12.0 12.2 11.7 13.5 27.0 2.0 0.4 0.3 5.1 2001 151,981 41.1 18.0 11.1 9.3 14.7 27.1 1.3 0.9 0.2 5.3 Thailand 1985 7,787 25.4 3.4 14.4 13.3 22.4 21.1 1.9 2.5 3.9 9.5 1995 54,837 32.0 2.9 19.7 18.5 16.6 23.4 1.7 1.1 1.4 5.3 2001 72,746 33.5 6.5 17.0 14.2 15.7 24.0 2.4 1.5 1.7 7.0 Vietnam 1985 407 44.9 0.0 20.3 16.1 5.8 0.4 2.0 1.7 1.0 28.0 1995 6,222 30.8 5.3 15.2 27.6 24.5 4.4 3.9 0.3 0.7 7.8 2001 14,894 29.2 6.8 15.3 17.5 26.8 8.8 8.2 0.5 1.1 7.8 All Above Countries 1985 186,156 23.7 3.2 10.2 19.0 12.0 33.0 2.2 1.7 0.7 7.9 1995 839,045 37.5 5.2 13.7 14.1 14.8 23.4 1.8 1.3 0.7 6.0 2001 1,194,401 35.0 7.0 11.5 12.1 15.3 25.9 2.0 1.7 1.1 7.1 MEMO ITEM East Asian Countries 1985- 11.3 3.8 1.3 -6.9 3.3 -7.1 -0.2 0.0 0.4 -0.8 Export Share Change 2001 Major Market Import 11.6 10.2 12.1 6.4 8.1 8.3 6.8 7.1 4.9 6.9 Growth Rate (%/_) * Brunei, Cambodia, China, Republic of Korea, Hong Kong, Indonesia, Lao PDR, Malaysia, Mongolia, Philippines, Singapore, Taiwan (China), Thailand, Vietnam Source: IMF Direction of Trade statistics. 8 One surprising observation is decline in the share of several East Asian countries (Philippines, Taiwan, Hong Kong, and Korea) exports going to NAFTA, which had a relatively high growth rate (8.3 percent annually) for global imports. Previous empirical analyses projected NAFTA preferential tariffs, which discriminate against non-member countries, would cause some diversion (mainly by Mexico) of East Asian exports to North America, and Table 2.1 suggests this occurred (Safadi and Yeats, 1996). Trade Trends 3 Does Size Matter? Kea Point The five largest regional exporters account for 80 percent of East Asian intra-trade. At the other extreme, the five smallest regional traders, namely, Brunei, Cambodia, Lao PDR, Mongolia. and Vietnam have a combined regional export share under 2 percent. If size is measured by gross domestic product somewhat greater inequalities are observed as China alone accounts for about 43 percent of regional GDP, as opposed to its 30 percent share of intra-regional trade. If countries that are engaged in regional trade differ markedly in their economic size this potentially could have negative implications for perceptions concerning the benefits of this exchange. In cases, changes in the macroeconomic, fiscal, or monetary policies of a large country have had major adverse effects on smaller RTA members. As an example, Brazil is the dominant member of the original Latin American MERCOSUR agreement (other original members include Argentina, Paraguay and Uruguay) with a GDP two and one-half times larger than that of the three smaller members combined, and a population almost four times greater. Brazil's major devaluation of the Real in the late 1990s resulted in significant export losses for Argentina, whose own currency was then tied to the United States dollar. This chain of events contributed to Argentina's present economic and financial problems. Some analysts have also argued that significant differences in the size of intra-regional trade flows can potentially have negative effects for some partner countries if resources are drawn disproportionately to areas where production for export is relatively high (see Jabar 1971, or Healey 1977). The unequal sharing of benefits due to disparities in regional trade shares may have contributed to the collapse of the Latin Americas Free Trade Area (LAFTA) and original Andean Pact agreement (Viatsos 1978). In the case of the latter, one country (Venezuela) originated more than 60 percent of all members' exports. More recently, Michaely (1994) demonstrated the lack of similarities between member countries major imports and exports also played a role in the failure of these agreements. How important are relative size differences in East Asian regional trade shares, or in the share of regional GDP originating in each country? Table 3.1 shows the value and share of regional exports that originated in each East Asian country in 1985, 1995 or 2001, along with its current share of regional gross domestic product. As indicated, the five largest regional exporters now account for 80 percent of intra-trade, although China is the dominant supplier originating almost one-third of this exchange. At the other end of the spectrum, the five smallest regional exporters, namely, Brunei, Cambodia, Lao PDR, Mongolia and Vietnam have a combined trade share under 2 percent. In addition, the data suggest the relative size differences have been increasing. Over 1985-2001 the share of the current five largest countries in regional trade rose by almost 10 percentage points, due largely to China and the Republic of Korea. If size is measured by the origins of regional gross domestic product a somewhat different picture emerges. China alone accounts for 43 percent of regional GDP (it originates about 30 percent of intra- regional trade) as opposed to about one-tenth of a percent for Cambodia, Laos, and Mongolia. Aside from China the greatest disparities in the "size" measures occur for Singapore and Malaysia where their regional trade shares are roughly three times high than their GDP shares. 9 Finally, there is the problem of how to properly account for the proper size of China in any East Asian regional arrangement. As indicated in the memo item, greater China, that is, China plus Hong Kong plus Taiwan would originate about one-half of all regional exports, and absorb about 55 percent of regional imports (import data not shown in Table 3.1). Currently, China and Hong Kong generate about 50 percent of regional GDP and this share would rise to about 65 percent if Taiwan (China) were included. For comparison, at the time of the original EU formation Germany, the largest country, produced about 30 percent of the member's gross domestic product. Greater China, like Brazil in MERCOSUR, clearly is of major importance in East Asian regional intra-trade. Table 3. 1 The Share of Intra-Regional Trade Accounted for by Individual East Asian Exporters: 1985, 1995 and 2001 2000 Intra-Regional Export Value* Share of Intra-Regional Share of ($million) Exports (%)* Regional Exporter 1985 1995 2001 1985 1995 2001 GDP Brunei 922 951 1,192 2.1 0.3 0.3 0.4 Cambodia 3 276 182 . 0.1 0.1 China 10,867 90,799 127,796 24.7 28.9 30.6 43.1 Hong Kong 6,637 20,016 20,981 15.1 6.4 5.0 .5 Indonesia 1,953 12,008 17,155 4.4 3.8 4.1 4.2 14.4 Korea 2,559 40,346 55,748 5.8 12.8 13.3 0.1 Lao PDR 17 190 220 0.1 0.1 3.3 Malaysia 6,844 37,642 46,759 15.5 12.0 11.2 0.1 Mongolia 4 111 242 0.0 0.0 0.1 2.9 Philippines 1,071 4,645 14,736 2.4 1.5 3.5 3.8 Singapore 6,032 38,979 41,806 13.7 12.4 10.0 13.9 Taiwan, China 4,994 49,069 62,477 11.3 15.6 14.9 5.0 Thailand 1,982 17,548 24,359 4.5 5.6 5.8 1.2 Vietnam 182 1,916 4,354 0.4 0.6 1.0 100.0 All Above Countries 44,067 314,496 418,007 100.0 100.0 100.0 50.6 MEMO ITEM 64.5 China and Hong Kong 17,504 110,815 148,777 39.8 35.3 35.6 China, Hong Kong and Taiwan 22,498 159,884 211,254 51.1 50.9 50.5 21.0 ASEAN 19,006 114,155 150,763 43.1 36.3 36.1 * Brunei, Cambodia, China, Republic of Korea, Hong Kong, Indonesia, Lao PDR, Malaysia, Mongolia, Philippines, Singapore, Taiwan (China), Thailand, Vietnam Source: IMF Direction of Trade data. 10 Trade Trends 4 Regional Implications of China's Emergence Kev Point Over 1995-2001, East Asia's exports to China grew at an average annual rate of 11.5 percent, which was far above the corresponding 3.8 percentage growth rate for world trade. China's internal contra-cyclical policies, and its maintenance of a stable exchange rate during this period, are generally viewed as important factors helping to contain the effects of the Asian financial crisis. Furthermore, the profile of China's imports and exports is changing in directions that facilitate the international segmentation of production processes. As a result, the interdependence of China and the East Asian countries has been rapidly increasing. Since the mid-1980s China has become an increasingly important factor in both world and East Asian regional markets. In 1985, China accounted for about 1.6 percent of global exports as opposed to about 6.5 percent in 2001. Viewed somewhat differently, in 1985 China's global exports were about 40 percent lower than the combined exports of all Sub-Saharan African countries. In 2001, just 16 years later, China's exports were more than four times higher. China's emergence has had a major positive impact on the trade of other East Asian countries. For example, over 1995-2001 East Asia's exports to China grew at an average annual rate of 11.5 percent, which was far above the corresponding 3.8 percentage growth rate for world trade. China's internal contra-cyclical policies, and its maintenance of a stable exchange rate during this period, are generally viewed as important factors helping to contain the effects of the Asian financial crisis. At present, China's regional trade is more that double that of Taiwan (China) which is the second largest East Asian exporter (see Table 3.1). A point that has received less attention, however, is that major changes also occurred in the structure of China's trade with East Asia that also have important implications for the region. The share of machinery and transport equipment products in China's regional exports rose almost seven fold (to 38 percent) since 1985, while sizeable declines occurred in the trade shares for foodstuffs, agricultural materials, and mineral fuels. There is evidence that the magnitude of ties between China and the regional countries are rapidly growing in relative importance. For example, analyses based on the use of so called "trade intensity" indices show that trade between China and individual East Asian countries is considerably greater than what should be expected based their proximity and relative size in world trade (see Trade Trends 8 that follows). As an illustration of the changing nature of China's trade with East Asia, Table 4.1 lists China's 30 largest four-digit imports from other East Asian countries in 2001 and also shows their value and share in 1987 and 1995.5 The three largest products, which account for approximately 15 percent of total regional imports, consist of parts and components for further assembly. Often these components are produced in relatively high wage countries, like Singapore or the Republic of Korea, who then capitalize on China's relatively low wage costs for product assembly - which is often a labor intensive process. The growth of some component product imports has been remarkable. For example, from 1995 to 2001 imports of office machinery parts grew approximately six fold, while imports of electronic microcircuits are now nine times their corresponding level in 1995. As a result of this internationalization of product processes the interdependence of China and other East Asian countries has been greatly strengthened. 5 Although data on China's total imports and exports are available from the IMF Direction of Trade Statistics, only UN COMTRADE records provide a detailed breakdown of the products traded in terms of the Standard International Trade Classification system China did not report trade statistics to the UN prior to 1987 so this is the first year for which product line trade data are available for analysis. Table 4.1 The 30 Largest PrOducts in China's Imports from East Asia; 1987, 1995 and 2001 Export Value ($000) Export Share (%) SITC Product 1987 1995 2001 1987 1995 2001 7599 Parts of office machines 50,722 490,818 2,869,804 0.94 1.88 6.45 7764 Electronic microcircuits 10,199 228,983 2,021,807 0.19 0.88 4.54 7649 Parts of telecom equipment 473,013 1,235,248 1,570,519 8.75 4.74 3.53 5138 Poly-carbonic acids 890 230,246 1,084,298 0.02 0.88 2.44 5831 Polyethylene 42,910 548,252 997,861 0.79 2.10 2.24 5833 Polystyrene 68,824 535,690 806,538 1.27 2.06 1.81 7284 Special industry machines 73,015 460,893 716,848 1.35 1.77 1.61 3330 Petroleum oils 0 803,865 628,421 0.00 3.09 1.41 5112 Cyclic hydrocarbons 6,252 408,371 626,479 0.12 1.57 1.41 7768 Piezo-electric crystals 7,925 70,075 622,133 0.15 0.27 1.40 7762 Electrical valves and tubes 177 13,024 581,159 0.00 0.05 1.31 6552 Knitted fabrics 100,251 460,805 569,087 1.85 1.77 1.28 7761 Television picture tubes 2,857 146,215 549,693 0.05 0.56 1.24 5834 Polyvinyl chloride 56,122 212,458 548,773 1.04 0.82 1.23 6746 Iron sheets and plates 4 180,986 540,908 0.00 0.69 1.22 8451 Jerseys and pullovers 56,820 191,990 530,948 1.05 0.74 1.19 5121 Acyclic alcohols 20,104 90,731 517,723 0.37 0.35 1.16 6573 Coated textile fabrics 29,992 247,752 450,836 0.55 0.95 1.01 6114 Bovine leather 27,685 465,378 443,100 0.51 1.79 1.00 5832 Polypropylene 33,466 405,059 440,034 0.62 1.56 0.99 3413 Petroleum gases 136 158,981 430,925 0.00 0.61 0.97 7524 Digital storage units 17 41,937 422,290 0.00 0.16 0.95 7788 Other electrical machinery 25,693 150,333 420,781 0.48 0.58 0.95 2320 Natural rubber 378,006 369,856 415,131 6.99 1.42 0.93 6727 Iron or steel coils 0 116,099 410,476 0.00 0.45 0.92 4242 Palm oil 5,963 687,280 408,704 0.11 2.64 0.92 8471 Clothing accessories 50,182 109,219 405,531 0.93 0.42 0.91 6412 Printing paper 295 268,817 394,777 0.01 1.03 0.89 6522 Cotton fabrics 227,577 392,338 380,991 4.21 1.51 0.86 6531 Synthetic fabrics 30,499 377,074 380,585 0.56 1.45 0.86 0 to 9 All above products 1,779,594 10,098,773 21,187,159 32.92 38.77 47.62 All goods 5,406,025 26,046,467 44,488,304 100.00 100.00 100.00 Source: UN COMTRADE statistics While parts and components also appear in the list of China's major regional exports (often these products are manufactured in association with Hong Kong - see Trade Trends 18), Table 4.2 suggest East Asian countries often draw on China as a supplier of goods normally produced using labor intensive manufacturing processes. The textile, clothing and footwear products listed in the table account for about 14 percent of China's regional exports. This share increases to over 20 percent if other items, like toys and footwear, which are normally produced by labor intensive processes, are included. Although the exact dimensions of this activity cannot be determined, World Bank (1994) consultations with Chinese government officials using thread, fabrics, or other unassembled or partly assembled materials produced abroad. China actively encourage these types of operations through the use of duty drawback schemes and other trade incentives on intermediate good imports that will be further processed and then exported. As such, both China's imports and exports reflect rapidly growing interdependence with other Asian countries due to the international "splitting up" of production processes. 12 Table 4.2 The 30 Largest Products in China's Exports to East Asia; 1987, 1995 and 2001 Export Value ($000) | Export Share (%) SITC Product 1987 1995 2001 1987 1995 2001 8942 Children stoys. 747,991 4,997,380 5,804,360 4.16 5.54 4.67 7599 Parts of office machinery 44,387 1,539,151 5,613,303 0.25 1.71 4.52 8510 Footwear 265,788 6,080,400 4,832,699 1.48 6.74 3.89 7649 Parts of telecom equipment 159,007 1,722,096 4,454,386 0.88 1.91 3.58 8451 Jerseys and pullovers 464,827 1,861,786 3,610,732 2.59 2.06 2.91 8310 Travel goods 563,662 3,140,776 3,130,025 3.14 3.48 2.52 7712 Electric power machinery 30,873 942,769 2,517,265 0.17 1.04 2.03 7643 Radiotelephonic equipment 3,949 674,338 2,427,842 0.02 0.75 1.95 8459 Knit outer garments 367,769 1,031,914 2,021,568 2.05 1.14 1.63 7638 Sound recorders 42,345 1,022,828 1,957,036 0.24 1.13 1.57 8439 Other outer garments 246,762 1,272,787 1,846,140 1.37 1.41 1.49 8462 Under garments 198,525 1,499,694 1,836,566 1.10 1.66 1.48 8939 Miscellaneous articles 107,399 1,170,145 1,798,534 0.60 1.30 1.45 7525 Peripheral control units 5,366 215,958 1,749,821 0.03 0.24 1.41 7788 Other electrical machinery 51,935 617,227 1,674,432 0.29 0.68 1.35 7641 Telephonic line 60,177 838,522 1,665,002 0.33 0.93 1.34 7721 Switches and relays 39,395 689,593 1,565,098 0.22 0.76 1.26 7764 Electronic microcircuits 1,918 222,354 1,540,239 0.01 0.25 1.24 7524 Digital storage units 0 439,188 1,520,902 0.00 0.49 1.22 6552 Knitted fabrics 136,737 705,440 1,455,088 0.76 0.78 1.17 6522 Cotton fabrics 515,919 1,763,450 1,420,636 2.87 1.95 1.14 7162 Electric motors 29,141 924,022 1,415,277 0.16 1.02 1.14 3222 Other coal 84,722 554,337 1,389,743 0.47 0.61 1.12 7758 Electro-thermal appliances. 109,531 1,088,780 1,297,473 0.61 1.21 1.04 7731 Insulated electrical wire 31,174 597,212 1,292,963 0.17 0.66 1.04 8851 Watches and movements 221,653 1,462,017 1,258,668 1.23 1.62 1.01 7722 Printed circuits and parts 11,073 233,719 1,228,034 0.06 0.26 0.99 8811 Photographic cameras 33,758 622,677 1,156,399 0.19 0.69 0.93 7757 Domestic appliances 84,288 976,719 1,103,904 0.47 1.08 0.89 8423 Trousers 235,975 858,065 1,071,445 1.31 0.95 0.86 All above products 4,896,049 39,765,344 65,655,581 27.24 44.06 52.83 0 to 9 All goods 17,975,100 90,243,269 124,282,677 100.00 100.00 100.00 Source: United Nations COMTRADE records. Prior to 1987 China did not report trade statistics to the United Nations. 13 Trade Trends 5 East Asian Regional Intra-Trade (Who is Dependent - Who is Not?) Ke. Point Overall, East Asian average intra-trade shares for both exports and imports increased significantly during 1985-2001, thus, indicating increased dependency on regional trade. Seven of the 14 East Asian countries now draw on regional suppliers for 50 percent, or more, of their total imports, while only Lao PDR directs more than one-half its exports to the region. Increased dependency is reflected in all countries' regional import and export shares, although China's increasing reliance on non-regional markets for its exports constitutes an important exception. Available evidence does not indicate smaller countries are more dependent on regional markets for trade. Several published studies show larger countries often are able to export a broader range of products that, in turn, helps them extend the geographic directions of their trade.6 If they have a larger trade base larger, or wealthier, countries may be better able to develop required logistical infrastructure to maintain commercial relations with a greater number of trading partners. If this is the case it might be presumed that the smaller East Asian countries may be more dependent on relatively near regional markets. As such, an important question is what variation exists in individual country's dependency on regional markets, and what factors account for these differences. The top one-half of Table 5.1 provides information on individual East Asian country's trade dependency by reporting global export values and the share of this exchange destined for regional markets. The lower one-half of the table provides corresponding information on imports. In each case, the share of the country in regional GDP (a measure of relative size) is shown for an initial assessment of the relationship between size and regional trade dependency. Two points are evident from these statistics, * East Asian average shares for both regional exports and imports increased by 11 and 15 percentage points, respectively, over 1985-2001, thus indicating increased dependency on regional trade. Increased dependency is reflected in all 14 countries regional import shares, although the relative importance of non-regional markets increased for China's exports. Some of the shares, however, appear to be quite volatile. For example, fromt 1995 to 2001 the share of Cambodia's exports destined for regional markets fell by 60 percentage points to about 10 percent. Over the same, relatively short, period a 20 percentage point increase occurred in Mongolia's regional export share. * Sizeable differences exist in the individual East Asian country's trade dependency ratios in the case of both imports and exports. Hlowever, the relative variation is considerably larger for imports, as reflected in a coefficient of variation of 42.9 percent, as opposed to 30.8 percent for exports. Laos PDR and Cambodia currently source about 90 percent of their total imports from regional countries, while 60 percent of the formers exports go to other East Asian countries. However, there is no indication that these variations are associated with country size. Statistical tests indicate the dependency ratios are not 6 Khalaf (1974) examined the relationship between country size and trade concentration and determined that small countries' exports were generally less diversified. Tuong and Yeats (1977) extended these findings and showed smaller countriDs often were able to maintain relatively fewer trade contacts. In the 1960s and 1970s, these investigations were motivated by the proliferation of new small states, particularly in Africa, and the feeling that there may be some critical size below which countries were not economically viable. More recently, Ng and Yeats (2002) determined that a relatively strong relationship still existed between the size of Sub-Saharan African countries and the diversity of their exports. 14 significantly correlated with the relative size of each country's global exports or imports, or the share of the country in regional gross domestic product. In spite of previous evidence that size can influence the direction of a country's trade, it does not appear to be an important factor in East Asia. Table 5. 1 The Share of Intra-Regional Trade in East Asian Imports and Exports; 1985, 1995 and 2001 Global Trade Value Share of Intra-Regional Trade in ($Million) Imports or Exports (%) East Asian Trader* 1985 1995 2001 1985 1995 2001 EXPORTS Brunei Darussalam (0.4) 2,864 2,573 3,632 32.2 37.0 32.8 Cambodia (0.1) 7 393 1,719 52.2 70.1 10.6 China (43.1) 30,928 232,487 414,884 35.1 39.1 30.8 Hong Kong, China (7.5) 24,108 56,163 59,649 27.5 35.6 35.2 Indonesia (4.2) 19,661 47,987 63,132 9.9 25.0 27.2 Korea (14.4) 25,240 118,360 163,645 10.1 34.1 34.1 Lao P. D. Rep. (0.1) 22 345 364 75.2 55.1 60.3 Malaysia (3.3) 17,982 86,557 111,422 38.1 43.5 42.0 Mongolia (0.1) 81 380 489 4.7 29.2 49.6 Philippines (2.9) 6,110 19,802 42,870 17.5 23.5 34.4 Singapore (3.8) 17,208 88,932 93,178 35.1 43.8 44.9 Taiwan, China (13.9) 33,797 123,903 151,942 14.8 39.6 41.1 Thailand (5.0) 7,771 54,975 72,624 25.5 31.9 33.5 Vietnam (1.2) 377 6,189 14,851 48.4 31.0 29.3 All Above Exporters 186,156 839,044 1,194,400 23.7 37.5 35.0 IMPORTS Brunei Darussalam (0.4) 663 3,090 1,202 55.2 62.3 70.8 Cambodia (0.1) 28 1,430 1,962 68.9 84.1 .89.4 China (43.1) 38,189 145,981 222,108 23.0 52.1 49.8 Hong Kong, China (7.5) 29,469 169,508 173,798 46.8 54.6 60.0 Indonesia (4.2) 7,778 36,079 31,526 13.8 25.8 37.3 Korea (14.4) 21,380 119,208 131,076 13.4 18.7 25.8 Lao P. D. Rep. (0.1) 53 593 651 64.5 81.2 90.7 Malaysia (3.3) 11,742 76,021 73,251 44.4 45.2 51.6 Mongolia (0.1) 87 489 596 7.5 24.7 39.1 Philippines (2.9) 5,743 29,236 39,596 34.1 33.6 37.1 Singapore (3.8) 25,560 114,164 111,074 39.2 42.2 43.5 Taiwan, China (13.9) 18,169 94,962 100,776 12.7 22.3 31.4 Thailand (5.0) 7,972 65,690 55,671 33.4 31.6 36.2 Vietnam (1.2) 576 9,942 15,028 33.4 68.1 64.9 All Above Importers 167,409 866,393 958,314 29.4 39.8 44.5 * Statistics in parentheses show the 2000 share of each economy in regional gross domestic product. This has been included as a measure of market size to help determine if larger economies are generally less dependent on regional trade. Source: IMF Direction of Trade Data 15 If size is not a factor, what explains the variation in regional trade shares observed in Table 5.1. Almost certainly considerations relating to comparative advantage have an influence. Some countries comparative advantage may, more strongly, direct trade toward non-regional market to better exploit differences in natural resource endowments or differences in worker wage costs or productivity. Government imposed trade barriers may also be important. For example, Safadi and Yeats (1993) determined that Asian trade barriers often escalate sharply with commodity processing. This appeared to be an important barrier to increased regional trade in processed natural resource based products. In addition, there is a growing appreciztion of the importance of the influence of international transport costs on the direction of trade. The World Bank (2003), for example, cites evidence that on some liner routes transport and insurance costs may double the fob cost of products exported from Vietnam, Laos and Cambodia. Trade Trends 6 Changing Geographic Patterns of Regional Trade Dependency Key Point The relative importance of China as a destination for regional exports significantly increased since the mid-1980s, and this trencd appears to have sharply accelerated since 1995. In part, China's maintenance of a stable exchange rate, in the face of major devaluations in other East Asian currencies, appears to have contributed to its recent increased importance as a regional market. The conclusion that East Asian countries became increasingly interdependent in trade raises questions concerning the factors responsible. Was a diversification of products exported a factor promoting regional trade, or did increased opportunities for intra-industry trade play a role? Do the changes reflect an increasing complementarity of regional exports and imports, were the gains due to increased competitiveness of East Asian exporters, or were growing opportunities for international production sharing a factor. While these points will be addressed in sections that follow, the focus here is on the intra-regional geographic pattern of this increased dependency. Specifically, was the overall increase in the importance of trade clue to a relatively few countries, or was it generally broad based across the region? For answers, a 1985, 1995 and 2001 bilateral regional matrix of export shares for each East Asian country's exports was first constructed (see Appendix Table A6.1). Next, differences in the 1985-2001 and 1995-2001 shares were calculated, and the largest positive and negative changes identified. The intention here was to try and determine how the direction of regional trade was changing, both in the longer term and over the period of the East Asian financial crisis. Information on the longer-term 1985-2001 East Asian trade share changes is summarized in Table 6.1. As an example, the table showS China's largest positive 1985 to 2001 export share increase (a gain of over 10 percentage points) occurred in trade with Korea, while the second largest gain (4.6 points) was in trade with Taiwan (China). In contrast, the share of China's regional exports destined for Singapore fell by 15 percentage points. The largest of all bilateral regional trade share gains was recorded for Mongolia's exports to China (up 46 percentage points), while the largest decline (down almost 54 percentage points) was for Laos PDR exports to China.. Similarly, Table 6.2 provides similar statistics for the recent 1995- 2001 period. The statistics in Table 6.1 confirm the longer-term increase in China's relative importance as a destination for regional exports during 1985-2001, but the data in Table 6.2 strongly suggest China's this swing toward China accelerated over 1995-2001. For example, 11 of the 13 countries listed in Table 6.2 record their largest, or second largest regional trade share increase for exports to China. In this six year 16 Table 6.1 Major Changes in East Asian Regional Trade Dependency: 1985-2001. Export Markets Increasi g In Relative Importance Largest Market Share Second Largest Market Share Largest Declining Increase Increase Market Share % Point % Point % Point Exporter Importer Change Importer Change Importer Change Brunei Korea 13.7 China 12.4 Singapore -11.4 Cambodia Thailand 6.8 Hong Kong 6.5 Vietnamn -23.1 China Korea 10.4 Taiwan, China 4.6 Singapore -15.3 Hong Kong Malaysia 5.9 Singapore 5.9 China -26.9 Indonesia Malaysia 6.0 China 5.8 Korea -8.1 Korea China 42.0 Taiwan, China 4.7 Hong Kong, China -25.2 Lao PDR Thailand 33.5 Vietnam 31.3 China -53.8 Malaysia China 10.4 Hong Kong, China 8.3 Singapore -11.6 Mongolia China 46.2 Korea 1.0 Vietnarn -47.4 Philippines Taiwan, China 12.4 China 4.2 Malaysia -9.0 Singapore China 8.3 Vietnam 5.1 Malaysia -10.1 Taiwan, China China 43.8 Vietnam 3.0 Hong Kong, China -31.5 Thailand China 6.0 Indonesia 3.8 Malaysia -10.0 Vietnam China 23.2 Taiwan, China 9.6 Hong Kong, China -48.7 Source: IMF Direction of Trade Data. period, the regional share of Brunei, Cambodia, Korean, Taiwan (China), and Thailand's exports to China rose by 10 percentage points, or more, with the increase for Cambodia and Korea exceeding 16 points. However, in cases these recent changes were clearly part of a longer-term trend. For example, Table 6.1 shows that over 1985-2001 the share of Korea's exports destined for China rose by 42 percentage points. Roughly two-fifths of this increase occurred within the 1995-2001 sub-interval. Apart from the longer-term trends, what factors account for the recent acceleration in the importance of China in regional trade. In part, one important factor was China's economic policies during the period of the Asian financial crisis. China is widely seen as having contributed to stability in 1997-98 by maintaining a fixed exchange rate in the face of major devaluations of other East Asian currencies. The combination of a strong currency and strong growth in China, set against weakening currencies in other East Asian countries, clearly contributed to the re-orientation of trade regional toward Chinese markets. Table 6.2 Major Changes in East Asian Regional Trade Dependency: 1995-2001. Export Markets Increasi g In Relative Importance Largest Market Share Second Largest Market Share Largest Declining Increase Increase Market Share % Point % Point % Point Exporter Importer Change Importer Change Importer Change Brunei China 12.4 Thailand 2.1 Singapore -8.3 Cambodia China 17.0 Singapore 14.7 Thailand -51.5 China Korea 2.2 Taiwan, China 1.2 Hong Kong, China -8.3 Hong Kong Indonesia 3.0 Hong Kong, China 1.7 Singapore -7.2 Indonesia China 5.6 Malaysia 3.0 Hong Kong, China -4.9 Korea China 16.5 Taiwan, China 1.3 Hong Kong, China -7.1 Lao PDR Vietnam 8.8 Thailand 3.9 Taiwan, China -7.6 Malaysia China 7.8 Korea 2.1 Singapore -8.1 Mongolia China 8.1 Thailand 0.1 Korea -7.7 Philippines Taiwan, China 8.2 China 7.3 Singapore -5.2 Singapore China 3.6 Indonesia 2.9 Thailand -3.9 Taiwan, China China 13.7 Indonesia 2.6 Hong Kong, China -11.9 Thailand China 10.1 Indonesia 2.0 Singapore -15.4 Vietnarn China 5.9 Thailand 5.3 Taiwan, China -4.5 17 Appendix Table A6.1 The Origins and Destinations of East Asian Intra-Trade in 1985, 1995 and 2001 Regional Share of Re ional Ex orts Destined For (%O Origin of Exports Hong Rep. of Taiwan Regional Exports Year ($ Mill.) China Kong Indonesia Korea Malaysia Philippines Singapore (China) Thailand Vietnam Others* Brunei 1985 922 0.0 0.1 0.1 24.2 0.1 1.6 26.6 11.4 35.9 0.0 1995 951 0.0 0.1 0.0 39.5 0.4 0.8 23.5 5.3 30.4 0.0 2001 1,192 12.4 0.1 1.4 37.9 0.4 0.0 15.2 0.0 32.5 0.0 Cambodia 1985 3 17.5 0.0 0.0 . 10.8 0.0 33.8 0.0 0.0 37.9 1995 276 2.1 4.5 1.6 0.0 5.3 0.0 15.3 3.5 58.3 8.5 1.0 2001 182 19.1 6.5 0.4 3.9 10.4 1.8 30.0 5.8 6.8 14.8 0.6 China 1985 10,867 -- 69.6 2.3 0.0 2.3 2.7 20.9 . 2.0 0.0 0.1 1995 90,799 76.8 1.6 8.2 2.9 0.7 4.5 3.4 2.3 0.4 0.3 2001 127.796 -- 68.5 2.4 10.4 3.0 0.7 5.6 4.6 2.9 1.6 0.2 Hong Kong 1985 6,637 71.8 -- 0.8 6.7 3.1 3.2 7.4 4.8 1.6 0.4 0.1 1995 20,016 43.0 . 1.4 4.2 8.4 6.9 20.5 9.2 3.7 2.1 0.7 2001 20,981 44.9 4.4 5.9 9.0 6.0 13.3 8.8 3.9 2.8 1.0 Indonesia 1985 1,953 16.9 7.7 34.2 7.1 9.7 . 21.2 3.1 0.0 1995 12,008 17.1 13.6 27.7 10.1 5.2 . 17.9 5.6 1.6 1.2 2001 17,155 22.7 8.7 -- 26.1 13.1 4.4 . 14.7 8.0 2.2 0.3 Korea 1985 2,559 0.0 41.6 8.0 -- 10.8 8.4 16.5 7.3 7.3 0.1 1995 40,346 25.5 23.5 6.1 7.9 3.5 13.4 10.7 6.1 3.1 0.2 2001 55,748 42.0 16.4 6.5 -- 5.3 3.5 6.9 12.0 3.8 3.4 0.3 Laos 1985 17 57.2 3.6 0.0 0.0 0.0 0.0 10.5 0.0 7.1 21.7 1995 190 3.4 0.5 0.0 0.0 0.0 0.0 5.6 9.5 36.7 44.2 2001 220 3.4 0.1 0.5 0.2 0.1 0.0 0.2 1.9 40.6 53.0 Malaysia 1985 6,844 2.9 2.5 0.8 18.0 . 5.7 54.6 7.0 8.0 0.0 0.4 1995 37,642 5.5 9.9 6.9 6.7 . 1.7 51.1 7.8 8.6 0.5 1.3 2001 46,759 13.3 10.8 3.7 8.8 I.1I 2.0 43.0 9.0 6.6 1.1 1.7 Mongolia 1985 4 52.6 0.0 . . 0.0 . . . . 47.4 1995 111 90.7 0.5 0.0 8.7 0.1 0.0- 0.0 . 0.0 0.0 2001 242 98.8 0.1 0.0 1.0 0.0 0.0 0.0 . 0.1 0.0 Philippines 1985 1,071 9.9 19.5 2.1 14.1 21.5 . 18.5 9.7 5.6 0.0 1995 4,645 5.9 18.6 1.7 13.1 9.9 . 23.7 13.9 12.5 0.5 0.2 2001 14,736 13.2 13.4 1.0 12.3 12.5 . 17.3 22.1 7.7 0.5 18 Appendix Table A6.1 Continued Regional Share of Regional Exports Destined For (°A Origin of Exports Hong Rep. of Taiwan Regional Exports Year ($ Mill.) China Kong Indonesia Korea Malaysia Philippines Singapore (China) Thailand Vietnam Others* Singapore 1985 6,032 4.0 24.0 13.9 4.4 32.3 2.1 4.6 11.4 0.4 2.9 1995 38,979 8.7 25.9 6.1 5.6 24.7 3.3 7.6 10.7 3.7 3.8 2001 41,806 12.3 22.4 9.0 7.2 22.2 4.3 -- 8.1 6.8 5.5 2.2 Taiwan, China 1985 4,994 . 53.7 5.8 6.7 6.5 3.7 17.5 -- 5.8 0.0 0.3 1995 49,069 30.1 34.1 0.0 5.2 8.1 3.1 10.4 7.0 1.8 0.2 2001 62,477 43.8 22.2 2.6 6.9 6.7 2.6 7.9 -- 4.2 3.0 0.1 Thailand 1985 1,982 13.3 14.9 2.4 7.7 22.0 2.8 27.5 7.4 -- 0.0 2.0 1995 17,548 9.2 15.5 4.2 5.3 11.6 2.4 36.6 8.5 2.5 4.1 2001 24,359 19.3 14.4 6.2 6.5 12.0 3.7 21.2 9.0 -- 3.6 4.2 Vietnam 1985 182 0.0 54.7 3.3 0.0 7.4 0.0 34.1 0.0 0.3 -- 0.1 1995 1,916 17.3 9.1 8.2 10.1 6.5 2.2 23.4 14.1 2.2 6.7 2001 4,354 23.2 6.0 6.9 8.9 7.3 6.4 19.5 9.6 7.5 -- 4.6 All Above 1985 44,067 24.7 15.1 4.4 5.8 15.5 2.4 13.7 11.3 4.5 0.4 2.1 1995 314,496 28.9 6.4 3.8 12.8 12.0 1.5 12.4 15.6 5.6 0.6 0.5 2001 418,007 30.6 5.0 4.1 13.3 11.2 3.5 10.0 14.9 5.8 1.0 0.5 * Includes Brunei, Cambodia, Lao PDR and Mongolia Source: Partner country import statistics drawn from IMF Direction of Trade data 19 Trade Trends i How "Intense" is East Asian Intra-Regional Trade? Ky Point Even after the influence of their relatively close proximity is accountedfor East Asian intra-trade must be generally classified as highly "intense. " Also, the intensity of trade within the region increased markedly over both the full 1985-2001, and the shorter 1995-2001 period For example, in 1985 only 40 percent of all East Asian bilateral trade flows were greater than expected, based on the countries' shares in world trade, as opposed to 61 percent in 2001. Trade relations between most East Asian countries have been growing sharply in terms of their intensity and importance! Several statistical indices can provide useful insights concerning aspects of East Asian intra- trade. One such measure -- the so called "trade intensity" or TI index - has been used to determine whether the value of trade between two countries is greater, or smaller, than should be expected based on their relative importance in world trade. For example, IMF Direction of Trade statistics report that approximately 46 percent of Indonesia's 2001exports went to other East Asian countries. Is this above, or below, what should be expected on the basis of the partners' relative size in global trade? Is China's year 2001 trade with other regional countries, about 32 percent of total exports, higher or lower than should be expected? Another question of importance is whether the intensity of trade between East Asian countries has been increasing over time. If so, what is the magnitude of the change? In previous applications the trade intensity index-has been defined as; (7.1) Tij = [x,i/XtId *X-1XA where xij and xw; are the values of i'! exports and world exports to j, Xi, is i's total exports, and Xwt are total world exports. As such, the index reflects the ratio of the share of country i's exports going to country j, relative to the share of world trade destined for country j (see Frankel 1997, Anderson 1983, or Drysdale and Garnaut 1982 for illustrative applications).7 An index of more (less) than unity has been interpreted as indicating a bilateral trade flow is lErger (smaller) than expected given the partner country's importance in world trade. However, a clear limitation of the standard trade intensity index is that it fails to account for distances between individual countries. With all other things equal, countries that are near to each other should be expected to have more "intense" trade relations than those that are geographically distant. This point has long been recognized, arid validated, in so called "gravity models" of international trade (see Linnemann 1966, Tinbergen 1962 and Pulliainen 1963), but the influence of distance has yet to be properly accounted for in previous analyses employing the trade intensity index. In recognition of this point, a modified application of the standard TI index, which accounts for geographic distance, is used for analysis of East Asian countries' trade. This approach first employs a regression equation to determine how trade intensities between countries normally vary with distance. The regression was estimated using bilateral trade statistics from a randomly drawn sample of both regional and non-regional countries and took the form, (7.2) Log (Tij) = 0.6245 - 0.00015 (distance), R2 = .672 (6.72) (9.97) 7 Several investigations have jointly computed trade intensity indices using both import and export statistics. These data could produce somewhat different results if a country's trade (that is, exports versus imports) was seriously out of balance. Also, some modified versions of equation 7.1 have subtracted country j's imports from the world trade total (X,,) to account for the fact that a country cannot trade with itself. Given the relatively small ;ize of most East Asian countries this "adjustment" would not have produced dissimilar results to those shown in Table 7.1. 20 where t values (which are all statistically significant at the 99 percent confidence level) are shown in parentheses.8 In the above, distances were expressed in miles between the capitals of exporting and importing countries with the exceptions of the United States and Canada. Here, if trade involved a South or East Asian country, distance was measured by the number of miles to San Francisco or Vancouver. Next, the regression equation was used to project the "expected" trade intensity (Tij*) given the geographic distance between two countries. The ratio of the actual to expected trade intensities was then calculated, (7.3) R1j = Tij . Tij* If this ratio exceeds unity the bilateral trade intensity between the two countries is higher than expected given the distance that separates them. Ratios below unity reflect a lower than expected trade intensity. Finally, the actual value of the expected distance adjusted trade intensity index can be derived from, (7.4) Tij* = Tij - Rj If the value of the traditional trade intensity (equation 7.1) index fails to exceed Tij* the intensity of bilateral trade must be considered as lower than expected even if the former exceeds unity. The top one-half of Table 7.1 reports values for the expected distance adjusted trade intensity indices between East Asian countries in 2001, while the lower half shows values for the traditional index. In the case of the latter, situations where the traditional index exceeds unity, but still falls below the critical value of the distance adjusted index, are marked with an asterisk. The intention here is to quickly identify situations where the traditional index would inappropriately lead to the conclusion that trade between two East Asian countries was more intense than expected. Table 7.2 provides information on traditional trade intensity indices for 1985 and 1995 and indicates whether or not they exceeded their distance adjusted expected values.9 Two points are evident from these comparisons, * First, any analysis of the intensity of trade between East Asian countries must account for the influence of the distance. Average expected distance adjusted TI indices for East Asia ranged from a high of 2.89 for Cambodia to a low of 2.22 for Korea. These values far exceed unity which was the "cut off" used in traditional trade intensity analyses. In 2001, there were 15 bilateral trade flows where the standard TI index exceeded unity, but which fell short of the expected distance adjusted index. In these cases, the traditional approach would have misclassified the intensity of trade as higher than expected although the reverse was true. s To be included in the sample countries had to be classified by the World Bank (2001) as being either middle or high income countries. Low income countries were excluded since a disproportionately high number are located in Africa and appear to have abnormally high transport costs that could distort the normal relation between distance and trade (Amjadi and Yeats 1995). Even more important is the fact that many of the low income countries fail to report timely trade data so the statistics in IMF DOT may often be unreliable estimated trade data. The mileage statistics used in the regression are "great circle" estimates of distance that account for features like the curvature of the earth between two geographic points. These estimates were taken from a US Department of Agriculture web page that can be found at www.wcrl.ars.usda. gov/cec/iava/lat-long.html. Tests involving a linear regression equation were distinctly inferior to equation 7.2 and could only "explain" about one-third the total variation in the data. 9 Some extremely high TI index values reported in Table 7.2, like that shown for Cambodia's trade with Vietnam, result from the partner's very small share of global imports, and the fact that bilateral trade relations were still distorted by unusual social, economic, or governmental problems, 21 Table 7. 1 East Asian Distance Adjusted and Traditional Trade Intensity Ratios in 2001 Expected Distance Adjusted Trade Intensity Indices Hong Taiwan, Exporter Cambodia China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Vietnam Japan Cambodia -- 2.05 3.02 2.76 1.91 3.40 2.82 3.29 2.52 3.76 3.35 1.63 China 2.05 -- 2.76 1.36 3.43 - 1.66 2.29 1.61 2.91 2.07 2.55 2.69 Hong Kong 3.02 2.76 -- 2.10 2.69 2.46 3.31 2.42 3.53 2.90 3.49 2.27 Indonesia 2.76 1.36 2.10 -- 1.35 3.27 2.32 3.48 1.85 2.56 2.20 1.21 Korea 1.91 3.43 2.69 1.35 -- 1.57 2.40 1.54 3.07 1.89 2.34 3.29 Malaysia 3.40 1.66 2.46 3.27 1.57 -- 2.48 3.94 2.10 3.27 2.72 1.34 Philippines 2.82 2.29 3.31 2.32 2.40 2.48 -- 2.52 3.27 2.62 2.89 2.36 Singapore 3.29 1.61 2.42 3.48 1.54 3.94 -.52 2.10 3.10 2.63 1.34 Taiwan, China 2.52 2.91 3.53 1.85 3.07 2.10 3.27 2.10 2.45 2.95 2.68 Thailand 3.76 2.07 2.90 2.56 1.89 3.27 2.62 3.10 2.45 -- 3.41 1.57 Vietnam 3.35 2.55 3.49 2.20 2.34 2.72 2.89 2.63 2.95 3.41 -- 1.91 Average 2.89 2.27 2.87 2.33 2.22 2.68 2.69 2.66 2.67 2.80 2.85 2.23 __________ __ Traditional Trade Intensity Indices Cambodia -- 1.55* 0.34 0.16 0.76 2.36* 1.14* 4.27 1.29* 2.48* 9.41 0.59 China 1.01* -- 10.22 2.88 5.92 1.96 1.41* 2.33 2.99 3.10 2.86 5.88 Hong Kong 9.34 12.11 -- 5.95 3.80 6.78 12.95 6.28 6.53 4.79 5.95 2.79 Indonesia 0.75 0.10 1.14* -- 13.08 7.58 7.39 3.14* 8.41 7.48 3.54 6.08 Korea 1.45* 10.96 2.70 8.45 -- 3.86 7.31 3.14 8.63 4.48 6.97 11.57 Malaysia 0.82 4.27 2.19* 5.91 6.83 -- 5.11 24.24 7.96 9.56 2.80 5.83 Philippines 0.28 0.14 2.23* 1.30* 7.83 9.17 -- 8.01 15.97 9.10 0.96 12.45 Singapore 20.44 4.23 4.87 15.51 5.96 21.31 11.81 -- 7.61 10.60 14.88 4.90 Taiwan, China 2.44* 13.80 4.43 4.09 5.22 5.90 6.48 4.36 -- 5.92 7.49 12.66 Thailand 33.05 4.98 2.34* 7.93 4.04 8.61 7.58 9.55 6.32 -- 7.23 10.18 Vietnam 35.27 5.22 0.85 7.79 4.80 4.58 11.57 7.69 5.94 7.62 -- 2.64 * Although the traditional trade intensity index exceeds unity in this case it falls below the expected distance adjusted index for the two trading partners. As such, the intensity to trade is lower than expected given the geographic distance between the two trading partners. Source: Based on data from International Monetary Fund, Direction of Trade (DOT) Statistics 22 Table 7.2 East Asian Traditional Trade Intensity Ratios in 1985 and 1995 Trading Partner Exp e i Hong | llaysi Taiwan | l l Exporter Cambodia China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Vietnam Japan 1985 Traditional Trade Intensity Indices Cambodia -- 8.16 0.00 0.00 0.00 16.37 0.00 19.16 0.00 0.00 1,719.58 0.78 China 1.15* -- 17.74 0.89 0.00 1.11* 4.26 5.79 0.05 0.92 0.00 3.47 Hong Kong 0.00 17.00 -- 2.21 1.17* 1.21* 3.82 2.16* 0.13 1.52* 9.82 0.66 Indonesia 0.00 0.30 1.27* -- 2.28 0.68 3.96 6.70 0.08 0.95 1.39* 7.19 Korea 0.00 0.00 3.50 1.27* -- 2.43 2.95 1.24* 0.01 1.03* 0.00 2.33* Malaysia 4.49 0.68 0.91 0.84 3.80 -- 8.85 14.88 0.00 7.45 0.34 3.82 Philippines 0.00 1.15* 2.74* 0.78 1.05* 6.16 -- 4.15 0.01 3.92 1.49* 2.95 Singapore 38.60 0.95 4.32 7.23 0.80 25.39 3.54 -- 0.75 9.06 29.92 1.46 Taiwan, China 0.00 2.02* 0.01 0.00 0.00 0.05 0.00 0.00 -- 0.08 0.00 0.00 Thailand 0.00 2.49 2.74 1.19* 1.21 * 8.16 2.76 6.09 0.01 -- 0.00 2.08 Vietnam 309.55 0.00 4.67 0.06 1.45* 0.00 0.00 4.02 0.00 0.13 -- 0.73 1995 Traditional Trade Intensitv Indices Canbodia -- 0.00 0.01 0.21 0.00 2.41* 0.00 0.00 0.00 2.14* 3.17* 0.04 China 1.65* -- 11.71 3.82 8.26 1.84 4.24 3.16 1.25* 4.07 2.90 2.97 Hong Kong 1.07* 25.57 -- 2.34 2.98 1.90* 7.10 3.83* 2.05* 3.22 2.20* 0.95 Indonesia 7.51 3.07 1.76* -- 12.37 4.91 7.67 8.33 1.55* 5.28 2.92 4.37 Korea 0.00 5.62 4.11 9.05 -- 5.04 7.31 7.18 6.69 6.70 6.47 2.12* Malaysia 5.01 1.96 2.59 5.04 5.04 -- 5.42 27.77 5.81 13.46 2.18* 1.94 Philippines 0.08 0.92 2.29* 2.79 4.70 3.86 -- 7.69 19.05 15.51 4.26 2.45 Singapore 20.15 1.79 4.15 5.77 5.06 40.96 10.01 -- 6.91 19.98 9.07 1.21* Taiwan, China 0.01 4.75 4.99 0.19 5.31 4.99 5.25 3.85 -- 3.39 0.44 3.11 Thailand 84.51 2.22 2.38* 5.08 3.10 7.83 4.50 15.53 2.21 -- 5.55 2.84 Vietnam 309.55 4.34 2.79* 10.27 0.00 4.56 12.45 10.30 3.62 2.54* -- 4.56 * Although the traditional trade intensity index exceeds unity in this case it falls below the expected distance adjusted index for the two trading partners. As such, the intensity to trade is lower than expected given the geographic distance between the two trading partners. Source: Based on data from International Monetary Fund, Direction of Trade (DOT) Statistics 23 . Second, in spite of this qualification, the statistics indicate East Asian intra-trade must be generally classified as highly "intense." This conclusion follows from the fact that TI indices for 85 (61 percent) of the possible 140 bilateral trade flows among regional countries exceed their critical distance adjusted expected values, often by a considerable margin. Also, the evidence strongly suggests that the intensity of trade between East Asian countries has been increasing markedly. For example, in 1985 only 40 percent of the distance adjusted TI indices exceeded their critical values as opposed to 61 percent in 2001. The general trend toward more intense trade continued in the recent 1995-2001 period (China is an exception - see Table 7.2). In 1995, for example, the TI indices for 78 bilateral trade flows (excluding Japan) exceeded their critical values as opposed to 85 in 2001. Also, in 2001 the median value for all East Asian trade intensity rose to 5.1 from 4.3 in 1995. Trade relations between East Asian countries have been growing sharply in terms of their iniensity and importance! Trade Trends 8 Have East Asian Trade Profiles Become More Complementary? KeU Point A trade "complementarity" index shows growing similarities between the types of goods East Asia exports, and the goods imported, was a potent factor promoting the expansion of intra-trade. The current East Asian values for this index are very similar to those for countries, like the original EU (6) members at the time of the formation of the European Economic Community. One possible explanation for the impressive expansion of East Asian intra-trade, which is reflected in the previous analyses, is that regional countries' export and import profiles became more "complementary" over time. That is, in the 1970s and early 1980s, the potential for intra-trade may have been constrained by the fact that many East Asian countries could not competitively export the types of goods that constituted the region's major imports. An important question is whether the region's export and import profiles became more similar over time and, therefore, facilitated the growth in intra-trade. The so called "trade complementarity index" can show how well the export profile of one country, or group of countries, matches the import profiles of others. Furthermore, changes in the index over time can help determine whether their trade profiles are becoming more, or less, compatible. The index of trade complementarity between two countries k and j (Ckj) is defined as, (8.1) Ci, = 100 - Z( I mik - xij I * 2) where x,j is the share of good i in the exports of country j, and mik is the share of good i in the imports of country k. The index is zero when no good exported by one country is imported by the other, and 100 when the export-import shares exactly match. As such, it is assumed that higher index values indicate more favorable prospects for a successfil trade arrangement between countries.'° Michaely (1994) used the '° Several caveats should be noted. First, use of the index presumes that a country can expand production and trade of its exports on a relatively constant cost basis. Second, considerations must be given to relevant factors like economic geography. High complementarity indices may be misleading if the countries are geographically distant, or have other natural barriers that make trade unprofitable. Third, relative size differences can be very important. If exporter i can only supply a very small share of country j's import needs this would be a negative factor, even if their trade complementarity indices were quite high. Finally, the index assumes that countries assign equal priorities for trade expansion to all goods. If there are different priorities for (say) manufactures as opposed to raw materials this complicates the use of the index. 24 index to assess prospects for Latin American trade arrangements, while Yeats (1998) employed the measure to analyze the compatibility of Sub-Saharan African countries' intra-trade. Table 8.1 reports 1985, 1995 and 2001 complementarity indices for trade between individual East Asian countries. Although indices for several smaller counties, like Brunei, Cambodia, Laos PDR, and Mongolia are low and essentially static, dramatic increases occur in the indices for most other countries. In fact, the latter rose by about 16 points over its value (51.2) in the mid-1980s. The trade complementarity indices for five countries, namely, Hong Kong, Malaysia, Philippines, Thailand and Taiwan rose by more than 50 percent, while Indonesia's indices more than doubled. Overall, the evidence presented in Table 8.1 shows growing similarities between the goods East Asia exports, and the goods other regional countries import, was a potent factor promoting the expansion of intra-trade. An interesting, although somewhat dissimilar, pattern emerges for trade with the non-regional partners. The indices for trade with the EU (15) registered only a slight increase (under 4 points) since the mid-1980s, while the increase for NAFTA trade was less than 8 points. The indices for trade with Japan, however, registered about the same magnitude of change as those for East Asian intra-trade. These data strongly suggest that the trade profiles of the regional countries changed in a way that allowed them to capitalize on opportunities in other Asian markets. This should not be surprising, however, since statistics compiled and analyzed by UNCTAD (1990, pp. 234-237) show a relatively strong interrelation exists between changes in national income and changes in the structure of exports." In general, as income levels rise the structure of a country's exports change to more closely parallel the structure of world trade. As a result of its rising income levels, East Asia's exports more closely matched regional imports, that is, trade became more complementary. An interesting question concerns similarities between the statistics shown in Table 8.1 with indices for countries that previously formed regional trade arrangements. . Yeats (1998) provides relevant information by reporting complementarity indices for "successful" and "failed" regional arrangements computed using trade data from the year in which the agreements were implemented. The indices ranged from values of 7 to 22 for previously failed arrangements (in the sense that the agreements were eventually dissolved) like LAFTA and the original Andean Pact, and from values of 53 to 64 for the EU(6) and NAFTA. Finally, the increase in East Asia's trade complementarity indices no doubt were an important factor fueling the rapid expansion of intra-regional trade. In 2001, trade among the emerging East Asian countries was approximately $418 billion. If Japan were included the value would be about $563 billion. This is approximately $30 billion higher than the current intra-trade of the six original founders (Belgium- Luxembourg, Netherlands, France, Germany, and Italy) of the European Union, and about $70 billion below NAFTA intra-trade. In contrast, intra-trade of MERCOSUJR members is under $20 billion. "These conclusions were based on the use of a trade structure (TS) index that took the form, (8.1) TSj = [: I huj - hi 1] . 2, where hij is the share of commodity i in the exports ofj, and hi is the share of i in total world exports. Lower values of the index indicate a country's export structure more closely matches that of world trade. For example, the UNCTAD (1990) document reported a mid-1980s TS index value of 0.429 for Japan, 0.605 for Singapore, and 0.909 for Lao PDR. 25 Table 8. 1 Complementarity Indices for East Asian Trade Regional Exports ($ million) Trade Complementarity Index Trader 1985 1995 2001 1985 1995 2001 REGIONAL TRADE Brunei 922 951 1,192 5.0 8.1 7.6 Cambodia 3 276 182 10.2 8.2 6.7 China 10,867 90,799 127,796 33.4 44.3 47.0 Hong Kong, China 6,637 20,016 20,981 32.0 53.6 .54.9 Indonesia 1,953 12,008 17,155 16.7 30.9 40.2 Korea 2,559 40,346 55,748 47.3 64.9 67.7 Lao, PDR 17 190 220 7.7 8.5 8.0 Malaysia 6,844 37,642 46,759 29.9 50.1 56.4 Mongolia 4 111 242 6.5 8.7 7.6 Philippines 1,071 4,645 14,736 28.1 43.8 47.2 Singapore 6,032 38,979 41,806 47.5 53.0 61.3 Taiwan, China 4,994 49,069 62,477 43.4 62.2 68.5 Thailand 1,982 17,548 24,359 29.3 48.5 57.3 Vietnam 182 1,916 4,354 13.2 16.2 23.5 All Above Countries 44,067 314,496 418,007 51.2 65.2 67.3 NON-REGIONAL TRADE East Asia- Japan 35,280 118,717 144,884 51.9 60.1 65.4 East Asia - NAFTA 61,368 196,118 309,066 53.8 63.0 61.4 East Asia- EU (15) 22,352 124,015 182,182 56.4 59.2 59.8 Source: Computations based on UN COMTRADE data Trade Trends 9 Competitive Factors and the Change in Regional Exports Kea Point An empirical procedure is used to isolate the effects of demand, diversification and competitiveness changes on East Asia's regional exports. The results show that a markedly improved ability to compete played a major role in the expansion of East Asian intra-trade since the mid-1980s. Separate tests for the 1995-2001 period indicate East Asian regional market shares continued to grow in spite of the effects of the financial crisis. Similar analyses involving exports to the EU(15), NAFTA and Japan shows East Asia 's improved competitiveness also occurred in major global markets. The previous analyses showed East Asian regional trade expanded at a relatively rapid pace since the mid-1980s. Factors relating to both supply and demand influenced these trade changes, and an important question concerns the extent to which an improvement in competitiveness contributed to this favorable performance. This question can be addressed by decomposing East Asian export growth into three factors, two of which relate to demand changes and changes in the ability to compete.'2 The influence of demand for a specific product can be measured by the change in the total (global) value of regional 12 A detailed description and early application of this procedure can be found in GATT (1966). The analysis also constituted a large part of Irving Kravis' (1970) classic analysis of the influence of trade on the 20th century growth of developing countries. 26 imports of the item. In calculating the influence of this factor, one assumes that a given country (like Thailand) maintains its regional trade share for the commodity. Specifically, if DOJ and Dij represent regional trade in product j, at time period o and t respectively, the change in a specific country's exports attributed solely to demand AEdi is: (9.1) AEdi = E(s0j) x (Dtj - Do.) where sOj is the share of country i in regional imports of product j (defined at the four-digit level of the Revision 2 SITC) from all countries in the base period o, and the summation is over all goods traded. Therefore, the above equation shows the change in country i's exports that would have occurred if only changes in demand took place. Second, the change in the competitive position of country i is measured by the difference between the exports that would have occurred if the country's market share had not changed, and those regional exports that were in fact realized. This competitive factor (AE,i) is: (9.2) AEc,i = E(stj - sJ(Dj) where sj is the share of the country in regional imports of the product in period t, and the summation is over all goods imported. Any differences between changes in a country's total exports and the sum of these two "demand" and "competitive" factors are due to product diversification. /3 Table 9.1 summarizes the results when these equations was applied to statistics on all four-digit SITC products exported by the East Asian countries to regional markets in 1985, 1995 and 2001. The table shows the value of exports in each year along with changes due to the supply and demand factors. For example, China's regional exports totaled $90.8 billion in 1995 and $127.8 billion in 2001. The 1995-2001 demand change factor generated a potential increase in annual exports worth $2.9 billion. However, China's improved ability to compete, as reflected in its higher regional market shares (particularly for products like telecommunications and office machinery components), resulted in a further increase of $30.8 billion. The sum of the supply and demand induced changes ($33.652 billion) falls about $3.345 billion short of the total 1995-2001 change in China's exports. As noted, this difference reflects China's diversification into new product lines that were not exported in 1995. Several important positive points are evident from the statistics in Table 9.1. First, in both the full 1985-2001, and shorter 1995-2001 periods, East Asian countries registered strong competitive gains in regional trade. Over the recent interval, which covered the period of the financial crisis, competitive regional export gains (about $51.802 billion) exceeded gains associated with increased demand by approximately $13 billion. Second, although China accounted for about one-half of the 1985-2001 competitive gains, only Brunei (whose major regional export is petroleum) experienced losses due to erosion of its market shares. Third, on a percentage basis, market share changes more than doubled the exports of the Philippines and Vietnam - an expansion that far exceeded the 34 percent increase associated 13 An illustrative example may help explain this approach. Assume country i exports one product j and has a 20 percent share of the regional markets with exports $20 million in 1995, and a 25 percent share with exports of $37.5 million in 2001. During this period regional demand forj rose from $100 to $150 million. The change in i's exports attributed solely to changes in demand would be: AEd., = .20($150 - $100) = $10 million while the change due to the competitive factor is: AE,i = (.25 - .20) x $150 = $7.5 million This example assumes that the country experiences no diversification in its exports. 27 with China's improved competitive ability. Overall, the data show that East Asian countries experienced a marked improvement in their competitive position in regional markets. 14 For East Asia as a whole the diversification into new product lines added about $30.8 billion to regional trade over 1985-2001 which represents about 7 percent of current exports. Measured as a percentage of 2001 exports the diversification factor was strongest in Hong Kong (24 percent), although new products account for 11 to 13 percent of Singapore, Malaysia and Thailand's current exports. An analysis of the underlying statistics shows that certain ores and minerals products account for the negative diversification values in non-regional markets. In other words, East Asia became. internationally uncompetitive for products like tin and lead ores and stopped exporting these items. While the evidence indicate;s East Asia greatly improved its ability to compete in regional markets, an important question concerns its performance elsewhere. Specifically, could the results for regional markets have been biased by special factorl like, for example, geographic proximity. For answers, the previous analysis, which was based on trade in individual four-digit SITC products, was repeated for trade with the European Union (15), NAFTA, and Japan. The results are reported in the lower one-half of Table 9.1. In all three major markets the East Asian countries registered strong competitive trade gains during both time periods tested. Over 1995-2001, the competitive market share gains were between $34 to $36 billion in NAFTA and the EU (IS). In the latter, the competitive gains exceeded those associated with higher demand by about $13 billion. A likely cause of the depressed European demand was prolonged sluggish economic conditions, particularly in Germany. In Japan, both the demand and competitive gains were smaller, averaging about $13 billion. Overall the data document the improved ability of East Asian countries to compete in both regional and global markets. 1 The actual change in total 1985-2001 intra-regional trade exceeded the sum of changes reported for the demand and competitive factors by approximately $30.8 billion. As indicated, this value represents the increase in regional trade associated with diversification into new product lines. For useful analyses of the factors responsible for the improvement in East Asia's competitiveness see Yusuf and Evenett (2002) or Crafts (1998) 28 Table 9. 1 The Impact of Competition and Demand Changes on East Asian Intra-Regional Trade Factors Underlying the 1995-2001 Export Change Factors Underlying the 1985-2001 Export Change Exports ($000) ($ million)* ($ million)* Demand Competitive Demand Competitive Trader 1985 1995 2001 Factor Factor Diversification Factor Factor Diversification REGIONAL TRADE Brunei Darussalam 922 951 1,192 923 -650 -32 2,073 -1,796 -7 Cambodia 3 276 182 -10 -85 1 2 150 27 China 10,867 90,799 127,796 2,856 30,796 3,345 43,052 69,649 4,228 Hong Kong 6,637 20,016 20,981 3,601 -3,419 783 38,480 -29,183 5,047 Indonesia 1,953 12,008 17,155 2,575 2,093 479 4,516 9,473 1,213 Korea 2,559 40,346 55,748 2,243 10,441 2,718 13,070 36,365 3,754 Lao P.D. Republic 17 190 220 -7 4 33 18 71 114 Malaysia 6,844 37,642 46,759 8,087 1,105 -75 23,367 11,417 5,131 Mongolia 4 111 242 22 111 -2 53 185 0 Philippines 1,071 4,645 14,736 1,930 8,157 4 12,979 536 150 Singapore 6,032 38,979 41,806 9,209 -6,629 249 25,678 5,594 4,502 Taiwan, China 4,994 49,069 62,477 3,930 5,965 3,513 28,293 25,918 3,272 Thailand 1,982 17,548 24,359 3,398 1,694 1,719 9,172 10,156 3,049 Vietnam 182 1,916 4,354 60 2,218 160 484 3,396 292 All Above Countries 44,067 314,496 418,007 38,817 51,801 12,893 201,237 141,931 30,772 NON-REGIONAL TRADE East Asia- Japan 35,280 118,717 144,884 13,419 12,743 5 64,707 45,289 -392 East Asia - NAFTA 61,368 196,118 309,066 79,093 34,373 -518 155,262 92,136 300 East Asia - EU (15) 22,352 124,015 182,182 23,049 35,808 -690 61,232 97,759 839 * The demand factor isolates the effects of the increase or decrease in regional demand for other East Asian countries' exports. This factor shows the increase or decrease in exports that would have occurred had there been no change in the country's market shares from the 1990 or 1995 base period. The competitive factor shows the change in exports, over or under that associated with demand changes, due to changes in a country's import market shares. Any difference between the change in the total exports and the sum of these two factors is due to product diversification. Source: Computations based on UN COMTRADE statistics. 29 Trade Trends 10 Who Lost in East Asian Markets!!! Kev Point East Asian exporters made broad based competitive gains in local markets against all major non- regional suppliers during 1985-2001. On average, East Asia increased its regional import share by about 18 percentage points for the 30 largest products in intra-trade (which implies trade gains of approximately $78 billion). NAFTA and Japan experienced the largest competitive losses in East Asian markets as their import shares fell by seven to eight percentage points, respectively. Trade Trends 9 showed that competitive gains often were responsible for significant increases in East Asian countries intra-trade, but the underlying disaggregate statistics revealed instances where regional trade shares appeared to static (as in the case of some textile and clothing products), or even declined in the case of energy products. This raises the question as to whether any non-regional countries, or groups of countries, expanded their share of regional imports. Conversely, what non-regional countries suffered the greatest displacement due to competitive gains made by East Asian exporters. For example, were (say) NAFTA or the European Union's regional import shares eroded to the same degree, or were there important differences in how they fared against East Asian competitors. Table 10.1 provides information on East Asian 1985-2001 market share changes for six major countries or country groups, namely, NAFTA, the European Union (15), all countries in Latin America and the Caribbean, South Asia, Japan, and Australia and New Zealand combined. These import share changes are reported for the 30 largest four-digit products East Asian countries export to the region. Altogether, these items account for just over one-half of total intra-regional trade (see Trade Trends 12 which follows). To assist in the evaluation of this iniormation the table also shows regional market share changes for the East Asian countries combined. Three significant points emerge from these statistics. First, the East Asian countries made broad based competitive gains against all of the major non-regional suppliers. On average, East Asia increased its regional import share by about 18 percent (which implies annual trade gains of approximately $78 billion). In six of the thirty product groups, East Asian regional import shares increase by more than fifty percentage points (the product descriptions of these items are highlighted in boldface), while in thirteen of the groups the increase exceeded twenty five percentage points. The only exception to the general pattern of increases occurs for the two energy products where regional market shares declined. Second, the NAFTA countries saw the greatest erosion of their regional import shares which fell by an average of about 8 percentage points. This implies annual trade losses of about $36 billion. The relatively strong US dollar, particularly in the last half of the 1990's, almost certainly was a contributory factor. NAFTA countries may also have diverted some exports from Asia to North America in order to capitalize on the newly established preferential tariffs. The average market share for Japanese exports fell by 7.4 points on average. However, four products, namely, radiotelephonic equipment, telephonic electrical line, sound recorders, and copper alloys had their market shares reduced by more than 30 percentage points. Third, the most important East Asian competitive share trade gains occurred within the broad machinery and transport equipment (SITC 7) group. Market share increases for seven four-digit SITC office machinery and equipment (SITC 77) products generated increased annual earnings of about $26 billion, while competitive gains for four telecommunications equipment (SITC 76) products increased export earnings by approximately $18 billion. East Asia virtually eliminated regional competition for digital control storage units (SITC 752.4) and radiotelephonic and radiotelegraphic equipment (SITC 764.3) where their market shares rose by more than 60 percentage points. 30 Table 10.1 1985-2001 Major Product Competitive Change Effects for Non-Regional Countries in East Asian Markets. 2001 East Asian 1985-2001 East Asian Market Share Changes (percentage oints) Global Imports East South Australiai Major Export Product (SITC)* ($million) Asia NAFTA EU(I5) LAC Asia Japan New Zealand Electronic microcircuits (776.4) 89,707 14.0 -3.6 3.3 0.4 -0.1 -13.0 0.0 Parts of office machinery (759.9) 37,547 36.8 -35.7 -1.1 1.4 -0.2 -4.2 -0.2 Parts of telecommunications equipment (764.9) 23,658 20.7 -3.1 3.3 0.3 0.0 -25.6 0.2 Radiotelegraphic and telephonic equipment (764.3) 13,047 61.2 -25.0 6.1 0.0 0.0 -44.8 0.0 Digital central storage units (752.4) 11,786 68.7 -32.5 -1.1 -17.1 0.1 -22.1 0.0 Petroleum oils (333.0) 60,469 -21.0 -0.1 0.2 -3.5 -0.2 0.0 2.5 Diodes and transistors (776.3) 11,984 23.5 -16.8 -8.6 0.3 0.1 -1.4 0.0 Children's toy and games (894.2) 7,010 19.1 -5.3 -3.3 0.0 0.0 -9.6 -0.1 Other electrical machinery (778.8) 14;509 22.7 -3.8 -6.2 0.6 -0.2 -15.9 0.0 Piezo-electric crystals (776.8) 25,111 9.6 -24.6 6.6 0.3 0.0 4.2 0.0 Electronic Peripheral control units (752.5) 7,694 60.1 -36.8 -7.1 -3.2 -0.5 -14.5 -0.9 Footwear (851.0) 5,613 34.0 - 1.1 -20.7 0.0 0.0 -7.2 0.0 Other electrical power machinery (771.2) 7,584 29.3 -8.0 -0.8 -0.4 0.5 -23.7 0.2 Electrical switches and relays (772.1) 14,148 19.7 -8.7 0.0 0.3 0.0 -11.4 -0.2 Printed circuits and parts thereof (772.2) 6,738 39.4 42.0 -4.5 0.4 0.0 4.3 -0.1 Jerseys and pullovers (845.1) 4,420 4.8 -0.1 -4.1 0.1 0.9 -2.1 0.6 Polystyrene (583.3) 5,104 62.1 -8.5 -14.5 -3.1 0.3 -6.1 -1.1 Petroleum gases (341.3) 8,509 16.4 0.4 0.3 0.0 0.0 0.1 -1.9 Knitted fabrics (655.2) 4,577 5.1 0.9 0.4 0.0 0.2 -10.3 0.2 Woven fabrics (653.1) 4,482 17.5 -0.5 0.0 0.0 0.4 -18.4 0.0 Miscellaneous art materials (893.9) 6,221 16.1 -3.3 -7.5 0.2 0.1 -4.8 -0.3 Travel goods and handbags (831.0) 4,093 7.0 -0.3 -2.8 0.0 -0.2 -3.8 -0.1 Electric motors and generators (716.2) 5,135 53.6 -25.4 -3.7 0.0 0.0 -30.4 0.2 Specialized machinery and appliances (728.4) 18,808 6.3 -3.2 -3.3 0.0 0.1 0.0 -0.1 Woven cotton fabrics (652.2) 4,266 17.4 -1.2 -0.4 0.0 -0.8 -19.6 0.0 Insulated electrical wire and cable (773.1) 4,854 41.1 -4.5 -12.3 0.2 0.0 -27.9 0.5 Telephonic electrical line (764.1) 8,689 27.3 20.3 -12.4 1.1 0.0 -36.8 -0.1 Other sound recorders (763.8) 4,323 55.6 0.2 0.3 0.1 0.0 -38.7 0.0 Copper and copper alloys (682.2) 4,792 34.1 -3.1 -4.2 -0.6 0.1 -30.4 0.1 Gas oils (334.3) 3,395 -16.9 -3.7 0.1 0.0 0.0 3.8 -0.4 ALL ABOVE PRODUCTS 428,272 18.1 -8.5 -1.7 -0.8 -7.4 East Asian import market shares rose by 50 percentage points or more for products whose description are highlighted in boldface. To be included in this list a product had to be among the 30 largest four-digit SITC items in intra-regional trade. Source: Computations based on UN COMTRADE statistics. 31 Table 10.2 1995-2001 Major Product Competitive Change Effects for Non-Regional Countries in East Asian Markets. 2001 East Asian 1995-2001 East Asian Market Share Changes (percentage points) Global Imports East South Australia/ Major Export Product (SITC)* ($million) Asia NAFTA EU(15) LAC Asia Japan New Zealand Electronic microcircuits (776.4) 89,707 10.9 -3.8 1.0 0.5 0.0 -10.2 0.0 Parts of office machinery (759.9) 37,547 5.1 -7.4 0.0 1.4 0.7 -2.7 -0.5 Parts of telecommunications equipment (764.9) 23,658 -3.0 1.0 8.1 0.2 0.0 -9.8 0.1 Radiotelegraphic and telephonic equipment (764.3) 13,047 44.2 -31.9 -11.8 0.0 0.0 -1.7 -0.4 Digital central storage units (752.4) 11,786 7.5 -4.2 1.2 0.3 0.1 -8.3 -0.2 Petroleum oils (333.0) 60,469 -5.8 0.1 0.1 -0.4 0.2 0.0 2.1 Diodes and transistors (776.3) 11,984 9.0 -0.1 -1.9 -0.2 0.1 -10.3 0.0 Children's toy and games (894.2) 7,010 7.3 -6.2 -1.1 0.0 -0.1 -0.9 0.3 Other electrical machinery (778.8) 14,509 6.7 -0.7 -0.9 0.5 0.0 -7.6 0.0 Piezo-electric crystals (776.8) 25,111 7.8 -2.9 4.0 0.2 0.0 -12.5 0.0 ~~~ ~ ~ ~ ~ ~ .7L~~~~~~~ A9 0A A AlI Al I lA Elecuolnic Peripheral cor.tro' units 7' 52.5) ,594 2°.9 -14.6 --.4 -0. -1. -.1 -,I_. Footwear (851.0) 5,613 1.2 -0.4 -0.8 0.2 0.0 -0.5 0.0 Other electrical power machinery (771.2) 7,584 5.9 -0.4 1.0 0.0 0.2 -9.7 -0.2 Electrical switches and relays (772.1) 14,148 6.5 0.4 -0.7 0.3 0.0 -7.5 -0.2 Printed circuits and parts thereof (772.2) 6,738 4.0 -3.6 1.4 0.3 0.0 -4.4 0.0 Jerseys and pullovers (845.1) 4,420 2.1 -0.1 -2.4 0.1 0.6 0.0 0.5 Polystyrene (583.3) 5,104 18.7 -6.6 -2.3 -0.1 0.3 -10.2 -0.2 Petroleum gases (341.3) 8,509 -11.7 -0.2 0.2 0.0 0.0 0.0 1.5 Knitted fabrics (655.2) 4,577 -1.2 0.5 0.9 0.0 0.0 -1.9 0.1 Woven fabrics (653.1) 4,482 -5.5 0.1 0.3 0.0 0.2 4.1 0.0 Miscellaneous art materials (893.9) 6,221 -0.4 0.7 -0.3 0.1 0.0 -0.2 -0.2 Travel goods and handbags (831.0) 4,093 -0.5 -0.1 0.3 0.0 0.1 -0.1 0.0 Electric motors and generators (716.2) 5,135 20.2 -8.7 -4.5 0.0 0.0 -12.8 -0.1 Specialized machinery and appliances (728.4) 18,808 2.9 1.5 -5.7 0.0 0.1 1.0 -0.2 Woven cotton fabrics (652.2) 4,266 -3`3 -1.5 0.5 0.0 -0.6 5.0 0.0 Insulated electrical wire and cable (773.1) 4,854 9.5 -2.4 -3.0 0.1 0.0 -6.0 0.3 Telephonic electrical line (764.1) 8,689 3.3 15.7 -8.7 1.1 0.0 11.1 1.1 Other sound recorders (763.8) 4,323 6.5 0.4 0.2 0.0 0.0 -8.3 0.0 Copper and copper alloys (682.2) 4,792 11.1 -2.8 1.0 -0.3 0.1 -9.7 -2.0 Gas oils (334.3) 3,395 2.1 -5.6 -1.9 -0.2 0.0 -3.4 -0.1 ALL ABOVE PRODUCTS 428,272 4.2 -2.4 -1.0 0.3 0.1 -7.1 0.2 Source: Computations based on UN COMTRADE statistics. 32 Finally, a question of interest concerns the pattem of market share changes during the 1995-2001 period that covers the Asian financial crisis. As indicated in Table 10.2, East Asian countries generally continued to improve their competitive position with their average market share increasing by just over 4 percentage points.'5 However, what is different from the full 1985-2001 period is the fact that East Asian exporters market shares declined for 8 of the 30 products. Aside from energy products, the eroded shares appear to be concentrated in products that are often manufactured using labor intensive production processes, that is, items like travel goods, and knit or woven fabrics. Trade Trends 1] Changes in the Product Composition of East Asian Intra-Trade Key Point Since 1985 the product composition of East Asian intra-trade changed dramatically as the share of machinery and transport equipment rose by over 26 percentage points. At present, these goods account for almost one half of all goods traded within the region. A similar pattern is observed in non-regional trade as the share of machinery and transport equipment rose from 18 to 46percentfrom 1985 to 2001. In both regional and non-regional markets, mineralfuels and crude materials exports registered the largest decline in relative importance. Several important policy questions relate to the broad product composition of individual East Asian country's regional exports. Are the export profiles basically similar, or do important differences exist. Differences in the composition of exports could be a positive factor if it allowed the exploitation of trade based on comparative advantage. However, it should be noted that countries that previously formed "successful" regional trade arrangements, like the European Union, imilar export profiles.'16 This may be due, in part, to the importance of opportunities to exploit intra-industry trade, or to engage in mutually beneficial production sharing. Second, does the evidence indicate that most East Asian export profiles are static, or are important changes taking place. If the export profiles are changing, are they evolving in similar, or dissimilar, directions? Third, it has long been recognized that primary commodities, and most other raw materials, have unfavorable long-term trade prospects. If some East Asian countries' exports contain a relatively high share of these goods this could have negative implications for longer-term trade prospects. 17 15 If one sums the positive and negative market share changes for the "all products group" in Table 10.2 the latter exceeds the positive changes by almost 5 percentage points. This difference is largely accounted for by market share gains made by energy exporters in Africa and the Middle East. These regions have not been included in the table. 16 At the time of the original EU (6) formation the share of manufactured goods in member countries' exports ranged from highs of nearly 80 percent for Italy and Germany to the mid-50s for the Netherlands. Similarly, the corresponding shares for the original EFTA countries averaged well over 60 percent. The share of manufactures in Canada's exports was about 60 percent, as opposed to a corresponding share of 75 percent for the United States, when negotiations on the Canadian-American Free Trade Agreement were concluded. 17 This proposition traces it origins to the writing of Raul Prebisch, former chairman of the UN Economic Commission for Latin America and Hans Singer of the United Nations. A major contributing factor to the adverse long term prospects for primary commodities is the low income elasticity of demand for many of these items. Hogendorn (1987, chapter 12) provides a useful survey of the relevant issues. Recent evidence (Ng and Yeats, 2002) shows an extensive deterioration in the terms-of-trade for commodities occurred over the last two decades, and this is projected to continue into the foreseeable future. 33 Table 11.1 provides summary statistics on the composition of each East Asian country's regional exports in 1985, 1995 and 2001 by showing the share of trade accounted for by broad product groups like foodstuffs, agricultural raw materials, ores and metals, or manufactures. In addition, the table provides similar trade statistics for all regional countries combined. The question as to whether export opportunities within the region differ substantially from those found elsewhere is also considered. For answers, the table's "memo item" shows the shares of these product groups in total exports to all non-regional markets. Perhaps the most striking point to emerge from Table 11.1 concerns the major increase in the relative importance of machinery and transportation equipment in intra-trade. These goods share in Malaysian and Thailand's exports rose more than four-fold since the mid-1980s, while their export share for China, the Philippines, Singapore, and Thailand rose by 30 percentage points or more."8 Significant increases in the share of machinery and transport equipment occurred for almost all of the East Asian countries, with the exceptions of Brunei, Laos, and Mongolia. At the opposite extreme, the importance of mineral fuels registered the largest relative decline. In 1985, fuels accounted for about one-fifth of East Asian intra-trade as opposed about 7 percent today. Which countries regional exports differ significantly from the East Asian average? In terms of manufactured goods (that is, the combined trade of chemicals, transport and machinery, and the "other" manufactures group) Brunei, Lao PDR, and Mongolia exports contain less than one-half the average share of these goods in all East Asian regional exports. Brunei's exports are concentrated in mineral fuels whose export share (82.5 percent) is more than 20 times higher than the regional average. Similarly, Lao PDR exports are highly concentrated in agricultural raw materials (85 percent of total exports) while Mongolia's exports, which largely consist of copper ores, have an abnormally high concentration (77 percent) in ores, minerals and metals. Appendix Table A4 identifies the largest four-digit regional products exported by each East Asian country. As far as these product groups are concerned, the changes in the composition of East Asia's exports to regional markets closely parallels that in trade with other countries. The overall share of machinery and transport equipment in regional exports increased by about 27 percentage points (from 21 to 47.9 percent), which was one percentage point less than the increase in non-regional markets (see the memo item). Furthermore, in both regional and non-regional trade mineral fuels experienced the greatest relative decline in importance, followed by foodstuffs and agricultural raw materials. Table 11.2 examines the regional countries' export profiles from a somewhat different perspective. Shown here are the total values of East Asian exports in 1985, 1995 and 2001 to; (i) other regional countries, (ii) Japan, and (iii) all other countries combined. The lower portion of the table shows the share of these exports accounted for by each one-digit SITC product group. These data reveal strong similarities in the composition of exports to these different destinations. In each case, the rank order of the three largest product groups is the same, that is, machinery and transport equipment, followed by miscellaneous manufactures, and manufactures classified by material.19 In addition, these three categories of goods account for about 70 percent, or more, of the total exports to each destination. Table 11.2 also reveals strong similarities in trade trends. In each case, exports of machinery and transport equipment registered the largest 1985-2001 trade share increase, while mineral fuels and crude materials experienced the largest relative declines. 18 The rapid expansion of Chinese and several other East Asian countries exports of these products was made possible by participation in the international segmentation of production processes. China specializes in assembling imported parts and components. According to Lemoine and Unal-Kesenci (2002) in 1999 85 percent of China's exports of electrical machinery, and 80 percent of its exports of precision instruments were the result of international assembly operations. 19 Trade Trends 12 provides additional information on the largest four-digit SITC products East Asia exports to these three destinations. Even at these relatively low levels of detail strong similarities exist in the composition of exports. 34 Table 11.1 The Export Structure of East Asian Intra-Trade by Major Product Categories: 1985, 1995 and 2001 Exports to Share of Product Group in Total Exports to East Asia (%/6) East Asia Foods and Agricultural Mineral Ores, Minerals Machinery Other Misc. Exporter Year ($million) Feeds Materials Fuels & Metals Chemicals & Transport Manufactures Goods Brunei 1985 921 0.1 0.1 98.3 0.1 0.2 0.4 0.1 0.5 1995 952 0.1 0.1 93.0 0.4 0.0 1.3 3.6 0.5 2001 1,213 0.1 0.1 82.5 0.3 0.0 3.5 12.3 0.5 Cambodia 1985 2 18.7 47.2 0.0 0.0 0.3 0.0 0.0 0.1 1995 249 3.9 88.4 0.0 0.2 0.3 0.7 5.9 0.2 2001 154 9.1 21.2 0.0 2.1 * 0.2 6.6 49.5 1.3 China 1985 10,818 15.1 5.0 21.6 2.2 4.0 5.6 33.8 10.9 1995 90,243 4.0 1.5 2.2 6.1 3.8 25.8 28.3 27.1 2001 124,283 3.4 0.6 3.2 3.2 3.1 37.9 25.3 22.6 Hong Kong 1985 10,279 2.1 1.5 1.0 1.3 3.6 39.5 34.0 15.3 1995 19,460 3.2 1.3 0.6 2.7 5.2 45.9 24.2 14.2 2001 19,597 1.6 0.6 0.9 3.5 6.4 49.7 21.8 13.0 Indonesia 1985 2,221 7.6 13.4 44.4 2.0 5.6 . 1.0 25.2 0.2 1995 11,673 4.2 8.8 31.8 6.7 8.2 4.4 28.5 2.5 2001 16,812 4.1 10.8 32.1 6.6 9.5 14.0 16.7 1.8 Korea 1985 2,573 2.1 2.4 3.6 11.8 12.5 28.3 30.0 6.2 1995 39,707 1.1 2.2 2.5 8.1 14.5 39.5 25.0 3.4 2001 52,511 0.6 1.5 7.1 8.8 16.0 45.9 16.1 3.3 Laos 1985 14 12.9 83.2 0.0 0.9 0.0 1.5 0.7 0.4 1995 106 7.9 76.4 0.2 2.9 3.8 0.4 4.1 0.8 2001 102 2.1 77.4 1.7 5.1 0.2 2.8 3.1 0.7 Malaysia 1985 6,939 15.5 20.8 37.5 1.3 1.3 15.5 5.8 1.3 1995 35,159 7.6 7.3 7.7 2.8 3.9 53.7 10.5 5.3 2001 44,724 4.3 2.3 9.4 2.0 5.3 64.5 7.0 4.5 Mongolia 1985 5 0.0 83.1 0.0 2.5 0.0 0.0 13.7 0.7 1995 109 3.4 39.5 0.0 55.2 0.7 0.1 1.1 0.1 2001 243 1.0 7.7 0.7 77.6 0.0 0.1 13.1 0.0 35 Tablell.l. Continued Exports to Share of Product Group in Total Exports to East Asia (%) East Asia Foods and Agricultural Mineral Ores, Minerals Machinery Other Misc. Exporter Year ($million.) Feeds Materials Fuels & Metals Chemicals & Transport Manufactures Goods Philippines 1985 1,120 12.7 3.9 10.1 10.0 11.4 40.1 6.4 2.1 1995 4,596 8.8 1.8 3.6 11.1 3.0 60.8 4.4 3.5 2001 14,727 3.0 0.3 1.3 3.0 1.6 84.1 2.2 2.3 Singapore 1985 6,273 2.5 1.5 46.7 2.6 9.4 25.5 4.3 3.4 1995 36,403 1.8 0.6 20.9 2.4 8.2 53.7 4.0 4.8 2001 38,076 1.1 0.3 15.6 1.5 11.7 59.3 3.5 5.3 Taiwan, China 1985 5.525 3.6 3.7 2.6 7.0 7.1 26.9. 36.7 9.7 1995 49,927 1.1 2.2 0.4 6.1 14.9 41.0 26.7 6.5 2001 59,992 0.7 1.3 1.1 8.3 13.8 53.3 15.9 5.3 Thailand 1985 2,091 50.6 11.5 0.4 5.3 4.0 12.2 11.8 3.0 1995 16,396 17.1 5.7 1.0 2.4 6.0 49.6 11.9 4.8 2001 22,020 10.5 5.4 5.7 2.9 11.7 50.1 9.2 3.2 Vietnam 1985 183 77.6 16.0 0.3 2.3 0.5 0.1 1.1 0.1 1995 1,787 43.8 10.5 18.1 2.8 1.6 3.8 11.8 5.6 2001 4,062 17.3 3.6 42.4 1.6 2.6 15.2 10.4 5.7 All Above 1985 48,965 9.9 6.4 20.9 3.2 5.2 21.0 23.5 7.9 Countries 1995 306,767 4.2 2.9 6.2 5.2 7.8 38.6 21.0 12.0 2001 398,516 3.0 1.7 7.1 4.5 8.3 47.9 16.1 10.3 MEMO ITEM East Asian Non- 1985 128,907 9.2 4.9 19.4 4.1 2.0 17.9 23.4 15.1 Regional Exports 1995 501,687 6.0 2.5 4.0 2.8 3.1 40.6 21.2 17.6 2001 719,116 3.8 1.2 3.8 3.0 3.3 45.9 19.4 18.5 Note: The product groups are classified by SITC products in Revision 2 as Foods and Feeds (0+1+22+4); Agricultural raw materials (2-22-27-28); Mineral Fuels (3); Ores And metals (27+28+67+68); Chemicals (5); Machinery and Transport (7); Other Manufactures (6-67-68+84); and Miscellaneous manufactured goods (SITC 8-84). Source: Computations based on UN COMTRADE statistics. 36 Table 11.2 The Composition of East Asian Exports to Regional and Non-Regional Markets in 1985,1995 and 2001 East Asia Japan [ All Other Countries East Asian Exports (SITC No.) 1985 1995 2001 1985 1995 2001 1985 1995 2001 East Asian Exports ($ million) ALL GOODS 48,965 306,767 398,516 35,007 118,841 145,003 f 99,339 382,846 574,780 Share of East Asian Exports (in %) ALL GOODS (0 to 9) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Food and live animals (0) 8.6 3.4 2.7 12.1 13.1 8.8 6.3 3.3 2.6 Beverages and tobacco (1) 0.5 0.5 0.3 0.1 0.1 0.1 0.3 0.1 0.1 Crude materials, inedible (2) 8.1 3.7 - 2.4 11.4 6.6 3.6 4.5 2.5 1.4 Mineral fuels and lubricants (3) 23.0 6.2 7.1 50.9 12.9 12.6 7.4 1.2 1.6 Animal and vegetable oils (4) 1.9 0.8 0.4 0.5 0.4 0.2 2.3 1.3 0.5 Chemicals and related products (5) 5.0 7.8 8.3 2.4 3.1 3.6 2.0 3.1 3.2 Manufacturedgoods(6) 18.2 20.8 15.1 8.7 13.4 10.1 14.9 11.4 11.0 Machinery and transport equipment (7) 18.1 38.6 47.9 3.5 24.9 35.4 24.4 45.5 48.5 Miscellaneous manufactured articles (8) 10.6 16.7 15.2 8.6 23.8 23.4 36.6 30.4 29.8 Commodities and transactions, nes (9) 5.8 1.6 0.6 1.9 1.8 2.1 1.1 1.0 1.4 Source: UN COMTRADE Statistics 37 Trade Trends 12 What Products Dominate East Asian Intra-Trade? Kea Point East Asian intra-trade is dominated by 30 four-digit SITC products that accounted for just over one half of this exchange in 2001. IWithin this group, electronic products are of major importance, as are several SITC categories used to record trade in components of various manufactured goods. The latter reflects the rapid expansion in East Asian production sharing operations in which various stages of a manufacturing process are undertaken at different geographic locations. Very strong similarities are observed in the lists of largest products exported to regional and non-regional markets. There are reasons why coultries may want to identify relatively important products in their intra- trade, and also determine how the composition of these goods was changing. First, this information could help focus attention on priority sectors for liberalization of government imposed trade barriers in future trade negotiations. Second, if goods that are increasing in importance generally have common characteristics like labor, capital or natural resource intensity in production, this could help focus regional efforts to reduce any transport, or other infra-structure constraints, these types of goods encounter. Third, analyses of intra-trade should attempt to identify any major potentially "sensitive" products which might adversely affect bilateral trade relations. For example, the Canadian-American Free Trade Agreement (CAFTA) experienced major disputes over issues involving purportedly subsidized Canadian lumber exports. Given the potential importmnce of these issues, Table 12.1 reports the value and share of the 30 largest four-digit SITC (Revision 2) products in 2001 intra-regional trade. Similar 1985 statistics for these products are shown, along with 1985-2001 average annual growth rates. The table also identifies the largest exporter and shows its current share of total trade in the good. Appendix Table A4 shows the largest regional export products of each individual East Asian country while Appendix Tables A5 and A6 shows East Asia's largest exports to Japan and all other destinations. Four important points emerge from these statistics. First, the 30 largest products accounted for just over 50 percent of regional trade in 2001, up sharply from their 35 percent 1985 share. The fact that the SITC system identifies close to 800 individual products at this level (four-digit) of detail accents the relative importance of these thirty items in regional trade. Second, some of the 1985-2001 value and share changes are remarkable! The share of electronic microcircuits rose by over 10 percentage points (to 12.4 percent). Similarly, the share of "parts of office machinery" (SITC 759.9) increased by over 5 percentage points. The fact that 15 of the 30 largest products are classified in SITC groups 75, 76, and 77 (office machinery, telecommunications equipment, and electrical machinery (nes) testifies as to the major importance of electronics in East Asian intra-trade. Third, a number of the major products are SITC groups that consist solely of parts and components (that is, groups like SITC 759.9 "parts of office machinery", or SITC 764.9 "parts of telecommunications equipment"). This reflects the rapidly growing importance of international production sharing in East Asia. (see Trade Trends 17 to 19 that follow). Finally, no agricultural products appear in the list. This point, is potentially important since the rural population is normally the most disadvantaged sector of society in developing countries, and a major expansion of agricultural exports could significantly improve living conditions.20 A more detailed analysis of intra-trade in agricultural products could provide useful information on this important question. 20 Available evidence suggests that changes in the structure of East Asian trade barriers could make a significant contribution towards alleviating conditions of rural poverty. Safadi and Yeats (1993) analyzed statistics on tariff escalation in East Asian countries and concluded this problem was far more serious than in OECD markets. Reduction of tariff escalation in Asia would have a two-fold positive impact on rural 38 Table 12.1 raises an interesting question, that is, does the composition of exports to regional markets differ substantially from East Asia's exports to other countries? This might be the case if (say) significant differences occur in regional and non-regional trade barriers, or if transport costs were an important negative constraint to penetration of relatively remote markets in North America or Europe. For answers, Table 12.2 identifies East Asia's 30 largest exports to Japan, and to all other non-regional markets combined (that is, global exports less exports to Japan, less exports to other East Asian countries). To help in assessing this information" items that appear on the list of the largest regional exports (Table 12.1) are highlighted in boldface. Strong similarities are observed in the profile of exports to these three destinations. Electronic microcircuits (SITC 776.4) are the largest single product in each case, and the seven largest products exported to both Japan and the "rest of the world" appears on the list of the largest goods in regional trade. Approximately 60 percent of the largest products in regional trade are among the largest products exported to other destinations. The profile of East Asia exports is such that it allows the region to capitalize on opportunities in both regional and non-regional markets. poverty. First, it would increase the level of demand for primary commodities due to increased opportunities for local processing. Second, it appears likely that some of the increased processing would be conducted where the commodities were produced and have ajob creation effect. 39 Table 12. 1 East Asia's Largest Four-Digit SITC Intra-Regional Export in 2001 Regional Trade ($ million) Share of Total % Growth Commodity (SITC No.) Major Supplier (share) 1985 2001 1985 2001 Rate (%) Electronic microcircuits (776.4) Malaysia (23) 1,106.5 48,975.0 2.26 12.43 26.7 Parts of office machinery (759.9) China (25) 294.0 22,365.9 0.60 5.67 31.1 Parts of telecommunications equipment (764.9) China (45) 644.7 9,840.7 1.32 2.50 18.6 Radiotelegraphic and telephonic equipment (764.3) Korea (32) 6.6 8,334.0 0.01 2.11 56.3 Digital central storage units (752.4) Singapore (23) 0.1 8,184.7 2.08 98.9 Petroleum oils (333.0) Indonesia (30) 5,903.6 6,287.2 12.06 1.60 0.4 Diodes and transistors (776.3) Malaysia (20) 283.5 6,208.9 0.58 1.58 21.3 Children's toy and games (894.2) China (95) 947.8 6,J27.8 1.94 1.55 12.4 Other electrical machinery (778.8) China (28) 199.4 6,050.9 0.41 1.54 23.8 Piezo-electric crystals (776.8) Taiwan (24) 329.2 5,500.8 0.67 1.40 19.2 Peripheral control units (752.5) China (33) 85.4 5,344.5 0.17 1.36 29.5 Footwear (851.0) China (93) 188.1 5,190.0 0.38 1.32 23.0 Other electrical power machinery (771.2) China (56) 128.7 4,511.4 0.26 1.14 24.9 Electrical switches and relays (772.1) China (35) 177.2 4,481.2 0.36 1.14 22.4 Printed circuits and parts thereof (772.2) Taiwan (28) 133.1 4,474.5 0.27 1.14 24.6 Jerseys and pullovers (845.1) China (88) 238.3 4,063.9 0.49 1.03 19.4 Polystyrene (583.3) Taiwan (44) 131.7 4,012.0 0.27 1.02 23.8 Petroleum gases (341.3) Indonesia (47) 101.8 3,883.1 0.21 0.99 25.6 Knitted fabrics (655.2) China (38) 139.0 3,867.3 0.28 0.98 23.1 Woven fabrics (653.1) Taiwan (45) 835.2 3,321.0 1.71 0.84 9.0 Miscellaneous art materials (893.9) China (54) 206.7 3,304.5 0.42 0.84 18.9 Travel goods and handbags (831.0) China (95) 271.9 3,293.6 0.56 0.84 16.9 Electric motors and generators (716.2) China (46) 47.9 3,104.9 0.10 0.79 29.8 Specialized machinery and appliances (728.4) Taiwan (42) 441.4 2,987.6 0.90 0.76 12.7 Woven cotton fabrics (652.2) China (48) 2,370.6 2,898.6 4.84 0.74 1.3 Insulated electrical wire and cable (773.1) China (45) 133.2 2,852.8 0.27 0.72 21.1 Telephonic electrical line (764.1) China (61) 37.2 2,740.4 0.08 0.70 30.8 Other sound recorders (763.8) China (72) 71.1 2,725.3 0.15 0.69 25.6 Copper and copper alloys (682.2) Taiwan (38) 93.9 2,554.4 0.19 0.65 22.9 Gas oils (334.3) Singapore (50) 1,609.4 2,519.1 3.29 0.64 2.8 ALL ABOVE PRODUCTS 17,159,068 200,017,751 35.05 50.79 16.9 Source: Computations based on UN COMTRADE statistics. 40 Table 12.2 East Asia's Thirty Largest Four-Digit SITC Exports to Japan and All Other Non-Regional Countries in 2001 EXPORTS TO JAPAN EXPORTS TO ALL OTHER NON-REGIONAL COUNTRIES SITC Product Description* Value ($000) Share (%) SITC Product Description* Value ($000) Share (%) TOTAL EXPORTS 145,002,541 100.00 TOTAL TRADE 572,884,033 100.00 776.4 Electronic microcircuits 8;834,146 6.09 776.4 Electronic microcircuits 33,851,396 5.91 341.3 Petroleum gases 8,618,857 5.94 759.9 Parts of office machinery 30,882,450 5.39 759.9 Parts of office machinery 5,064,704 3.49 894.2 Children s toys and games 22,689,247 3.96 333.0 Petroleum oils 3,385,009 2.33 752.4 Digital central storage units 21,150,427 3.69 845.1 Jerseys and pullovers 3,043,494 2.10 752.5 Peripheral units & adapters 21,033,579 3.67 764.9 Parts of telecom equipment 2,967,883 2.05 851.0 Footwear 20,054,966 3.50 752.5 Peripheral units including adapters 2,805,570 1.93 764.3 Radiotelephonic equipment 12,944,357 2.26 752.4 Digital central storage units 2,784,993 1.92 781.0 Passenger motor cars 12,461,436 2.18 334.1 Motor spirit and other light oils 2,457,621 1.69 763.8 Other sound recorders 10,267,198 1.79 851.0 Footwear 2,272,008 1.57 752.2 Complete digital data processing machines 10,163,693 1.77 752.3 Complete digital processing equipment 2,204,222 1.52 845.1 Jerseys and pullovers 9,778,780 1.71 036.0 Crustaceans 2,187,799 1.51 764.1 Electric telephonic & telegraphic line 8,491,822 1.48 843.9 Other textile outer garments 2,060,961 1.42 831.0 Travel goods and handbags 8,010,007 1.40 763.8 Other sound recorders 1,904,222 1.31 821.9 Other fumiture and parts 7,934,572 1.39 761.1 Color television receivers 1,874,914 1.29 843.9 Other outer garments of textile fabric 7,790,250 1.36 846.2 Under garments of cotton 1,789,840 1.23 764.9 Parts of telecom equipment 7,163,547 1.25 894.2 Children s toys and games 1,764,205 1.22 893.9 Miscellaneous articles 6,647,579 1.16 752.2 Complete digital data processing machines 1,725,974 1.19 778.8 Other electrical machinery 5,773,110 1.01 773.1 Insulated electrical wire 1,686,788 1.16 845.9 Other knit outer garments 5,667,265 0.99 634.2 Plywood sheets 1,592,357 1.10 771.2 Other electric power machinery 5,435,563 0.95 831.0 Travel goods and handbags 1,575,179 1.09 812.4 Lighting fixtures and fittings 5,058,851 0.88 821.9 Other fumiture and parts 1,544,285 1.07 775.8 Electro-thermal appliances 4,968,078 0.87 322.2 Other coal 1,422,334 0.98 762.8 Other radio-broadcast receivers 4,800,235 0.84 771.2 Other electric power machinery 1,416,974 0.98 752.8 Off-line data processing equipment 4,521,606 0.79 778.8 Other electrical equipment 1,314,368 0.91 821.1 Chairs and other seats 4,473,660 0.78 764.1 Electrical and telephonic line 1,310,827 0.90 772.1 Electrical switches and relays 4,203,768 0.73 845.9 Other knit outer garments 1,303,814 0.90 333.0 Petroleum oils 3,951,801 0.69 034.2 Frozen fish (excluding fillets) 1,235,742 0.85 846.2 Under garments of cotton 3,840,324 0.67 772.1 Electrical switches and relays 1,216,875 0.84 761.1 Color television receivers 3,695,114 0.65 037.1 Fish, prepared 1,153,974 0.80 772.2 Printed Circuits and Parts 3,546,071 0.62 * Products whose SITC numbers and descriptions are reported in boldface also occur among the 30 largest regional exports (see Table 11.1). 41 Trade Trends 13 Have East Asian Markets Facilitated Export Diversification? Key Point Summary measures of export concentration suggest very little general diversification of exports occurred over 1985-2001 in East Asian intra-trade. However, there are instances involving Korea, the Philippines and Taiwan (China) where exports became more concentrated The underlying statistics show the trend toward increased concentration of exports in these cases was largely due to a remarkable export expansion for electronic products, or for office machinery parts and components. This greatly increased the importance of these products relative to other exports. Does the available evidence suggest regional trade promoted the diversification of East Asian exports? This could be the case if regional markets were an initial base for the launch of new exports, which subsequently were traded elsewhere once positive scale and other "learning" effects were achieved. The question is important since it is generally assumed that the greater the level of diversification the better the prospects a country's regionally or global exports. If only a limited range of tradable goods exist, RTA members may have to rely on third countries for a high share of their imports, and this could reduce perceived benefits from the regional trade scheme. Important negative effects from a high concentration of exports may exist. For example, some studies show countries with highly concentrated exports may experience relatively unstable export earnings, a factor that makes economic planning difficult.21 In analyses of the magnitude and effects of trade concentration, three empirical indices often have been employed. These include, * A count of the number of products exported. Two related problems are how to distinguish between established and marginal exports, and at what level of aggregation should products be defined. UNCTAD adopted an approach that seems sensible and differentiates goods at the four-digit level of the SITC. To be included in the count, a product had to account for at least one-half of one percent of total exports. * A second index is the share of a country's total exports accounted for by the largest products. Previous studies based this measure on the three, or ten, largest products. The higher the shares of these products the higher is the level of export concentration. * The so called "Hirschmnann" index has been used as a measure of trade concentration (see UNCTAD, various issues). This index ranges between 0 and 1, with lower values indicating less concentrated trade structures. The I:iirschmann index is defined as; (13.1) Hj = 4(E(xi/X)' where xi is the value of exports of commodity i (normally defined at the four-digit SITC level) and X is the total value of country j's exports. 21 For an earlier related analysis see MacBean (1966), while Labys and Montague (1990) and the World Bank (2001b) stress the need for many developing countries to diversify their exports. For recent evidence on the negative impact of unstable export earnings, and the need for diversification, in Sub-Saharan Africa see Ng and Yeats (2002). 42 Table 13.1 presents 1985, 1995 and 2001 results when these concentration indices were calculated for; (i) each individual country's regional trade, (ii) the total intra-trade of all East Asian country's combined, and (iii) for East Asia's global exports. There are instances, involving Cambodia, Hong Kong, Table 13.1 Changes in Concentration Indices for East Asian Intra-Trade No. of Products Concentration Products Share i Exports (%) Exporter Year Exported Index Three Largest Ten Largest Brunei 1985 1 0.98 98.9 99.4 1995 5 0.78 92.4 95.5 2001 7 0.70 85.7 96.6 Cambodia 1985 4 0.37 53.9 58.0 1995 8 0.54 86.5 93.9 2001 31 0.26 37.5 64.3 China 1985 37 0.18 22.1 36.8 1995 51 0.12 15.8 28.7 2001 45 0.12 13.1 29.3 Hong Kong, China 1985 24 0.26 39.0 58.9 1995 39 0.15 19.7 36.1 2001 45 0.16 21.0 37.3 Indonesia 1985 20 0.46 64.3 80.7 1995 30 0.23 37.3 56.6 2001 37 0.19 27.8 45.5 Korea 1985 46 0.16 19.7 35.5 1995 43 0.19 24.5 38.7 2001 45 0.16 20.9 35.2 Laos 1985 9 0.75 90.6 96.6 1995 16 0.45 62.9 91.9 2001 18 0.53 73.2 87.9 Malaysia 1985 20 0.37 51.8 72.8 1995 39 0.18 23.0 43.7 2001 31 0.29 40.2 55.6 Mongolia 1985 9 0.63 81.8 98.5 1995 19 0.37 49.2 83.9 2001 15 0.73 79.0 92.8 Philippines 1985 32 0.29 37.9 59.4 1995 27 0.30 45.1 65.0 2001 19 0.49 64.0 78.3 Singapore 1985 32 0.24 35.4 54.4 1995 36 0.17 23.0 41.2 2001 39 0.23 30.1 48.6 Taiwan, China 1985 47 0.12 14.5 29.3 1995 43 0.12 13.3 31.7 2001 40 0.21 27.1 41.5 43 Table 13.1 Continued No. of Products Concentration Products Share in Exports (%) Country Year Exported Index Three Largest Ten Largest Thailand 1985 27 0.22 32.5 53.9 1995 35 0.19 26.8 46.8 2001 37 0.18 27.0 41.9 Vietnam 1985 25 0.36 53.8 76.3 1995 36 0.25 38.3 57.9 2001 28 0.42 48.7 62.8 All Above Countries 1985 36 0.15 20.2 34.6 1995 45 0.11 13.7 24.5 2001 41 0.16 20.6 32.4 MEMO ITEM East Asian Global 1985 45 0.11 13.4 28.0 Exports 1995 46 0.14 17.0 34.3 2001 43 0.13 15.3 34.1 Source: UN COMTRADE Statistics. Indonesia, Laos, Mongolia and Thailand where an important diversification of exports occurred.22 For example, over 1985-2001 the number of Cambodia's regional export products rose more than ten fold (from 3 to 31), while the share of Indonesia's three largest exports fell from 64 to 28 percent. However, there are several instances involving the Philippines, Taiwan (China) and Korea where the Hirschmann, and other indices, reflect an increased concentration of exports. What factors were responsible for these divergent trends? For an initial appraisal, these three countries current largest export products were identified. The value and export share of these itemns was tabulated and compared with similar information for 1985 (see Table 13.2). Two points emerge from these comparisons. First, a remarkable relative increase occurred in the importance of exports of electronic goods and components which did, in fact, cause the overall structure of exports to become more concentrated. For example, the share of electronic microcircuits (SITC 776.6) in Taiwan's exports rose from 1.2 to almost 19 percent over 1985 to 2001. A similar increase occurred in the relative importance of this product in Korean and the Philippines exports. Second, increased electronic or machinery component exports ligure prominently in the trade of all three countries (a point that underscores the growing importance of international production sharing in the region (see Trade Trends 17- 19). In short, the statistics in Table 13.2 indicating increasingly concentrated trade structures for these countries can largely be explained by the rapid expansion of these types of specialized products which grew at rates far in excess of those for other established exports. 22 The 1985-2001 export share of the three largest products fell by 10 percentage points or more in the case of Brunei, Cambodia, Hong Kong, Indonesia, Laos and Malaysia. Hong Kong and Indonesia recorded the largest reductions in their 10 product export shares, that is, 22 and 35 percentage points, respectively. For Indonesia the reduction was largely due to a decline in the relative importance of petroleum exports. 44 Finally, in answer to the question posed in Trade Trends 6 the available evidence does not support the proposition that regional markets fostered a general diversification of exports. From 1995 to 2001 the share of the three largest products in regional trade rose by 7 percentage points to approximately the same level as in 1985. Similar changes occurred in the concentration index and the export product count. These developments do not appear to be related to the financial crisis, but are seemingly due to intense East Asian demand for several specific electronics products. Table 13.2 Why Some East Asian Exporters Did Not Diversify! Evidence from Korea, the Philippines, and Taiwan, (China) Value of Regional Exports Share of Regional Trade ($million) (%) Exporter/Product/SITC No. 1985 1995 2001 1985 1995 2001 KOREA ALL GOODS 2,573 39,707 52,511 100.0 100.0 100.0 Electronic microcircuits (776.4) 119 6,237 6,223 4.6 15.7 11.9 Radiotelephonic gear (764.3) 75 3,151 0.2 6.0 Electronic peripheral units (752.5) 1 171 1,619 0.1 0.4 3.1 Parts of telecommunications (764.9) 34 876 1,293 1.3 2.2 2.5 PHILIPPINES ALL GOODS 1,120 4,596 14,727 100.0 100.0 100.0 Electronic microcircuits (776.4) 294 1,100 6,898 26.2 23.9 46.8 Parts of office machinery (759.9) 23 576 1,358 2.0 12.5 9.2 Digital storage units (752.4) 0 201 1,170 0.0 4.4 7.9 Diodes and transistors (776.3) 7 223 575 0.6 4.8 3.9 TAIWAN, (CHINA) ALL GOODS 5,525 49,927 59,992 100.0 100.0 100.0 Electronic microcircuits (776.4) 66 3,060 11,136 1.2 6.1 18.6 Parts of office machinery (759.8) 43 1,312 3,390 0.8 2.6 5.7 Polystyrene (583.3) 49 1,781 1,757 0.9 3.6 2.9 Source: UN COMTRADE statistics. Trade Trends 14 Are There "Dynamic" East Asian Exports Key Point Manufactured goods that are high skill and highly technology intensive in production comprise a large share of East Asia's fastest growing products in regional trade. Electrical machinery accounts for about one-fifth (by value) of this exchange. East Asia is in the enviable position of having many of its fastest growing regional exports included on a list of its largest export products. Although they presently may not constitute a large share of East Asian exports, there are reasons why one should attempt to identify "dynamic" (that is, fast growing) exports. Even though their current trade may be small, if their above-average growth continues for an extended period, these items eventually could become an importance source of export earnings. Second, if the dynamic products have common production characteristics, this could convey important information. For example, if they are (say) highly labor- or resource-intensive, both the reasons for their growth and whether similar export opportunities exist in related goods could have important implications. Third, there is an obvious interest in identifying 45 dynamic products to focus attention on the removal of any trade barriers they face in possible regional trade arrangement negotiations. Fourth, correlations show a relatively strong relationship exists between the growth rates for specific manufactures in the 1980s and 1990s (Yeats 1999). As such, the identification of current dynamic products may provide useful information concerning their future growth prospects. Table 14.1 lists the fastest-growing four-digit (Rev. 2) export products in regional trade over the recent 1995-2001 period. It shows the value of exports in each year, each item's percentage increase, and (where possible) whether or not the item is normally produced by labor- or capital- or skill intensive manufacturing procedures. These chissifications are based on an UNCTAD (Mayer et. al. 2002, p. 27) analysis that attempted to identify the fastest growing products in world trade. To guard against the results being biased by items with a very low initial trade base, products were excluded if they failed to account for at least one-half of one percent of total 1995 intra-regional exports. Product descriptions are highlighted in boldface if the item was also classified as one of the regions largest exports (see Table 12.1). Finally, the largest regional exporter(s) of each item is identified and its trade share is shown. Three important points emerge from the information presented in Table 14.1, * High technology and high skill intensities are frequent characteristics of East Asia's fastest growing exports. Almost one-half of the products listed are classified as high skill, high capital and high scale intensive manufactures, while 22 percent are medium intensive in the use of these factors. In contrast, only three of the products, all of which are articles of clothing, are normally manufactured using labor-intensive processes. * Electrical machinery (SITC 77) accounts for the largest number of products listed in the table (8 of the four-digit items), and about one-fifth ($83 billion) of the total value of dynamic product exports. The export value of these goods doubled over 1995-2001. Within this group, intra-regional trade in electronic microcircuits (SITC 776.4) was approximately $50 billion. Office machinery and equipment (SITC 75) is the second largest group with regional trade of about $36 billion. * East Asia is in the enviable position of having many of its largest regional exports (identified in boldface) included in the "dynamic" or fast growing product group. Approximately 56 percent of the dynamic products, which accounted for $137 billion of intra-regional trade, also appear in the region's largest product list (see Table 12.1). Trade Trends 15 Has Intra-Industry Trade Facilitated the Expansion of East Asian Exports? Key Point A growing level of intra-indzustry trade can improve a country's prospects for development and growth, expand the range of products available to consumers, and also increase its interdependence in the global economy. Available evidence shows that East Asian intra-industry trade has been steadily growing in relative importance. These trends are evident in trade both within the region, and in trade with major global markets. Some analyses of factors promoting regional trade and growth conclude a growing level of inter- industry trade (IIT) can play an important positive role (see Grubel and Lloyd 1975, Greenway et. al. 1994, Feenstra 1998, or Hoekman and Djankov 1996). There are several reasons for this assumption. First, intra-industry exchange produces gains from international trade, over and above those from comparative advantage, because it allows countries to take advantage of larger markets. By engaging in IIT, a country can often simultaneously reduce the number of similar goods it produces, while the variety of goods available to consumers is increased. By manufacturing fewer varieties, a country can produce each on a larger scale, often with higher productivity and lower cost. 46 Table 14. 1 East Asian Countries "Dynamic" Four-Digit SITC Revision 2 Intra-Regional Export Products Regional Trade Value 2001 Percentage Major 2001 Supplier(s) ($ 000) Export Increase Commodity (SITC No.) and Share (%) 1995 2001 Share (%) (%/0) Radiotelegraphic & telephonic equipment (764.3)* Korea (38), China (29) 1,181,223 8,333,994 2.11 605.5 Peripheral electronic units (752.5)* China (33), Korea (30) 1,474,474 5,344,467 1.36 262.5 Digital central storage units (752.4)* Singapore (23), China (19) 3,324,042 8,194,712 2.08 146.5 Piezo-electric crystals (776.8)* Taiwan (24), Singapore (20) 2,362,571 5,500,780 1.4 132.8 Electronic microcircuits (776.4)* Malaysia (23), Taiwan (23) 22,762,712 48,975,040 12.43 115.2 Other coal (322.2) China (58), Indonesia (41) 1,132,592 2,404,728 0.61 112.3 Parts of office machinery (759.9)* China (34), Malaysia (33) 10,608,952 22,365,857 5.67 110.8 Printed circuits and parts (772.2)** Taiwan (28), China (27) 2,136,143 4,474,498 1.14 109.5 Jerseys and, pullovers (845.1)**** China (89) 2,043,761 4,063,947 1.03 98.8 Diodes and transistors (776.3)* Malaysia (25), Taiwan (20) 3,280,603 6,208,868 1.58 89.3 Petroleum gases (341.3) Indonesia (47), Malaysia (32) 2,075,375 3,883,072 0.99 87.1 Fuel oils (334.4) Singapore (48) 1,065,655 1,960,483 0.5 84.0 Other outer garments (845.9)**** China (84) 1,377,805 2,420,411 0.61 75.7 Other electric power machinery (771.2)** China (56) 2,682,822 4,511,373 1.14 68.2 Iron sheets & plates (674.6)*** Taiwan (48), Korea (40) 1,334,516 2,237,419 0.57 67.7 Other electrical machinery (778.8)** China (28), Taiwan (19) 3,635,115 6,050,890 1.54 66.5 Electrical switches and relays (772.1)** China (36), Taiwan (16) 2,825,977 4,481,204 1.14 58.6 Telephonic equipment (764.1)* China (61), Taiwan (12) 1,755,083 2,740,412 0.7 56.1 Polyethylene (583.1)* Korea (37), Singapore (21) 1,305,583 2,037,600 0.52 56.1 Kerosene and other medium oils (334.2) Singapore (46) 1,123,867 1,666,733 0.42 48.3 Cameras and camera parts (881.1)* China (59) 1,333,829 1,967,849 0.5 47.5 Other outer garments (843.9)**** China (87) 1,441,471 2,125,397 0.54 47.4 Polypropylene (583.2)* Korea (36), Taiwan (24) 1,136,868 1,665,179 0.42 46.5 Electric motors & generators (716.2)** China (46), Thailand (17) 2,153,960 3,104,906 0.79 44.1 Other polymerization material (583.9)* Taiwan (30), Korea (26) 1,364,979 1,944,928 0.49 42.5 Insulated wire and cable (773.1)** China (45), Taiwan (15) 2,026,478 2,852,770 0.72 40.8 Cyclic hydrocarbons (511.2)* Korea (58), Singapore (17) 1,399,254 1,968,195 0.5 40.7 All goods 303,521,831 394,140,708 100 29.9 * Classified by UNCTAD (2002, p. 27) as a high skill, technology-, capital and scale intensive manufactured good. ** Classified as a medium skill, medium capital and scale intensive manufactured good. *** Classified as a low skill, low capital and scale intensive manufactured good. **** Classified as a labor intensive manufactured good. Note: Products whose description is highlighted are also classified as one of the region's largest exports. 47 Several summary measures provide useful insights as to the extent that IIT is taking place or is changing. One such measure is the IIT ratio. This index ranges between zero and one, with larger values indicating greater trade between firms in the same industry. Higher IIT ratios suggest that gains from specialization in differentiated products are being exploited, and that the participating country is increasing its interdependence with regional or global markets.23 Table 15.1 presents 1985 and 2001 East Asian regional intra-trade ratios for all manufactured goods as well as several fabricated product sub-groups. To help visualize the pattern of changes, situations where the IIT index rose by a factor of 0.100, or more, are marked with an asterisk. An analysis of IIT indices in other published studies suggests this magnitude of change constitutes a relatively strong increase in intra-industry trade. These statistics show that overall intra-industry trade generally strengthened for most regional countries Brunei, Cambodia, and Laos are exceptions as little or no "base" for this activity seemingly has been established. Also, somewhat different patterns occur between the product groups. For example, the 1985-2001 IIT indices for manufactures rose for all but two of the East Asian countries, and 9 of the 14 East Asian countries registered an increase in excess of 0.100.24 The regional intra- industry trade ratios for Indonesia and Taiwan more than doubled to relatively high (approximately 0.500) values.25 However, the trend toward increased intra-industry trade appears weaker within the chemical products sector where the indices declined for 5 of the 14 regional countries. Are the intra-industry trade trends within East Asia unusual, or do they basically reflect the region's experience in global markets. Table 15.1 provides relevant information by showing 1985, 1995 and 2001 IIT indices for East Asia's trade with Japan, NAFTA, and the European Union (15). Strong similarities are evident in East Asia's IIT trends for both intra- and inter-regional trade. The 1985-2001 intra-industry ratios for trade in all mnanufacture goods with Japan more than doubled (from 0.199 to 0.462), while significant increases are also reported for the European Union (15) and NAFTA. Even during the recent 1995-2001 period, that covered the financial crisis, the IIT ratios generally tended to increase. In short, the statistics provide strong evidence as to East Asia's continuing successful expansion into both regional and global markets. 23 The IIT index is defined as, (15.1) IIT = I - [XXXXijk - Mujkl . (Xijk + Mijk)A Where Xijk represents exports from industry i by country j to country k, and Mijk represents corresponding import values. Industries are defined at the three-digit level of the SITC system and the analysis is confined to manufactured goods, that is, items classified in SITC groups 5 through 8 less nonferrous metals 24 Assembly operations for foreign produced parts and components are one reason for the increase in some IIT ratios. Machinery parts and components are normally classified in the same SITC category as their final stage product so the import of components for assembly, and the export of the final (assembled) stage good, is reflected in the IIT ratios. Lemoine and Unal-Kasenci (2002) report that over 90 percent of China's exports and imports of hight technology goods occur in the same product sectors due to assembly operations. 25 Kierzkowski (2001, p. 239) provides statistics on intra-industry trade ratios for 45 countries who trade with the European Union. This information should help assess implications of the statistics in Table 15.1. in general, many of the East Asian IIT indices appear relatively high. For example, Kierzkowski calculates an index of 0.274 and 0.432 for Greece and Portugal's (both EU members) trade with the European Union, while the indices for Poland and Hungary are 0.437 and 0.509, respectively. 48 Table 15.1 Intra-Industry Trade Ratios for Individual East Asian Regional Trade in 1985,1995 and 2001 Chemicals Machi nery & Transport Other Manufactures All Manufactures Country 1985 1995 2001 1985 1995 2001 1985 1995 2001 1985 1995 2001 Brunei Darussalam 0.041 0.011 0.016 0.080 0.045 0.016 0.091 0.040 0.115 0.080 0.040 0.075 Cambodia 0.004 0.023 0.005 0.000 0.010 0.064 0.000 0.044 0.060 0.001 0.023 0.056 China 0.214 0.423* 0.382* 0.522 0.385 0.458 0.285 0.225 0.282 0.322 0.287 0.365 Hong Kong 0.368 0.238 0.304 0.544 0.458 0.337 0.336 0.303 0.314 0.422 0.359 0.326 Indonesia 0.303 0.653* 0.672* 0.112 0.343* 0.571* 0.226 0.341 * 0.366* 0.223 0.397* 0.509* Korea 0.324 0.320 0.314 0.313 0.384 0.606* 0.228 0.427* 0.399* 0.271 0.393* 0.498* Lao P. D. Rep. 0.000 0.260* 0.010 0.004 0.006 0.033 0.003 0.033 0.029 0.002 0.043 0.029 Malaysia 0.359 0.617* 0.743* 0.709 0.742 0.749 0.444 0.564* 0.681* 0.588 0.693* 0.738* Mongolia -- 0.109* 0.003 -- 0.006 0.005 -- 0.050 0.226* -- 0.045 0.140* Philippines 0.507 0.240 0.305 0.446 0.563* 0.525 0.212 0.212 0.334* 0.379 0.418 0.484* Singapore 0.344 0.526* 0.392 0.838 0.804 0.810 0.430 0.503 0.607* 0.638 0.728 0.746* Taiwan, China 0.343 0.288 0.344 0.282 0.545* 0.646* 0.150 0.292* 0.305* 0.213 0.411 * 0.519* Thailand 0.284 0.455* 0.467* 0.530 0.719* 0.775* 0.508 0.550 0.579 0.473 0.645* 0.692* Vietnam 0.009 0.060 0.142 0.114 0.078 0.241 * 0.033 0.172* 0.211 * 0.027 0.119 0.211 * Average of Above 0.221 0.302 0.292 0.321 0.362 0.416 0.210 0.268 0.322* 0.260 0.329 0.384* MEMO ITEM IIT for Trade with: Japan 0.362 0.343 0.473* 0.104 0.354* 0.534* 0.277 0.327 0.342 0.199 0.344* 0.462* NAFTA 0.337 0.344 0.594* 0.483 0.482 0.429 0.100 0.209* 0.164 0.275 0.374 0.337 EU (15) 0.290 0.503* 0.577* 0.328 0.401 0.516* 0.287 0.396* 0.362 0.305 0.407* 0.465* * The regional intra-industry trade index increased by 0.100 or more over the 1985 level. Source: Computations based on UN COMTRADE statistics. 49 Trade Trends 16 Have East Asian Countries "Re-Orientated" Their Exports? Key Point According to the Asian Development Bank recent evidence pertaining to MERCOSUR shows that a regional trade arrangement can distort the composition and direction of member countries' trade in ways that incorporate major economic inefficiencies. Although East Asian RTAs (like ASEAN) are weaker a re- orientation of trade may be occurring. However, an analysis of regional trade changes shows these negative trends are not occurring within East Asia even though the relative importance of intra-trade has grown very rapidly. Rather, East Asia's global and regional exports appear to be evolving in ways that are fully consistent with these countries' comparative advantage. Any assessment of the effects of an established regional trade arrangement should consider how it influenced the direction and composition of trade. If substantial trade diversion occurred this could have important negative implications for third countries whose exports have been displaced. Second, the effects on the product composition of trade can be equally important. If an RTA stimulates intra-trade in products in which members do not have a cornparative advantage serious economic losses and inefficiencies may occur. The Asian Development Bank (2002, p. 187) cites evidence showing MERCOSUR had such negative economic effects through the "re-orientation" of member countries trade toward each other, "Inter-block trade in MERCOSUR increased at the expense of trade with non-member countries and caused significant trade diversion. This stemmed from the groups "discriminatory" tariffs against nonmembers which are four to six times higher than those in other major preferential trade arrangements. The trade block appears to reinforce the inward orientation of MERCOSUR economies enabling inefficient domestic producers to expand markets within the block remaining uncompetitive on the wider international scene. The decline in MERCOSUR tiade (both within and outside of the bloc) in the late 1990s reflects the impact of accumulated inefficiencies sustained through relatively high discriminatory protection. The MERCOSUR case highlights the importance of examining broader economic policies - rather than just looking at trade flows - when analyzing the impact of preferential trade arrangements." These observations raise an important issue. Have East Asian countries been re-orienting their, own trade toward each other. If they have, has the re-orientation been along lines consistent with comparative advantage or is it likely that important inefficiencies are involved? For example, in the case of MERCOSUR high discriminatory tariffs promoted intra-trade in highly capital intensive manufactures that could not be exported competitively to third markets. East Asia generally does not apply high discriminatory tariffs, but there are still several reasons why questions concerning the re-orientation of regional trade should be addressed; * The Asian Development Bank (2002, p. 185) cites evidence showing that, "since Lao PDR, Myanmar and Vietnam joined the ASEAN preferential trade arrangement between 1995 and 1998, a sharp increase in their within-block trade occurred." Similar shifts in the direction of trade may have occurred for other ASEAN countries. This re-orientation of trade may have been further encouraged by several trade facilitation and trade agreements such as the ASEAN Industrial Cooperation Scheme (which provides preferential tariffs for ASEAN owned enterprises), or the ASEAN Customs Vision 2020 agreement that attempts to streamline and simplify customs clearance procedures. * Preferential trade arrangements in non-regional markets may have caused East Asian countries to re-direct their trade toward each other. For example, over the last decade NAFTA and MERCOSUR were formed, and the EU agreement was strengthened and expanded. These developments could have worsened relative market access conditions for East Asian exporters in North America and Europe, and caused some trade to be diverted to regional markets (Asian Development Bank 2002, p. 188). * Exporters may have been motivated to re-orient exports toward the region by special trade facilitation arrangements, like the China-ASEAN framework agreement, which includes provisions for 50 future preferential tariffs, that streamlines and simplifies procedures for international trade. The incentive to re-orient trade could be significant if the framework agreements were viewed as precursors of formal preferential trade arrangements. The establishment and operation of special economic growth zone may also have caused a re-orientation of exports as local entrepreneurs attempt to capitalize on opportunities in these areas. An empirical measure is available that can provide useful insights concerning changes in the nature and composition of goods traded regionally. This measure, referred to as the regional "orientation" index for country i and good j, is defined as, (16.1) ROir = (share of i in country i's exports to the region) (share of j in country i's non-regional exports) The interpretation of this measure is somewhat similar to that for the standard RCA index. If the index exceeds unity the country has a higher than expected propensity to export product j to regional markets. If ROir is below unity the propensity to export j is lower than expected. Changes in the index over time are of particular interest since increases (decreases) indicate a growing (declining) regional orientation of trade in a specific product. See Yeats (1998) for a previous application of the regional orientation index. Table 16.1 reports individual East Asian country's 1985 and 2001 regional orientation indices for broad product groups like foodstuffs, chemicals and mineral fuels, as well as similar information for the combined exports of these countries. To help identify any underlying trends, the last line of the table shows the 1985-2001 overall change in each of the product group's indices.26 The major impression conveyed by Table 16.1 is that, with one exception (ores and metals), no major unexpected re-orientation occurred in the broad composition of goods destined for regional markets, even though the overall relative importance of intra-trade has increased dramatically (see Table 2. 1).27 Stated differently, East Asia's exports for these major product groups expanded at approximately the same pace in both regional and global markets. This point is reflected in the virtually unchanged RO index for machinery and transport manufactures (an index of 1.004 in 1985 versus 1.021 in 2001) as well as the relatively static indices for the other broad product groups. A specific example may help the pattern of results reported in Table 16.1. Trade Trends 14 determined that machinery and transport products were among the largest and most dynamic (that is, fastest growing) products in regional trade. Was the dynamism the result of diversion of exports from global to regional markets? No! As previously noted in Trade Trends 11 "Since 1985 the product composition of East Asian intra-trade changed dramatically as the share of machinery and transport equipment rose by over 26 percentage points. At present these goods account for approximately one half of all goods traded within the region. A similar pattern is observed in non-regional trade as the share of machinery and transport equipment rose from 18 to 46 percent." East Asia's trade performance shows it is fully competitive for these types of goods in both regional and global markets. As such, the evidence 26 Clearly, factors influencing global trading conditions could also have a major influence on the RO index apart from closer economic ties within East Asia. For example, the Uruguay Round agreement significantly liberalized barriers to trade in some products like steel, textiles and clothing that may have enhanced export opportunities in global, as opposed to regional markets. Some estimates indicate the Round, when fully implemented, could increase the volume of developing countries' exports by 13 to 36 percent. 27 The regional orientation index for ores and metals increased by a value of 1.258 over 1985-2001 which is the largest change reported in the table. Analysis of the underlying statistics shows the index change was almost totally accounted for by the redirection of Mongolian, Indonesian and Taiwan's exports of copper alloys and ores toward regional markets. The rapid expansion of regional electronic products, whose production is intensive in the use of copper, clearly contributed to this directional change in trade. 51 Table 16.1 East Asian Regional Orientation Indices for Intra-Trade of Broad Product Groups; 1985 and 2001 Regional Orientation Indices for Major Product Groups Manufactures Machinery Food & Beverages Agricultural Ores & Mineral Animal & Classified by & Transport Misc. Exporter . Year Feeds & Tobacco Raw Materials Metals Fuels Vegetable Oil Chemicals Materials Equipment Manufactures Brunei 1985 0.003 0.000 0.017 0.034 5.191 0.000 0.035 0.005 0.019 0.030 2001 0.009 0.010 0.065 0.154 21.511 0.000 0.013 0.629 0.076 0.029 Cambodia 1985 3.472 0.000 14.219 0.000 0.000 0.000 0.183 0.000 0.002 0.011 2001 2.927 1.708 19.159 1.145 0.001 0.000 0.050 2.736 0.154 0.075 China 1985 1.868 2.912 1.014 0.576 1.144 0.092 1.834 1.359 0.295 0.718 2001 0.835 4.365 0.526 1.581 0.835 0.155 0.945 1.286 0.815 1.204 Hong Kong, China 1985 0.299 5.877 0.645 1.007 0.087 0.186 1.992 0.863 2.339 1.039 2001 0.179 2.332 0.542 1.811 0.250 0.097 1.977 1.140 1.100 0.715 Indonesia 1985 0.984 0.179 2.489 0.777 2.684 0.513 2.720 0.707 0.031 0.014 2001 1.424 3.713 9.072 3.364 8.397 3.588 2.873 0.852 0.303 0.098 Korea, Rep 1985 0.305 1.387 0.504 3.094 0.192 0.016 5.879 1.228 1.508 0.414 2001 0.165 0.745 1.236 4.412 1.845 0.039 4.848 0.821 0.990 0.179 Lao, PDR 1985 6.356 0.000 9.525 0.000 0.000 0.000 0.000 0.006 0.010 0.011 2001 1.831 0.038 65.356 2.605 0.442 0.005 0.067 0.158 0.062 0.039 Malaysia 1985 0.705 0.552 4.019 0.338 2.024 5.350 0.597 0.227 0.825 0.085 2001 0.560 5.110 1.930 1.009 2.443 4.580 1.604 0.357 1.386 0.240 Mongolia 1985 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.934 0.000 4.996 2001 0.242 0.007 6.347 38.860 0.171 0.008 0.003 0.662 0.001 0.001 Philippines 1985 1.558 1.542 0.878 3.048 0.572 0.764 3.329 0.226 2.246 0.148 2001 0.794 1.283 0.242 1.539 0.335 1.251 0.473 0.114 1.832 0.123 Singapore 1985 0.272 1.215 0.312 0.754 2.510 0.459 4.480 0.182 1.375 0.240 2001 0.241 3.274 0.264 0.761 4.099 0.242 . 3.575 0.178 1.291 0.285 52 Table 16. 1 Continued Regional Orientation Indices for Major Product Groups Manufactures Machinery Food & Beverages Agricultural Ores & Mineral Animal & Classified by & Transport Misc. Exporter Year Feeds & Tobacco Raw Materials Metals Fuels Vegetable Oii Chemicals Materials Equipment Manufactures Taiwan, China 1985 0.647 0.443 0.648 1.960 0.152 0.014 3.080 1.437 1.434 0.688 2001 0.208 0.466 1.086 4.148 0.280 0.056 4.173 0.805 1.145. 0.283 Thailand 1985 6.228 2.649 1.793 1.517 0.023 0.265 1.774 0.500 0.676 0.211 2001 2.709 1.830 4.473 1.470 1.486 0.609 3.537 0.467 1.083 0.173 Vietnam 1985 9.354 0.032 3.205 0.600 0.014 1.693 0.227 0.043 0.008 0.007 2001 4.497 1.171 3.005 0.789 11.028 0.450 0.776 0.531 0.327 0.305 All above countries 1985 1.192 1.945 1.389 1.031 1.286 1.058 2.446 0.820 1.005 0.467 2001 0.695 2.851 1.455 2.289 1.848 0.840 2.521 0.819 1.033 0.553 MEMO ITEM Net Change: 1985-2001 -0.497 0.906 0.066 1.258 0.562 -0.218 0.075 -0.001 0.028 0.086 Note: The product groups are classified by SITC products in Revision 2 as Foods and Feeds (0+1+22+4); Agricultural raw materials (2-22-27-28); Mineral Fuels (3); Ores and metals (27+28+67+68); Chemicals (5); Machinery and Transport (7); Other Manufactures (6-67-68+84); and Miscellaneous manufactured goods (SITC 8-84). 53 indicates East Asia's regional exporls expanded along lines consistent with comparative advantage without any significant policy induced distortions. Trade Trends 17 How :Big is East Asian Production Sharing? Key Point Trade in parts and components has grown steadily in East Asia and now accounts for about $66 billion, or over one-fifth of all in.sra-trade in manufactured goods. Regional trade in parts of office machinery and telecommunications equipment now total about $43 billion. The magnitude of production sharing in East Asia would clearly be a positive factor facilitating regional cooperation and increased interdependence. A growing body of evidence has documented the remarkable increase in international production sharing as reflected in far above average growth rates for trade in components or partially assembled manufactured goods.28 Production sharing often involves the development of specialized (often) labor intensive activities within vertically integrated international manufacturing activities. As an example, electronic semi-conductors, valves, tuners and other cornponents are now assembled for multinational firms in places like Malaysia or the Philippines. Parts of wearing apparel and leather goods are assembled in Jamaica and the Dominical Republic for re-export to the US market - one estimate by the World Bank puts the value of assembly exports from the Caribbean at over $3 billion. Among the many industries where major parts of a production process were internationalized include television and radio receivers, sewing machines, calculators, office equipment, electrical machinery, power and machine tools, typewriters, cameras and watches (USITC 1994). In its original form, the Standard International Trade Classification (SITC) system did a less than adequate job of distinguishing between trade in final goods as opposed to parts and components. At its lowest (five-digit) level the SITC R.evision 1 identified about 800 individual products - only 10 of which consisted of "parts" of manufactured goods that normally would undergo further assembly. However, in the late 1970s and early 1980s many countries adopted the more detailed SITC Revision 2 system which expanded the number of product groups composed solely of parts and components. The coverage of these groups was most extensive within the machinery and transport equipment sector (SITC 7) where about 60 individual three, four, and five-digit product classifications that consist solely of components of manufactured equipment intended for further assembly.29 This data source greatly facilitated empirical analyses relating to production sharing. The recently introduced Harmonized System (HS) trade data classification scheme further expancled the coverage of statistics on trade in parts and components. 28 Production sharing is the internationalization of a manufacturing process in which several countries participate in different stages of a specific good's fabrication. The process is of considerable economic importance since it allows stages of production to be located where they can be undertaken most efficiently. Ng and Yeats (1999, p. 13) East Asian intra-trade in goods normally used in production sharing grew at an annual rate of 21 percent from the mid-1980s to mid-1990s. This was approximately 7 percentage points higher than East Asia's intra-trade in all goods. 29 This analysis is based exclusively on product groups defined by the UN as consisting solely of parts and components. This almost certainly causes estimates of East Asian production sharing to be downward biased. Some other traded SITC 7 products, like television picture tubes, or threads and fibers in SITC 6, likely experience further assembly operations, but it is not possible to accurately determine what is their true end use. 54 Table 17.1 The 2001 Value and Share of East Asian Regional Trade in Parts and Components (values in $ 000) Regional Trade Component Part Description (SITC Number)* Value Share (%) Steam boilers and auxiliary plants (711.9) 50,718 0.08 Aircraft internal combustion engines (713.19) 32,184 0.05 Outboard Motors (713.31) 2,619 0.00 Outboard motors, nes (713.32) 80,057 0.12 Internal combustion engines, nes (713.9) 317,289 0.48 Engines and motors, nes (714.9) 170,469 0.26 Rotating electric motors (716.9) 488,209 0.74 Water turbines and motors (718.89) 4,815 0.01 Cultivating equipment (721.19) 9,939 0.02 Harvesting machinery (721.29) 6,965 0.01 Dairy machinery (721.39) 762 0.00 Wine making machinery (721.98) 1,450 0.00 Agricultural machinery, nes (721.99) 11,551 0.02 Construction machinery (723.9) 540,244 0.82 Spinning machinery (724.49) 40,587 0.06 Looms and knitting machinery (724.69) 69,144 0.11 Textile machinery, nes (724.79) 83,248 0.13 Paper making machinery (725.9) 24,573 0.04 Bookbinding machinery (726.89) 850 0.00 Printing and typesetting machinery (726.9) 119,388 0.18 Grain milling machinery (727.19) 7,255 0.01 Food processing machinery (727.29) 14,939 0.02 Machines for special industries (728.19) 63,660 0.10 Mineral working machinery (728.39) 31,084 0.05 Machines for special industries, nes (728.49) 602,013 0.92 Machine tools for metal working (736.9) 175,356 0.27 Foundry equipment (737.19) 15,248 0.02 Rolling mill parts (737.29) 26,549 0.04 Refrigerating equipment (741.49) 117,514 0.18 Pumps for liquids (742.9) 75,179 0.11 Centrifuges and filters (743.9) 287,150 0.44 Fork lift trucks (744.19) 18,878 0.03 Lifting and loading machines (744.9) 447,655 0.68 Power hand tools (745.19) 30,445 0.05 Packing machinery (745.23) 22,085 0.03 Non-Electric machinery (749.99) 162,630 0.25 Office and adding machinery (759) 24,604,494 37.48 Telecommunications equipment (764) 18,198,727 27.72 Electric power machinery (771.29) 750,139 1.14 Switchgear (772) 8,477,535 12.91 Domestic electrical equipment (775.79) 49,726 0.08 Electro-thermal appliances (775.89) 208,005 0.32 Electronic components, nes (776.89) 4,374,729 6.66 Electronic accumulators (778.19) 73,358 0.11 Electric lamps and bulbs (778.29) 30,756 0.05 Electrical machinery, nes (778.89) 370,171 0.56 Motor vehicles and accessories (784) 1,542,921 2.35 Carriages and cycles (785.39) 854,227 1.30 Trailers and non-motor vehicles (786.89) 60,100 0.09 55 Table 17. 1 Continued Regional Trade Component Part Description (SITC Number)* Value Share (%) Railroad equipment and vehicles (791.99) 12,758 0.02 Aircraft and helicopters (792.9) 426,848 0.65 Chairs (821.19) 54,474 0.08 Other furniture parts (821.99) 166,969 0.25 Measuring or drawing machines (874.29) 119,798 0.18 Still cameras, nes (881.19) 686,945 1.05 Cameras under 16mm (881.21) 31,253 0.05 Cameras under 16mm, nes (881.29) 12,580 0.02 Unmounted optical elements (884.1 1.) 23,517 0.04 Clocks and watches (885.29) 328,587 0.50 Umbrellas and canes (899.49) 38,090 0.06 ALL ABOVE ITEMS 65,649,409 100.00 MEMO ITEM: EAST ASIAN REGIONAL TRADE All Above Parts and Components 65,649,409 26.23 All Manufactures Excluding Chemicals 250,269,408 100.00 *The official description of this item. in UN COMTRADE is preceded by the term "Parts of ....". This has been omitted in the table to avoid excessive duplication. Source: Computations based on UN COMTRADE statistics. Table 17.1 utilizes the UN SITC Revision 2 trade statistics to examine the composition and relative importance of individual component products in East Asian trade.30 The table identifies each product by SITC number, it provides a short description, and also indicates the value and share of each item in all East Asian regional components trade. To help assess the relative importance of East Asian production sharing, the table also compares the value of regional trade in parts and components with that for all manufactured goods exclusive of chemicals. Regional trade in components now accounts for about one-quarter of this exchange. One interesting point evident from these statistics is that East Asian component trade is concentrated in a relatively few items. Four products account for almost 85 percent of regional trade, with parts of office machinery and telecommunications equipment accounting for about two-thirds of this exchange. Production sharing is of major importance in these sectors that are among the fastest growing global exports of the East Asian countries (see Trade Trends 14). An analysis of the underlying individual East Asian country's trade statistics reveals little variation in the relative importance of these products across countries (see Appendix Table A4). A similar high level of product concentration has also been observed in global statistics on components trade except that motor vehicle parts were the largest single traded component product on all world markets (Yeats 2001). How big is East Asian production sharing? The answer is very big! With regard to the relative importance of parts and components in East Asian trade, the table's memo item shows these goods now account for more than one-quarter of the region's intra-trade in manufactures exclusive of chemicals. The 30 According to United Nations trade data the United States and Germany were the two largest exporters and importers of components, but Singapore, Hong Kong, Japan, Malaysia, and China ranked among the 10 largest countries participating in this exchange. In 1996, East Asian (including Japan) global trade in parts and components ($165 billion) fell between North America ($152 billion) and OECD Europe ($239 billion) according to Ng and Yeats (1999, p. 10) 56 magnitude of this exchange, and East Asian countries links in international production sharing, would clearly be positive factors in any regional trade arrangements Trade Trends 18 The Direction of East Asian Trade in Parts and Components Key Point Japan is an important center or "hub " of production sharing operations in East Asia originating about one-third ($38.7 billion) of all regional exports of components for assembly. Over 70 percent of Indonesia's regional imports of components originate in Japan, while the corresponding share for Korea, the Philippines and Taiwan exceeds 50 percent. Trade in parts and components plays a key role in several countries strategic trade policy, often serving as a means of penetrating markets for high technology, or high skill products. Any analysis of East Asian intra-trade in parts and components should examine the geographic pattern of this exchange. Specifically, countries that specialize the export of these goods may be at a competitive disadvantage in further assembly operations, possibly due to the influence of relatively high wage costs.3' Similarly, countries that are primarily importers of components may have a competitive advantage in assembly operations, possibly due to a large available pool of low cost labor. These latter countries may be at a comparative disadvantage in the production of some components, particularly those manufactured using capital intensive techniques. As such, the sign and size of the trade balance in parts and components may help indicate the magnitude of the competitive advantage, or disadvantage, of a country in the production of components, or in assembly operations. One further point should be noted. Previous empirical analyses demonstrated the Japan played a central role as a "hub" for production sharing in East Asia in the mid-1990s (Ng and Yeats 1999), and was the major "source" of these goods. As such, the country coverage of this section is expanded to permit current analysis of trade in parts and components between Japan and other countries of East Asia. Table 18.1 provides 2001 statistics on the origins and destinations of East Asian intra-trade in these goods. The top row of the table identifies the countries originating regional exports of components, while the left-most column shows the destinations (that is, the importers) of these shipments. For example, the table indicates Japan exported $8.3 billion in parts and components to China, while Singapore's exports to Hong Kong were just under $2 billion. Five countries, namely, Brunei, Cambodia, Lao PDR, Mongolia, and Vietnam were excluded from this analysis due to the fact that their participation in this regional activity was relatively unimportant. The table's middle third shows the share of each country's total imports of components supplied by individual East Asian exporters. As an example, China sourced 43 percent of its imports of components from Japan, and about 13 percent from the Republic of Korea. Similarly, Hong Kong's major supplier of components was China which originated $13.6 billion, or 45.5 percent of its total imports. Finally, the lower third of the table shows each exporters regional trade balances (exports minus imports) in terms of values, and expressed as a percentage of total exports. For example, Japan's exports of parts and components to East Asia exceeded its imports by about $23.5 billion - the value of this positive balance was about 60 percent of its total exports. Bilateral trade balances can be determined from the appropriate column and row entries in Table 18.1 Four important points are evident in the statistics in Tables 18.1, For example, in 2001 Japan's regional exports of all exports of parts and components totaled about $38.7 billion, which was almost two and one half times the value ($15.2 billion) of imports of components for further assembly. In contrast, the value of imports of components by a low wage country like Indonesia ($2.2 billion) was 30 percent higher than the corresponding value ($1.7 billion) of its exports. 57 * First, although China's exports of parts and components increased by almost $16 billion over 1995 to 2001 (to a current value of S26.8 billion), Japan largely remains the important center of production sharing operations in East Asia originating about one-third ($38.7 billion) of all regional exports of components. Over 70 percent of Indonesia's regional imports of components originate in Japan, while the corresponding share for Korea, the Philippines and Taiwan exceeds 50 percent (Table 18.1). Only in the unusual cases of Hong Kong and Singapore does China (or Malaysia) surpass.Japan as the major supplier of components.32 * Second, although Japan was the third largest East Asian importer of components in 2001 (receiving shipments of $15.2 billion) behind Hong Kong (imports of almost $30 billion) and Singapore, it still maintained a sizeable regional trade surplus of about $30 billion for these goods. In addition to China (which had a positive trade balance of $7.7 billion, due largely to its close association with Hong Kong) Indonesia, Korean and Taiwan had a net positive balance for regional trade in components. * Third, China is the second largest regional importer of parts and components, with trade of $20 billion, behind Hong Kong. In consultations with the World Bank in the early 1990s, Chinese authorities indicated these imports had a major strategic role in the country's overall trade policy. Specifically, trade in components was encouraged by governmental policies, such as tariff exemptions, that viewed local assembly of foreign produced components as a means of entering markets for high skill or high technology products that would otherwise be impenetrable. Imports of components were also viewed as a means of improving the foreign competitiveness of other industries by lowering production costs (see Lemoine and Kesenci 2002, or World Bank 1994 for details). * Fourth, the statistics suggest that countries with relatively low wage costs tend to be major importers of components for further assembly. For example, according to the World Bank (2000a) yearly labor costs per worker in manufacturing ranged from $1,000 to $3,400 in the Philippines, Malaysia, and Thailand (as opposed to $32,000 in Japan), and these three developing countries had deficits in regional parts and components trade. Singapore and Hong Kong, with average annual labor costs of $21,500 and $13,500 respectively appear, at first, to be outliers as both are relatively high labor cost countries with regional imports of components in excess of their exports. Why do countries like Singapore and Hong Kong, with their relatively high wage costs, have relatively high imports of parts and components? The answer, in part, is that this is the result of a conscious effort to upgrade the composition of their final exports. Partly as a reaction to the East Asian financial crisis, Singapore and Hong Kong adopted a policy of upgrading exports by encouraging production of high technology products.33 This strategy relied on increased imports of parts and components, primarily of 32 Production sharing between China and Japan has grown rapidly since the mid-1990s. As shown in Table 18.1 Japan now sources about $5.6 billion of its total regional imports of components from China (as opposed to $2.1 billion in 1996), while China's current imports from Japan ($8.3 billion) are approximately double their 1996 value. See Ng and Yeats (1999) for statistics on regional trade in parts and components in the mid- 1 990s. 33 A recent (17 September 2002) Oxford Analytica report notes. "Since the introduction of market reform policies, the Pearl River Delta (PRD) transformed its primarily agricultural economy into one of the world's leading export-processing zones. Recent economic development in the PRD has been distinguished by a rapid shift to high-tech industry, the region tops national growth rankings for this sector. In 2001, high-tech manufacturing constituted 24% of total industrial output, of which information technology (IT) and electronics were the fastest growing sectors. High-tech exports reached 31% of total exports, worth 22 billion dollars. Brisk growth continued in the first six months of 2002, spurred by a 24% year-on-year growth in the production of telecornmunications equipment and a 21% growth in electrical machinery and equipment." 58 Table 18. 1 The Matrix of Intra-Trade and Trade Balances in-Parts and Components Among East Asian Countries in 2001 Exporter Partner (Importer) China Hong Kong Indonesia Korea, Rep. Malaysia Philippines Singapore Taiwan Thailand Japan EAIO ' Value of Exports of Parts and Components ($ million) China 0 1,542 313 2,442 1,267 342 759 3,279 952 8,292 19,188 Hong Kong, China 13,556 0 97 2,038 2,070 494 1,980 2,928 513 6,119 29,795 Indonesia 109 13 0 114 40 10 219 64 82 1,558 2,209 Korea, Republic 1,695 230 64 0 330 183 287 754 162 4,317 8,022 Malaysia 1,394 745 500 748 0 416 1,697 1,102 687 3,610 10,899 Philippines 170 502 26 788 259 0 804 523 256 3,683 7,011 Singapore 1,989 808 1,426 838 4,611 390 0 1,118 1,623 3,890 16,693 Taiwan, China 1,308 237 42 719 303 202 529 0 97 3,502 6,939 Thailand 1,030 153 139 486 729 625 490 363 0 3,714 7,729 Japan 5,587 238 500 1,728 1,086 1,229 766 2,866 1,230 0 15,230 ALL THE ABOVE 26,838 4,468 3,107 9,901 10,695 3,891 7,531 12,997 5,602 38,685 123,715 Share of Exporter in Total Imports of the Trading Partner (%) China 0.0 8.0 1.6 12.7 6.6 1.8 4.0 17.1 5.0 43.2 100.0 Hong Kong, China 45.5 0.0 0.3 6.8 6.9 1.7 6.6 9.8 1.7 20.5 100.0 Indonesia 4.9 0.6 0.0 5.2 1.8 0.5 9.9 2.9 3.7 70.5 100.0 Korea, Rep. 21.1 2.9 0.8 0.0 4.1 2.3 3.6 9.4 2.0 53.8 100.0 Malaysia 12.8 6.8 4.6 6.9 0.0 3.8 15.6 10.1 6.3 33.1 100.0 Philippines 2.4 7.2 0.4 11.2 3.7 0.0 11.5 7.5 3.7 52.5 100.0 Singapore 11.9 4.8 8.5 5.0 27.6 2.3 .0.0 6.7 9.8 23.4 100.0 Taiwan, China 18.9 3.4 0.6 10.4 - 4.4 2.9 7.6 0.0 1.4 50.5 100.0 Thailand 13.3 2.0 1.8 6.3 9.4 8.1 6.3 4.7 0.0 48.0 100.0 Japan 36.7 1.6 3.3 11.3 7.1 8.1 5.0 18.8 8.1 0.0 100.0 Trade Balance of the Exporter Value ($ million) 7,650 -25,327 898 1,879 -204 -3,120 -7,736 6,058 -2,127 23,455 Share of exports (%) 28.5 -566.8 28.9 19.0 -1.9 -80.2 -102.7 46.6 -38.0 60.6 -- * East Asia only includes 9 countries plus Japan due to the lack of COMTRADE data for Brunei, Cambodia, Lao PDR, Mongolia and Vietnam in 2001. Source: Computations based on UN COMTRADE Statistics. 59 telecommunications equipment and office machinery, for further assembly (see Lemoine and Kesenci 2002). In the case of Hong Kong, this strategy drew on the capabilities of "high technology areas" established within China for the manufacture of technology intensive products.34 These areas were intended to be counterparts to silicon valley in California or the route 128 corridor in Massachusetts.35 Table 18.2 provides infonnation relevant to this point. The table lists the largest parts and components products imported from China (which was, by far, the largest supplier of these goods), it shows the value and share of each good, and (in parentheses) reports the share of the product in all regional countries imports. As indicated, the unusually high level of Hong Kong's imports of components is largely accounted for by two high technology products, parts of telecommunication equipment and parts of office and adding machinery. These two component groups accounted for over $10 billion, or 75 percent, of Hong Kong's 2001 imports from China. Trade in telecommunications equipment, that accounted for $6.8 billion or 50 percent of Hong Kong's imports (as opposed to a corresponding share of 32 percent in all regional countries trade) was well above the average levels for imports of these goods in other East Asian countries.36 Table 18.2 The 2001 Value anid Share of Hong Kong's Major Parts and Components Import Products from China 2001 Imports from China Component Part Description (SITC Number)* Value (000) Share** Telecommunications equipment (764)*** 6,797,411 50.14 (32.40) Office and adding machinery (759)*:'* 3,309,430 24.41 (33.85) Switchgear (772) 1,788,043 12.19 (14.44) Electrical power machinery (771.29) 314,460 2.32 (1.62) Still cameras (881.19)*** 242,602 1.79 (1.23) Electronic components, nes (776.89)*** 152,211 1.12 (7.03) Carriages and cycles (785.39) 146,557 1.08 (0.99) All Above Products 12,750,716 94.06 (91.56) *The official description of this item in UN COMTRADE is preceded by the term "Parts of .. This has been omitted in the table to avoid excessive duplication. ** To better help assess implications of the unusual structure of Hong Kong's imports from China, numbers in parentheses show the share of the product in all East Asian countries regional imports. * * * According to UNCTAD (Mayer et. al, 2002) this item is normally manufactured using high skill and high technology production techniques. 34 Singapore participates in a somewhat more complex economic zone that combines its comparative advantages with those of Malaysia and Indonesia. Specifically, the general objective of the Johor-Riau- Singapore growth zone is to bring together semiskilled labor from Malaysia, low cost land and labor from Indonesia, and capital from Singapore. 35 Yusuf and Evenett (2002) provide a useful discussion of the factors required for the development of these high technology clusters. The city of Shenzhen, which borders Hong Kong, is one such center and has been a growing supplier of parts and components of high technology products. See the web cite Shenzhenwindow.net/20years/hitech.htm for interesting information* on the development of this high technology city. 36 Our analysis of Singapore's imports showed that these same product groups (parts of office machinery and telecommunications equipment) were also largely responsible for what, at first, appeared to be a relatively high level of components imports. In this case, however, the high technology cluster supplying these goods was located in Malaysia. 60 Given the special nature of the trade relationship between Hong Kong and China, Table 18.3 examines East Asian trade in parts and components from a somewhat different perspective. The table nets out intra-trade between China and Hong Kong (jointly referred to as Greater China) and analyzes the intra- trade of Greater China, Japan, and the East Asian (7) countries as a group. The latter includes Korea, Malaysia, Philippines, Singapore, Taiwan (China), and Thailand. This revised analytical framework confirms the generally accepted view of (Greater) China as a major importer and specialist in the assembly of components. As indicated, China's 2001 regional imports and exports of components leaves it with a negative trade balance of $17.6 billion for these goods. A breakdown of this negative balance shows it to be about the same magnitude for Japan and the East Asia (7) countries. Similarly, Japan's total regional trade surplus of $29.3 billion is about evenly distributed between Greater China and East Asia (7). In both cases, the relative size of the negative balances are about 60 percent of Japan's 2001 component exports. Table 18.3. Trade in Parts and Components Among Greater China (Hong Kong plus China) and Other East Asian Producers in 2001 Exporter Greater All East Partner (Importer) China* East Asia (7)** Japan Asia Value of Exports of Parts and Components ($ million) Greater China* 19,474 14,411 33,885 East Asia (7)** 10,383 24,845 24,274 59,502 Japan 5,825 9,405 -- 15,230 All East Asia 16,208 53,724 38,685 108,617 Share of Exporter in Total Imports of Trading Paer (%) Greater China* -- 57.4 42.6 100.0 East Asia (7)** 17.4 41.8 40.8 100.0 Japan 38.2 61.8 -- 100.0 All East Asia 14.9 l 49.5 35.6 100.0 Trade Balance of Exporter ($ million) Greater China* -- 9,091 | 8,586 17,677 East Asia** -9,091 -- 14,867 5,778 Japan -8,586 -14,869 -- -23,455 All East Asia -17,677 -5,778 | 29,280 l Trade Balance as a Percent of Exports (%) Greater China* -- 46.6 59.6 52.2 East Asia** -87.5 -- 61.2 9.7 Japan -147.4 -158.1 -- -154.0 All East Asia -109.1 -10.8 60.6 -- * Hong Kong plus China ** Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan (China), and Thailand. Source: UN COMTRADE statistics 61 Trade Trends 19 East Asian Comparative Advantage in the Production and Assembly of Manufactured Components Key Point Production sharing in East Asia may be motivated by several strategic trade policy factors including efforts to upgrade the quality and types of goods exported In addition, considerations relating to factor proportions theory also affect. a country's participation in production sharing. The production of parts and components, which is often a capital intensive operation, generally is undertaken in wealthier economies like Japan or Taiwan (China). These goods may then be e-xported to lower wage cost countries like Indonesia and Thailandfor further assembly, which generally is a labor intensive operation. Economic theory argues there is a relationship between the factor intensities required for the manufacture of specific goods and the location for their optimal production. Goods that are manufactured using labor intensive techniques sho'uld normally be produced in poorer, less developed, countries to capitalize on relatively low wage cost;. In contrast, goods that are capital intensive in production should be manufactured in richer developed countries where the cost of capital is relatively low. While factor proportions theory has been verified in tests involving the manufacture of goods (see Lary 1968 or Yeats 1989), it has not been tested rigorously for production sharing assembly operations. However, since assembly operations often involve labor intensive activities one would anticipate a pattern in which capital intensive components, like transistors and other electronic equipment, are produced in richer countries and then sent for assembly to less developed (lower wage cost) locations. Is this expected pattern observed in production sharing in East Asia? Economists often utilize the concept of "revealed" comparative advantage to identify countries whose factor endowments make it advantageous for them to specialize in the production of a good. The revealed comparative advantage (RCA) index for country i in the production of product j has been defined as; (19. 1) RCAUjp = [xij/Xj] . [xwj/Xw] x 100 where xij and xw; represent the value of j exported by country i and the world, respectively, while X,j and X, are world trade in j and total world trade. The index has a relatively simple interpretation. If its value exceeds unity the country is said to have a comparative advantage in the production of product j. In contrast, if the RCA index is below one the country is at a comparative disadvantage in the good.37 However, equation (19.1) must be used with some caution since domestic measures, that have nothing to do with comparative advantage (like local subsidies or foreign trade barriers), can bias the index. This analysis employs a vari.mt of equation (19.1) developed by Ng and Yeats (1999) to identify countries that appear to have a comparative advantage in further upstream operations - that is, the assembly of the next step of a manufacturing process. Specifically, the revealed comparative advantage of country i in the assembly of product j is; (19.2) RCA,j; = [m1j/Mj] . [m,Mj/M4 x 100 where the m's represent imports, but otherwise correspond to the terms in equation (18.1). The reasoning behind this proposition is relatively straightforward. Parts and components typically have no general end us in themselves, but are exchange for further assembly into a product that does.38 Therefore, it follows 37 Balassa (1965) developed and applied the concept of "revealed" comparative advantage and also made important extensions in Balassa (1977)(1979). 38 There is one exception when an irnported component is used as a replacement for a failed part in an already assembled good. However, this should have a neutral effect across countries unless failure rates for 62 that countries that have above average import shares for components also have a comparative advantage in the assembly operation for these goods. Appendix Tables A19.1 through A19.3 show 1985, 1995 and 2001 RCA indices calculated using each East Asian country's import statistics. As noted, these data should indicate whether or not the country has a comparative advantage in the assembly of each product. Similarly, Appendix Tables A19.4 through A 19.6 show RCA indices computed using export statistics, and indicate whether these countries have a comparative advantage in the production of components. Statistics for Japan are included in these appendices since Trade Trends 18 showed this country plays a major role in East Asian production sharing operations. Comparative advantage indices for the United States are also shown to assist in making informed comparisons. Table 19.1 provides summary statistics for the 1985, 1995 and 2001 RCA indices reported in the appendix tables. Shown here is the percentage of all 60 component product groups in which each East Asian country had a 1985 or 2001 comparative advantage in the production, or assembly, of components. For example, in 1985 China only had a comparative advantage in the production of less than 7 percent of the 60 component groups, as opposed to approximately 42 percent for these item's assembly operations. By 2001, however, China's comparative advantage in the production of components increased to include one-fifth of the parts and components groups and, in assembly operations, more than one-half of these products Several noteworthy points are evident in these summary statistics; * The pattern reflected in the data generally are in line with expectations based on factor proportions theory. Japan, which has the highest unit wage costs in the region,- now only has a comparative advantage in the assembly of about one-fifth of the 60 component product groups, which is sharply lower than the results for China, Thailand and Indonesia. China, for example, has a comparative advantage in the assembly of 53 percent of the component product groups, while the corresponding share for Indonesia is ten percentage points higher. * Exclusive of Japan, the East Asian Countries (taken together) now have a comparative advantage in the assembly of about 44 percent of these component product groups. This is almost two and one half times higher than corresponding statistics on their comparative advantage in production. This pattern is reversed for Japan where the comparative advantage in production operations (56.7 percent of all component product groups) is almost three times higher than in the case of imports for further assembly. * The comparative advantage of almost all East Asian countries in assembly operations is concentrated in the office machinery and electrical machinery groups (see Appendix Table A19.3). In contrast, there are a few product sectors, like motor vehicle components, where no East Asian country has yet to develop a comparative advantage in assembly operations. parts in assembled products differed substantially between nations, or there was wide differences in the use of a given finished product across countries. 63 Table 19.1 The Percentage of All Parts and Components Products in Which East Asian Countries lHave a Comparative Advantage Export - Production Operations Import - Assembly Operations (0/0 of Products with RCAs > 1)* (% of Products with RCAs > 1)* Country 1985 1995 2001 1985 1995 2001 East Asia Brunei .. 3.3 0.0 0.0 18.3 23.3 Cambodia .. 1.7 0.0 0.0 15.0 11.7 China 6.7 11.7 20.0 41.7 55.0 53.3 Hong Kong 13.3 23.3 23.3 36.7 23.3 31.7 Indonesia 0.0 5.0 10.0 65.0 55.0 63.3 Japan 43.3 58.3 56.7 3.3 8.3 21.7 Korea 6.7 13.3 15.0 25.0 41.7 33.3 Lao PDR .. 0.0 0.0 .. 11.7 11.7 Malaysia 8.3 15.0 18.3 53.3 45.0 43.3 Mongolia .. 0.0 0.0 .. 21.7 11.7 Philippines 6.7 10.0 10.0 38.3 50.0 31.7 Singapore 20.0 23.3 20.0 36.7 40.0 38.3 Taiwan, China 20.0 31.7 28.3 13.3 35.0 31.7 Thailand 8.3 11.7 15.0 33.3 55.0 58.3 Vietnam .. 8.3 5.0 .. 30.0 38.3 Average of Above 1:3.8 20.3 21.7 34.7 40.8 40.7 Average Excluding Japan 10.5 16.1 17.8 38.1 44.4 42.7 Comparators** Mexico .. 20.0 33.3 45.0 46.7 53.3 Hungary 10.0 31.7 25.0 71.7 53.3 46.7 Poland .. 30.0 41.7 51.7 48.3 61.7 United States 61.7 63.3 66.7 30.0 33.3 31.7 * Percentages based on the 60 parts and component products listed in the appendices. ** Comparator countries statistics drawn from Ng and Yeats (1999). CONCLUSIONS Almost without exception this study's findings show that East Asian intra-trade has had a major positive influence on regional cooperation and growth. Since the mid-1980s, East Asian intra-trade has been growing at a rate roughly double that of world trade, and at a rate far higher than the intra-trade of NAFTA or the European Union. Similarly, evidence based on intra-industry trade ratios, or statistics on international production sharing, show economic linkages and the interdependence of East Asian economies have considerably strengthened. Furthermore, the export and import profiles of East Asian countries have been changing in directions that increase complementarity which further increases the potential for intra-regional trade. China's emergence has had a major positive influence on the region. Specifically, China's internal counter-cyclical policies, and its maintenance of a stable exchange rate, are generally viewed as important factors that helped contain the effects of the Asian financial crisis. 64 Appendix Table A19.1. The Revealed Comparative Advantage of East Asian Countries in Assembly Operations as Reflected in Their 2001 Import Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 2.89 0.19 1.41 0.57 5.83 0.96 0.90 1.27 0.51 0.27 1.36 Aircraft engines 0.43 0.45 0.20 0.86 0.82 0.10 1.59 0.60 1.13 1.64 1.29 Outboard Motors 0.30 0.20 2.31 0.52 0.91 0.12 0.23 0.19 0.28 0.07 2.12 Outboard motors, nes 2.38 0.19 2.10 1.47 1.07 1.82 2.65 2.62 0.72 0.28 0.56 Combustion engines, nes 0.76 0.18 2.74 0.85 0.80 0.56 0.83 0.60 1.51 0.34 1.15 Engines and motors, nes 0.26 0.57 0.57 0.40 0.65 0.31 1.95 0.48 0.90 1.00 1.60 Rotating electric motors 1.99 1.23 1.19 1.17 1.09 1.90 1.26 0.80 2.48 0.80 1.20 Water turbines 4.04 0.27 0.15 0.10 0.76 3.59 0.10 0.11 0.40 0.18 0.43 Cultivating equipment 0.24 0.16 0.89 0.13 .0.24 0.85 0.46 0.14 0.79 0.78 0.76 Harvesting machinery 0.15 0.07 0.32 0.18 0.14 0.12 0.09 0.11 0.14 0.36 0.76 Dairy machinery 0.36 0.05 1.04 0.52 0.10 0.09 0.07 0.12 0.27 0.77 0.27 Wine making machinery 2.14 0.27 2.02 0.07 0.78 0.28 0.14 0.35 0.35 0.36 0.28 Agricultural machinery, nes 0.59 0.14 2.26 0.30 0.60 1.37 0.15 0.18 1.30 0.73 0.54 Construction machinery 0.67 0.32 1.84 0.44 2.12 1.12 3.61 0.11 1.06 0.35 0.43 Spinning machinery 3.94 0.48 5.82 1.31 0.70 0.61 0.36 1.97 3.09 0.52 0.52 Knitting machinery 1.94 2.06 4.23 1.06 0.54 0.47 0.64 1.28 1.91 0.78 0.68 Textile machinery, nes 1.94 0.65 2.22 0.47 1.47 0.91 0.24 0.50 3.46 0.78 0.30 Paper making machinery 1.52 0.15 1.76 0.57 0.64 0.37 0.24 0.32 1.63 0.52 0.81 Bookbinding machinery 0.15 0.33 0.50 0.52 0.20 0.23 0.47 0.30 0.20 0.60 1.36 Printing machinery 1.34 0.78 1.55 1.00 0.64 0.83 0.58 0.77 0.96 1.05 0.88 Grain milling machinery 1.17 0.29 1.53 0.72 0.46 1.63 0.32 0.36 1.12 0.39 0.43 Food processing machinery 0.88 0.20 1.75 0.51 0.40 0.95 0.29 0.24 1.87 0.80 0.65 Machines for special industries 1.06 0.67 1.63 1.00 1.91 0.97 1.72 3.00 1.11 0.95 0.79 Mineral working machinery 1.10 0.19 3.44 0.30 1.01 0.56 0.77 0.34 0.53 0.45 0.63 Special industry machines, nes 1.66 0.67 1.35 2.19 2.42 1.87 1.86 2.26 1.98 0.96 0.82 Metalworking machinery 1.11 0.52 0.64 1.12 1.04 0.72 0.87 2.23 1.71 1.02 1.03 Foundry equipment 1.92 0.50 1.61 0.91 0.66 0.30 0.43 1.39 1.09 0.82 1.02 Rolling mill parts 3.17 1.07 3.61 2.78 0.95 0.26 0.13 1.81 1.72 0.29 0.56 Refrigerating equipment 0.93 0.61 1.96 0.24 0.65 0.86 1.15 0.45 1.04 0.48 0.64 Pumps for liquids 0.85 0.24 1.24 1.21 0.58 0.44 1.29 0.60 0.86 0.43 0.86 Centrifuges and filters 1.46 0.49 1.07 1.29 1.17 0.70 1.21 1.06 1.71 0.75 0.83 Fork lift trucks 0.54 0.47 0.76 0.27 0.56 4.87 0.40 0.28 4.23 0.89 0.93 Lifting and loading machines 1.37 0.36 2.41 0.74 0.73 0.51 1.02 0.45 0.82 0.45 0.87 Power hand tools 0.25 0.42 1.28 0.40 1.56 1.00 0.81 0.52 0.57 0.62 1.26 Packing machinery 0.93 0.39 1.59 0.37 0.39 0.77 0.60 0.41 1.30 0.54 0.75 65 Appendix Table A19.1. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery 0.92 0.52 0.79 1.20 1.13 0.68 1.30 1.67 1.30 0.64 0.77 Office and adding machinery 1.50 2.06 0.59 0.86 2.15 2.18 3.45 1.80 2.92 1.30 1.09 Telecommunications equipment 1.61 1.69 1.17 0.85 1.61 1.17 1.17 0.91 1.45 0.91 1.13 Electric power machinery 3.87 2.85 1.98 1.25 2.58 2.57 1.91 0.86 1.72 0.90 0.75 Switchgear 1.59 1.86 1.05 1.04 2.50 2.12 2.12 1.20 1.73 0.64 0.97 Domestic electrical equipment 1.75 1.04 0.29 0.52 1.81 0.12 0.48 0.23 0.30 0.79 0.85 Electrothermic appliances 2.85 1.56 1.40 0.30 1.59 0.22 0.32 0.48 2.75 0.77 0.53 Electronic components, nes 2.97 2.02 1.92 3.68 14.70 10.25 2.39 4.93 5.83 0.94 0.59 Electronic accumulators 3.67 1.50 2.07 1.53 2.77 0.58 0.24 2.36 0.51 0.29 0.33 Electric lamps and bulbs 1.79 1.13 3.45 1.09 0.43 0.43 0.84 0.77 2.46 1.08 0.63 Electrical machinery, nes 1.17 2.59 0.35 2.'2 2.21 2.89 3.01 2.23 1.79 0.8Q 1.00 Motor vehicles and accessories 0.67 0.11 1.04 0.44 0.44 0.44 0.18 0.38 0.99 0.41 1.14 Carriages and cycles 0.64 1.02 9.80 0.29 0.76 1.69 0.75 2.27 1.40 0.97 0.81 Trailers and non-motor vehicles 0.19 0.18 0.65 0.13 1.02 0.30 0.34 0.15 0.28 0.39 0.39 Railroad equipment 0.50 0.18 0.20 1.38 .0.37 0.23 0.25 0.54 0.06 0.31 1.13 Aircraft and helicopters 0.34 0.30 0.33 1.21 0.28 0.30 1.23 0.74 0.68 1.31 0.77 Chairs 0.37 0.14 0.40 0.14 0.23 0.14 0.12 0.11 0.57 0.40 1.85 Other fumiture parts 0.14 0.53 0.23 0.24 0.35 0.30 0.44 0.33 0.16 1.12 1.18 Measuring or drawing machines 1.03 0.60 0.40 1.35 1.90 1.20 2.26 2.38 1.38 1.64 1.09 Still cameras, nes 6.55 7.47 1.58 0.48 4.39 7.10 0.54 1.03 3.97 2.52 0.47 Cameras under 16mm 0.45 1.64 0.13 0.89 0.54 0.81 2.07 0.46 1.05 1.15 2.01 Cameras under 16mm, nes 0.49 1.34 0.24 1.89 2.68 0.71 0.78 0.92 0.75 1.61 0.59 Unrmounted optical elements 0.25 0.60 0.48 0.39 0.24 0.06 2.69 0.58 0.37 4.49 0.76 Clocks and watches 4.07 10.64 0.31 0.65 3.23 2.34 1.86 0.46 8.91 1.18 0.24 Umbrellas and canes 0.88 11.10 1.19 0.32 0.42 1.32 0.18 0.46 2.77 0.97 0.45 MEMO ITEM RCA For All Components 1.25 1.18 1.14 0.86 1.58 1.32 1.52 1.04 1.63 0.84 1.06 No. of Product Groups with 32 19 38 20 26 19 23 19 35 13 19 RCAs exceeding unity * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 66 Appendix Table A19.2. The Revealed Comparative Advantage of East Asian Countries in Assembly Operations as Reflected in Their 1995 Import Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 5.31 0.47 12.34 1.31 2.41 4.65 1.06 1.88 1.67 0.17 0.17 Aircraft engines 0.77 0.24 0.18 1.01 0.34 0.54 1.51 0.40 0.69 2.14 1.15 Outboard Motors 0.04 0.88 0.58 0.46 1.04 0.15 0.83 0.33 0.29 0.10 1.59 Outboard motors, nes 0.95 0.20 2.64 2.00 1.86 1.73 2.48 3.10 0.61 0.35 0.81 Combustion engines, nes 0.98 0.40 2.36 0.93 0.79 1.08 1.00 0.93 1.55 0.36 1.21 Engines and motors, nes 0.29 0.34 1.14 0.84 0.84 0.64 1.17 0.45 1.24 0.70 1.63 Rotating electric motors 2.39 1.85 2.93 1.03 2.30 0.68 0.84 1.31 3.10 0.51 0.76 Water turbines 3.40 0.05 2.88 0.35 1.56 1.78 0.09 0.15 1.07 0.10 0.28 Cultivating equipment 0.05 0.08 0.67 0.51 0.25 0.56 0.22 0.52 0.67 0.27 1.05 Harvesting machinery 0.04 0.12 0.09 0.73 0.19 0.12 0.17 0.09 0.17 0.27 0.80 Dairy machinery 0.35 0.17 0.41 0.51 0.19 0.12 0.31 0.32 0.29 0.55 0.32 Wine making machinery 0.87 0.17 0.32 2.23 0.20 0.65 0.54 2.04 0.28 0.29 0.55 Agricultural machinery, nes 3.13 0.06 1.72 0.77 0.20 0.95 0.14 0.40 1.14 0.32 0.71 Construction machinery 1.05 0.79 1.46 0.26 1.70 1.62 2.30 0.21 0.92 0.40 0.35 Spinning machinery 2.08 0.46 6.68 2.42 0.52 0.83 0.41 2.49 1.50 0.44 0.82 Knitting machinery 1.95 1.33 2.98 1.18 0.50 0.79 0.42 1.34 1.00 0.88 1.08 Textile machinery, nes 1.68 0.74 2.27 0.65 1.26 2.55 0.60 0.79 1.48 0.41 0.51 Paper making machinery 1.12 0.16 7.36 1.43 0.59 1.03 0.25 0.75 2.43 0.39 0.79 Bookbinding machinery 0.06 0.25 0.62 0.44 0.19 0.19 0.44 0.30 0.21 0.68 1.92 Printing machinery 0.81 0.55 0.84 0.56 0.65 0.72 0.57 0.53 0.52 0.81 0.95 Grain milling machinery 2.56 0.22 2.99 0.94 0.46 2.26 0.51 1.08 1.01 0.32 0.48 Food processing machinery 1.30 0.27 0.16 0.50 0.46 0.84 0.15 0.08 2.16 0.18 0.69 Machines for special industries 1.61 0.76 1.85 0.62 2.21 1.30 1.13 0.58 1.21 0.48 0.88 Mineral working machinery 3.15 0.32 4.08 0.79 0.96 1.63 0.40 0.57 1.99 0.20 0.48 Special industry machines, nes 2.41 0.69 1.58 2.27 1.82 1.74 1.36 1.35 1.44 0.84 0.95 Metalworking machinery 2.16 0.44 0.76 1.97 0.96 0.60 0.88 1.13 1.35 0.65 1.08 Foundry equipment 6.80 0.45 1.24 2.78 2.50 0.34 0.20 3.31 1.93 0.43 1.07 Rolling mill parts 6.48 0.13 2.91 3.54 2.95 1.22 0.12 2.27 2.04 0.16 0.74 Refrigerating equipment 1.05 0.59 2.80 0.58 0.57 1.20 1.06 1.00 1.55 0.30 0.57 Pumps for liquids 0.67 0.28 1.55 1.61 0.42 0.66 0.90 0.55 0.90 0.44 0.81 Centrifuges and filters 1.43 0.55 1.69 1.31 1.13 1.01 1.25 1.18 1.53 0.49 0.85 Fork lift trucks 1.03 0.58 0.64 2.42 9.48 2.13 0.60 0.18 0.73 0.19 0.57 Lifting and loading machines 1.20 0.42 1.31 1.24 1.47 0.76 1.30 0.56 1.09 0.28 0.84 Power hand tools 0.13 0.50 0.83 0.56 1.01 0.60 1.51 0.71 0.64 0.42 1.43 Packing machinery 1.10 0.54 0.88 0.72 0.37 1.13 0.28 0.37 0.95 0.53 0.75 67 Appendix Table A19.2. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery 0.59 0.49 1.04 0.94 1.10 1.21 1.00 1.73 1.39 0.50 0.86 Office and adding machinery 0.69 1.00 0.13 0.52 1.37 1.26 2.69 1.02 1.38 0.96 1.80 Telecommunications equipment 2.55 1.91 1.56 0.87 2.56 1.56 1.84 0.57 1.51 0.89 1.07 Electric power machinery 2.61 3.46 1.16 1.28 3.25 2.21 2.00 1.47 2.11 0.67 0.56 Switchgear 1.33 1.28 1.43 1.13 2.40 1.71 2.21 1.32 1.56 0.44 1.02 Domestic electrical equipment 1.41 0.57 0.33 0.22 0.83. 0.34 0.53 0.33 0.37 0.50 0.78 Electrothermic appliances 3.75 1.52 0.19 0.64 1.82 0.88 0.35 0.36 0.88 0.43 0.52 Electronic components, nes 1.01 0.99 0.50 4.75 11.30 8.78 3.86 4.89 2.78 0.43 1.02 Electronic accumulators 2.89 1.68 2.43 1.24 0.83 1.26 1.01 0.37 0.18 0.91 0.25 Electric lamps and bulbs 0.56 1.17 1.94 0.78 0.52 0.86 0.50 0.44 1.43 0.56 0.92 Electrical machinery, nes 0.17 1.03 0.22 0.67 0.80 1.01 2.33 1.03 0.65 0.56 1.67 Motor vehicles and accessories 0.66 0.13 1.45 0.56 0.51 0.65 0.27 0.65 1.32 0.29 1.24 Carriages and cycles 0.97 1.63 5.48 0.29 1.37 1.35 1.59 2.93 3.95 0.69 0.74 Trailers and non-motor vehicles 0.51 0.14 0.44 0.19 0.68 0.18 0.46 0.37 0.62 0.32 0.40 Railroad equipment 0.61 0.20 2.36 2.17 0.37 0.11 0.14 0.51 0.10 0.23 1.09 Aircraft and helicopters 0.39 0.17 0.59 1.35 0.33 0.41 0.96 1.07 0.63 0.89 0.77 Chairs 0.10 0.07 0.75 0.13 0.42 0.17 0.12 0.23 0.38 0.44 1.76 Other fumiture parts 0.12 0.48 0.22 0.31 0.21 0.51 0.53 0.40 0.12 1.24 0.93 Measuring or drawing machines 1.02 0.58 0.34 1.35 1.63 0.49 1.20 0.94 0.79 1.44 1.04 Still cameras, nes 3.41 4.05 1.40 2.07 6.75 12.08 0.51 3.34 3.28 2.19 0.52 Cameras under 16mnm 0.11 1.40 0.16 0.92 0.51 1.07 1.03 0.38 0.44 0.97 1.67 Cameras under 16mm, nes 0.25 0.82 0.24 1.51 1.71 1.59 0.86 0.34 0.91 0.97 0.65 Unmounted optical elements 0.18 0.75 0.26 0.43 0.37 0.08 0.91 0.50 0.24 1.94 0.49 Clocks and watches 5.65 9.19 1.16 0.81 3.42 2.85 1.45 0.52 6.12 0.91 0.21 Umbrellas and canes 1.05 13.47 0.88 0.21 0.75 2.93 0.34 0.96 3.85 0.62 0.44 MEMO ITEM RCA For All Components 1.28 0.94 1.33 0.92 1.60 1.29 1.48 0.94 1.41 0.63 1.18 No. of Product Groups with 33 14 33 25 27 30 24 21 33 5 20 RCAs exceeding unity * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 68 Appendix Table A19.3. The Revealed Comparative Advantage of East Asian Countries in Assembly Operations as Reflected in Their 1985 Import Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 3.47 3.61 2.22 0.98 0.30 2.03 1.55 0.17 2.17 0.00 0.34 Aircraft engines 0.03 1.61 3.31 0.09 7.52 0.33 3.94 0.00 0.26 0.03 0.00 Outboard Motors 0.17 1.42 1.39 0.11 2.84 0.08 0.52 0.00 0.00 0.05 1.71 Outboard motors, nes 0.50 0.97 1.18 12.01 1.50 0.13 1.96 0.00 0.00 0.21 0.29 Combustion engines, nes 0.30 0.31 1.42 0.84 1.10 0.65 1.23 0.00 2.15 0.10 1.16 Engines and motors, nes 0.18 0.07 1.15 1.17 0.08 0.12 0.31 0.00 0.26 1.13 1.30 Rotating electric motors 2.64 1.33 3.13 1.15 1.42 0.75 1.00 0.00 0.00 0.39 0.87 Water turbines 0.52 0.01 23.11 0.26 0.62 0.64 0.11 0.00 0.04 0.11 0.61 Cultivating equipment 0.05 0.08 0.27 0.16 0.25 0.24 0.09 0.00 2.12 0.12 0.96 Harvesting machinery 0.61 0.00 0.13 0.51 0.35 0.08 0.05 0.00 0.02 0.07 0.54 Dairy machinery 0.06 0.16 3.42 0.22 0.19 0.65 0.08 0.00 0.02 0.09 0.00 Wine making machinery 16.61 0.00 11.18 0.17 3.29 3.31 0.25 0.00 0.51 0.09 0.00 Agricultural machinery, nes 0.66 0.17 0.64 0.04 0.45 0.27 0.11 0.00 0.06 0.04 0.52 Construction machinery 1.05 0.82 13.51 0.33 4.46 0.67 3.31 0.00 2.57 0.08 0.70 Spinning machinery 4.89 0.87 4.13 1.79 0.40 0.90 0.29 4.04 0.01 0.29 0.76 Knitting machinery 1.96 1.65 1.81 0.57 0.71 1.12 0.20 0.73 3.23 0.56 0.89 Textile machinery, nes 2.24 1.52 0.86 0.32 1.01 0.49 0.14 0.00 0.70 0.07 0.61 Paper making machinery 1.56 0.11 1.23 0.44 17.62 0.64 0.05 0.00 2.27 0.23 1.00 Bookbinding machinery 0.12 0.23 0.25 0.05 0.92 0.20 0.19 0.00 0.04 0.24 1.67 Printing machinery 0.49 0.40 0.58 0.22 0.51 0.15 0.35 0.00 0.09 0.21 1.03 Grain milling machinery 0.40 0.12 12.34 0.23 1.13 5.08 0.29 0.00 0.18 0.03 0.20 Food processing machinery 1.15 0.40 3.06 0.21 0.52 3.05 0.28 0.00 2.59 0.15 0.00 Machines for special industries 0.57 0.49 3.59 0.38 1.17 1.59 0.62 0.00 0.00 0.21 1.15 Mineral working machinery 0.59 0.48 2.62 0.23 2.04 1.34 0.71 0.00 0.00 0.05 0.61 Special industry machines, nes 2.43 0.70 6.29 0.83 3.28 7.72 0.58 0.00 2.30 0.34 0.32 Metal working machine tools 0.88 0.27 1.31 0.61 '0.74 0.50 1.01 0.57 0.58 0.28 1.30 Foundry equipment 9.21 0.25 3.11 0.51 1.20 1.93 0.59 0.00 2.39 0.22 0.00 Rolling mill parts 5.87 0.11 2.69 1.49 0.98 18.06 0.14 0.00 0.70 0.12 0.00 Refrigerating equipment 8.94 1.19 1.87 0.12 1.74 0.49 1.41 0.00 0.87 0.20 0.00 Pumps for liquids 0.76 0.29 5.18 0.75 0.83 1.19 1.27 0.00 1.01 0.30 0.72 Centrifuges and filters 0.68 0.45 1.10 0.65 1.04 1.20 1.25 0.00 1.82 0.77 0.01 Fork lift trucks 0.33 0.20 0.28 0.63 0.48 1.11 0.27 0.43 0.11 0.03 0.86 Lifting and loading machines 1.34 1.80 1.77 0.72 1.30 0.86 0.86 0.00 0.00 0.25 0.86 Power hand tools 0.15 0.14 8.06 0.22 2.06 0.51 0.68 0.00 0.19 0.18 0.70 Packing machinery 0.77 0.46 0.68 0.47 0.77 1.56 0.30 0.00 0.51 0.18 0.31 69 Appendix Table A19.3. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery, nes 0.43 0.31 1.12 0.89 1.64 1.31 0.78 0.78 0.50 0.32 0.23 Office and adding machinery 0.45 1.38 0.19 0.40 0.37 0.12 1.60 0.76 1.00 0.36 1.38 Telecommunications equipment 2.17 1.79 1.16 1.37 2.07 0.59 1.36 1.14 1.70 0.27 1.75 - Electric power machinery 1.54 3.12 1.27 3.12 3.85 1.56 1.17 1.73 0.00 0.08 1.81 Switchgear 0.57 1.17 1.33 1.32 2.21 0.70 2.07 1.88 3.28 0.40 0.79 Domestic electrical equipment 1.38 3.91 0.87 0.07 0.61 0.40 0.28 0.00 1.18 0.16 0.75 Electrothermnic appliances 0.31 2.62 0.23 0.00 1.26 0.16 2.59 0.00 0.58 0.03 1.99 Electronic components, nes 0.49 1.78 0.82 9.48 32.70 11.23 8.32 0.00 0.02 0.09 1.19 Electronic accumulators 0.07 0.99 3.81 0.24 2.67 1.13 0.43 0.06 0.32 0.07 0.00 Electric lamDs and bulbs 0.15 0.63 2.68 1.77 0.59 2.02 0.08 0.31 1.42 0.08 0.00 Electrical machinery, nes 2.37 2.33 4.21 2.46 0.29 10.08 0.01 2.42 2.44 0.41 0.00 Motor vehicles and accessories 1.80 0.19 0.41 0.23 0.24 0.19 0.24 0.34 1.08 0.06 1.25 Carriages and cycles 1.39 0.57 3.65 0.45 1.22 0.50 0.59 3.98 4.37 0.13 1.27 Trailers and non-motor vehicles 0.10 0.05 0.14 0.10 1.10 0.05 0.32 0.51 0.36 0.02 0.00 Railroad equipment 2.09 0.64 0.90 0.58 0.29 0.60 0.05 0.32 0.87 0.12 1.14 Aircraft and helicopters 1.09 0.47 1.58 1.11 0.71 0.71 1.41 0.07 0.20 0.51 1.13 Chairs 0.01 0.09 0.38 0.34 0.54 0.05 0.54 0.00 0.28 0.49 0.00 Other fumiture parts 0.26 1.22 0.31 0.58 0.61 0.02 1.01 0.15 0.00 0.54 0.00 Measuring-drawing machines 0.81 0.10 7.12 0.71 1.99 0.22 0.42 0.00 0.90 0.43 0.00 Still cameras, nes 2.26 6.43 0.35 2.82 5.53 1.56 0.54 6.00 0.51 0.49 0.73 Cameras under 16mm 0.44 0.02 1.52 0.05 1.36 0.04 4.65 0.00 0.00 0.00 1.20 Cameras under 16mm, nes 0.54 1.25 0.97 0.32 0.92 0.19 0.81 0.00 0.11 0.44 0.65 Umnounted optical elements 0.16 2.01 0.09 0.69 0.62 0.07 1.14 0.68 0.45 0.92 1.21 Clocks and watches 25.82 26.75 0.13 6.33 2.10 1.86 1.88 1.72 5.38 0.21 0.25 Umbrellas and canes 2.99 7.03 1.95 2.05 3.13 3.19 2.79 0.03 7.00 1.31 0.46 MEMO ITEM RCA For All Components 1.41 1.01 1.42 1.04 2.12 0.95 1.26 0.66 1.36 0.26 1.17 No. of Product Groups with 25 22 39 15 32 23 22 8 20 2 18 RCAs exceeding unity _ _ * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 70 Appendix Table A19.4. The Revealed Comparative Advantage of East Asian Countries in Production of Components as Reflected in 2001 Export Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 0.22 0.01 1.24 6.68 0.16 0.40 0.16 0.14 1.32 0.68 0.95 Aircraft engines 0.03 0.12 0.01 0.19 0.16 0.38 1.17 0.06 0.03 1.97 4.39 Outboard Motors 0.02 0.09 0.00 0.01 0.05 0.00 0.01 0.00 0.10 9.71 1.50 Outboard motors, nes 0.06 0.04 0.00 1.95 0.04 0.00 0.88 0.04 0.15 2.66 1.24 Combustion engines, nes 0.15 0.04 0.13 0.27 0.04 0.10 0.23 0.24 0.30 2.31 1.47 Engines and motors, nes 0.11 0.24 0.05 0.35 0.07 0.02 0.84 0.10 0.20 0.65 3.35 Rotating electric motors 0.79 0.65 0.34 0.88 0.34 0.65 0.76 1.14 0.78 1.98 1.18 Water turbines 0.91 0.01 0.02 0.90 0.01 0.00 0.21 0.06 0.02 1.08 0.72 Cultivating equipment 0.36 0.01 0.03 0.34 0.02 0.02 0.12 0.14 0.01 0.10 0.98 Harvesting machinery 0.27 0.05 0.02 0.16 0.03 0.02 0.06 0.56 0.01 0.40 1.69 Dairy machinery 0.03 0.08 0.02 0.00 0.00 0.03 0.20 0.09 0.00 0.03 0.80 Wine making machinery 0.26 0.11 0.00 0.10 0.50 0.08 0.20 0.52 0.08 0.11 0.83 Agricultural machinery, nes 0.49 0.29 0.01 0.10 0.14 0.01 0.24 0.22 0.19 0.05 1.35 Construction machinery 0.18 0.09 0.07 0.21 0.31 0.09 2.11 0.02 0.19 0.25 3.13 Spinning machinery 0.34 0.12 0.17 0.40 0.07 0.00 0.73 0.82 0.05 1.60 0.43 Knitting machinery 0.23 0.38 0.14 0.57 0.08 0.01 0.28 0.93 0.09 1.56 0.26 Textile machinery, nes 0.73 0.48 0.06 1.58 0.05 0.18 0.18 0.57 0.27 0.51 0.58 Paper making machinery 0.06 0.02 0.12 0.26 0.02 0.01 0.14 0.33 0.07 0.43 1.05 Bookbinding machinery 0.04 0.12 0.00 0.04 0.02 0.00 0.18 0.15 0.00 0.31 1.35 Printing machinery 0.20 0.38 0.12 0.14 0.11 0.06 0.42 0.30 0.16 0.96 1.47 Grain milling machinery 0.44 0.02 0.27 0.06 0.26 0.01 0.36 0.72 0.61 0.66 0.82 Food processing machinery 0.07 0.09 0.01 0.07 0.03 0.04 0.16 0.21 0.06 0.30 1.30 Machines for special industries 0.26 0.20 0.01 0.48 0.23 0.02 0.39 1.46 0.19 1.80 1.24 Mineral working machinery 0.34 0.07 0.28 0.48 0.59 0.05 0.29 0.23 0.21 0.25 1.13 Special industry machines, nes 0.20 0.64 0.16 0.55 0.44 0.13 0.81 0.59 0.28 2.09 1.68 Metal working machine tools 0.24 0.16 0.01 0.57 0.15 0.12 0.30 1.10 0.28 2.52 1.39 Foundry equipment 0.19 0.07 0.00 1.32 0.09 0.01 0.11 0.35 0.20 1.81 0.64 Rolling mill parts 0.16 0.04 0.03 0.56 0.06 0.05 0.08 0.21 0.07 1.79 0.66 Refrigerating equipment 0.50 0.22 1.29 0.92 0.48 0.41 0.64 0.39 0.64 0.84 1.38 Pumps for liquids 0.45 0.11 0.13 0.35 0.10 0.11 0.66 0.47 0.87 1.07 1.77 Centrifuges and filters 0.29 0.34 0.12 0.43 0.17 0.20 0.47 0.59 0.33 1.65 1.75 Fork iift trucks 0.20 21.15 0.00 0.25 0.09 0.02 2.24 0.27 2.10 4.11 0.90 Lifting and loading machines 0.31 0.10 0.27 0.85 0.18 0.11 0.51 0.20 0.14 1.43 1.09 Power hand tools 0.56 0.16 0.15 0.20 0.09 0.02 0.20 1.84 0.04 1.30 2.36 Packing machinery 0.12 0.06 0.02 0.07 0.09 0.04 0.24 0.24 0.10 0.39 0.88 71 Appendix Table A19.4. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery 0.19 0.18 0.19 0.50 0.29 0.29 1.16 0.61 0.25 1.36 1.72 Office and adding machinery 1.74 2.23 0.47 1.18 4.22 3.39 3.87 3.82 2.30 1.72 1.17 Telecommunications equipment 1.68 1.49 0.41 2.70 2.01 1.02 1.31 1.28 1.07 1.10 1.19 Electric power machinery 1.72 2.30 3.05 1.94 1.17 0.84 0.95 2.27 0.96 1.80 1.19 Switchgear 1.08 2.07 0.59 0.76 0.96 0.93 1.65 2.33 0.82 1.86 1.52 Domestic electrical equipment 2.17 0.97 0.08 0.44 0.39 0.01 0.20 0.94 0.43 0.33 1.15 Electrothermic appliances 1.97 1.86 0.58 3.27 0.54 0.10 1.13 1.07 0.58 0.81 0.66 Electronic components, nes 0.27 1.06 0.23 1.58 1.25 2.38 2.92 1.92 0.88 3.01 2.83 Electronic accumulators 0.64 2.71 0.24 0.26 3.14 1.04 0.30 1.01 0.43 3.09 1.40 Electric lamps and bulbs 1.29 0.97 0.10 0.59 0.07 0.31 0.26 0.85 0.09 1.02 1.30 Electrical machinery, nes 0.68 1.99 0.14 0.51 0.62 1.53 1.87 1.41 i.24 2.99 2.Su Motor vehicles and accessories 0.11 0.02 0.14 0.38 0.06 0.29 0.06 0.38 0.30 1.64 1.60 Carriages and cycles 2.06 0.80 0.58 0.26 1.59 0.30 1.27 5.88 1.84 3.54 0.42 Trailers and non-motor vehicles 0.60 0.09 0.05 0.54 0.45 0.01 0.10 0.58 0.06 0.03 0.88 Railroad equipment 0:13 0.02 0.02 0.13 0.01 0.00 0.01 0.02 0.02 0.88 1.41 Aircraft and helicopters 0.05 0.17 0.03 0.30 0.02 0.14 0.39 0.07 0.05 0.70 2.20 Chairs 0.39 0.05 0.19 0.19 0.16 0.27 0.04 0.33 0.71 0.26 1.96 Other furniture parts 2.11 0.71 3.07 0.23 1.05 2.44 0.11 1.41 0.79 0.05 0.56 Measuring or drawing machines 0.17 0.73 1.48 0.30 0.65 0.50 0.84 0.45 0.47 1.21 2.76 Still cameras, nes 2.70 5.42 0.31 0.60 1.65 0.77 0.81 5.27 6.79 4.68 0.29 Cameras under 16mm 0.21 0.83 0.04 0.18 2.85 0.04 0.64 1.00 0.23 2.10 1.84 Cameras under 16mm, nes 0.24 2.63 0.07 0.17 3.83 0.06 0.56 0.50 0.19 1.49 1.88 Unmounted optical elements 0.15 1.03 8.37 0.25 0.06 0.28 0.54 0.20 1.14 0.19 2.74 Clocks and watches 1.50 8.37 0.04 0.39 1.36 0.60 1.64 0.96 4.89 4.90 0.15 Umbrellas and canes 7.05 4.62 0.72 0.11 0.01 0.02 0.27 6.57 0.17 0.11 0.05 MEMO ITEM RCA For All Components 0.96 1.12 0.38 1.19 1.43 1.11 1.40 1.50 0.94 1.51 1.51 No. of Product Groups with 12 14 6 9 - l 6 12 17 9 34 40 RCAs exceeding unity * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 72 Appendix Table A19.5. The Revealed Comparative Advantage of East Asian Countries in Production of Components as Reflected in 1995 Export Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 0.12 0.13 0.02 0.33 0.14 3.12 0.52 0.18 0.00 1.74 1.05 Aircraft engines 0.09 0.02 0.00 0.03 0.02 0.01 0.41 0.10 0.01 1.18 4.30 Outboard Motors 0.01 0.62 0.01 0.01 0.00 0.00 0.03 0.02 0.00 6.30 2.13 Outboard motors, nes 0.07 0.11 0.00 1.89 0.03 0.00 0.25 0.01 0.01 2.38 1.34 Combustion engines, nes 0.10 0.14 0.06 0.23 0.03 0.03 0.28 0.48 0.14 2.43 1.31 Engines and motors, nes 0.04 0.19 0.07 0.19 0.05 0.27 0.72 0.04 0.39 0.34 3.19 Rotating electric motors 0.57 0.86 0.16 0.46 0.87 0.10 1.20 1.91 0.42 2.47 1.05 Water turbines 0.13 0.01 0.00 0.18 0.01 0.00 0.59 0.03 0.00 1.26 1.04 Cultivating equipment 0.30 0.04 0.01 0.34 0.01 0.01 0.03 0.10 0.02 0.20 0.68 Harvesting machinery 0.12 0.02 0.01 0.09 0.01 0.00 0.03 0.48 0.01 0.71 1.48 Dairy machinery 0.01 0.01 0.00 0.03 0.00 0.00 0.05 0.09 0.02 0.06 0.57 Wine making machinery 0.43 0.48 0.00 0.10 0.07 0.00 0.22 2.02 0.28 0.19 1.04 Agricultural machinery, nes 0.27 0.05 0.00 0.07 0.06 0.00 0.11 0.38 0.15 0.08 1.42 Construction machinery 0.08 0.31 0.02 0.27 0.77 0.33 2.53 0.04 0.16 0.43 2.78 Spinning machinery 0.11 0.17 0.05 0.63 0.04 0.00 0.50 0.54 0.04 1.62 0.42 Knitting machinery 0.20 0.42 0.02 0.77 0.03 0.00 0.10 0.83 0.05 1.12 0.25 Textile machinery, nes 0.32 0.62 0.02 1.24 0.14 0.31 0.89 0.65 0.09 1.03 0.61 Paper making machinery 0.05 0.07 0.11 0.12 0.06 0.04 0.15 0.40 0.25 0.83 0.93 Bookbinding machinery 0.02 0.07 0.00 0.02 0.00 0.00 0.05 0.25 0.01 0.23 0.56 Printing machinery 0.07 0.22 0.01 0.13 0.04 0.04 0.27 0.25 0.03 0.74 1.19 Grain milling machinery 0.42 0.14 0.44 0.09 0.32 0.00 1.99 0.56 0.51 0.37 0.72 Food processing machinery 0.10 2.49 0.08 0.17 0.13 0.17 1.41 1.53 0.13 0.44 0.81 Machines for special industries 0.10 0.22 0.02 0.50 0.07 0.01 0.27 1.21 0.06 1.22 0.79 Mineral working machinery 0.22 0.09 0.01 0.36 0.28 0.33 0.15 0.17 0.24 0.39 1.20 Special industry machines, nes 0.13 0.61 0.02 0.28 0.19 0.05 0.75 0.52 0.11 1.92 1.60 Metal working machine tools 0.24 0.22 0.03 0.40 0.27 0.24 0.30 0.92 0.32 1.70 1.21 Foundry equipment 0.17 0.08 0.01 0.97 L0.02 0.04 0.07 0.33 0.06 1.10 0.64 Rolling mill parts 0.17 0.05 0.02 0.39 0.04 0.00 0.04 0.21 0.07 1.96 0.64 Refrigerating equipment 0.16 0.26 0.95 0.77 0.40 0.04 0.26 0.40 0.85 1.00 1.12 Pumps for liquids 0.12 0.13 0.00 0.18 0.08 0.10 0.33 0.33 0.10 0.91 1.51 Centrifuges and filters 0.27 0.36 0.04 0.29 0.29 0.23 0.59 0.86 0.20 1.27 1.56 Fork lift trucks 0.08 0.10 0.03 0.37 0.34 0.05 0.11 0.25 0.01 1.68 2.42 Lifting and loading machines 0.15 0.11 0.26 0.56 0.13 0.08 0.40 0.17 0.10 1.58 1.01 Powerhand tools 0.18 0.12 0.13 0.14 0.03 0.01 0.16 1.13 0.03 1.35 1.85 Packing machinery 0.04 0.21 0.00 0.09 0.01 0.10 0.16 0.18 0.10 0.34 0.88 73 Appendix Table A19.5. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery 0.14 0.30 0.14 1.01 0.29 0.23 0.85 0.67 0.16 1.30 1.41 Office and adding machinery 0.95 2.81 0.18 1.81 1.98 2.84 4.28 3.57 3.13 1.70 1.62 Telecommunications equipment 1.49 1.60 0.35 1.62 2.47 2.13 2.22 1.41 1.38 1.99 1.29 Electric power machinery 1.19 2.29 1.44 1.09 0.89 0.60 1.45 4.99 1.37 2.30 0.90 Switchgear 0.71 1.70 0.15 0.63 1.04 0.78 1.86 2.04 0.84 1.95 .i2 Domestic electrical equipment 0.84 1.30 0.00 0.42 0.27 0.07 0.24 1.54 0.13 0.28 0.84 Electrothermic appliances 0.92 2.66 0.15 4.24 0.70 0.29 1.44 2.84 0.51 1.27 0.47 Electronic components, nes 0.16 1.22 0.01 0.60 1.28 0.53 1.77 1.01 0.62 3.73 2.93 Electronic accumulators 0.17 2.35 0.11 0.15 0.58 0.21 1.20 0.65 0.19 2.28 1.28 Eect-ric lamps and bulbs 0.51 0 57 0.05 0.36 0.05 0.14 0.62 1.11 0.53 0.73 1.31 Electrical machinery, nes 0.20 0.91 0.02 15.17 1.29 0.12 0.94 0.97 0.44 1.77 1.12 Motor vehicles and accessories 0.05 0.02 0.05 0.21 0.05 0.30 0.06 0.32 0.10 1.90 1.39 Carriages and cycles 1.13 1.03 0.39 0.17 1.54 0.36 2.42 7.01 0.64 3.85 0.32 Trailers and non-motor vehicles 0.33 0.13 0.03 0.73 0.36 0.03 0.34 0.60 0.12 0.10 0.81 Railroad equipment 0.11 0.04 0.00 0.04 0.01 0.00 0.02 0.07 0.01 0.56 1.37 Aircraft and helicopters 0.05 0.08 0.01 0.20 0.04 0.05 0.46 0.02 0.06 0.28 2.82 Chairs 0.18 0.06 0.47 0.10 0.28 0.24 0.04 0.48 0.84 0.46 1.33 Other furniture parts 1.38 0.47 5.32 0.43 1.07 5.01 0.12 1.80 1.91 0.04 0.52 Measuring or drawing machines 0.09 0.55 0.05 0.11 0.09 0.08 0.79 0.37 0.17 1.32 2.20 Still cameras, nes 1.79 4.06 0.45 0.39 2.11 1.41 1.05 3.94 3.22 5.04 0.36 Cameras under 16mm 0.19 0.82 0.02 0.22 0.16 0.06 0.57 0.14 0.19 1.92 2.76 Cameras under 16mm, nes 0.43 1.11 0.16 0.14 0.10 0.02 0.33 1.64 0.18 1.63 1.62 Unmounted optical elements 0.32 0.74 1.92 0.29 0.24 0.55 0.76 0.61 3.32 0.30 2.70 Clocks and watches 1.87 8.52 0.02 0.43 2.10 1.80 1.38 1.91 5.81 3.50 0.05 Umbrellas and canes 3.50 4.07 0.81 0.05 0.05 0.19 0.08 21.87 0.41 0.12 0.05 MEMO ITEM RCA For All Components 0.62 1.16 0.21 0.97 1.07 1.14 1.59 1.45 1.03 1.79 1.49 No. of Product Groups with 7 14 3 8 9 6 14 19 7 35 38 RCAs exceeding unity * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 74 Appendix Table A19.6. The Revealed Comparative Advantage of East Asian Countries in Production of Components as Reflected in 1985 Export Statistics Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Steam boilers 0.03 0.00 0.00 0.65 0.09 0.01 0.07 0.03 0.00 4.88 1.74 Aircraft engines 0.03 0.00 0.00 0.08 3.41 0.00 2.61 0.00 0.12 0.04 7.37 Outboard Motors 0.05 2.21 0.00 0.01 0.02 0.03 0.55 0.00 0.00 8.85 0.00 Outboard motors, nes 0.18 0.00 0.00 0.02 0.05 0.00 1.43 0.00 0.00 3.27 0.00 Combustion engines, nes 0.07 0.22 0.00 0.09 0.02 0.01 0.57 0.00 0.07 1.57 2.08 Engines and motors, nes 0.01 0.00 0.00 0.52 0.01 0.00 0.07 0.00 0.00 0.14 3.54 Rotating electric motors 0.13 0.51 0.01 0.25 0.05 0.00 2.08 0.00 0.00 1.63 1.95 Water turbines 0.58 0.00 0.00 0.00 0.05 0.00 0.14 0.00 0.06 1.22 1.20 Cultivating equipment 0.37 0.01 0.00 0.26 0.03 0.00 0.02 0.00 0.01 0.13 2.34 Harvesting machinery 0.13 0.00 0.00 0.00 0.01 0.01 0.06 0.00 0.01 0.21 2.58 Dairy machinery 0.00 0.00 0.00 0.00 0.01 0.18 0.02 0.00 0.00 0.05 0.98 Wine making machinery 0.63 0.00 0.00 0.00 0.55 0.00 0.02 0.00 0.00 0.08 0.00 Agricultural machinery, nes 0.15 0.00 0.00 0.00 0.01 0.44 0.14 0.00 0.43 0.01 1.06 Construction machinery 0.03 0.00 0.01 0.04 0.46 0.00 2.78 0.00 1.02 0.36 5.04 Spinning machinery 0.48 0.04 0.00 0.05 0.01 0.00 0.72 0.05 0.00 1.11 1.27 Knitting machinery 0.52 0.26 0.00 0.31 0.00 0.00 0.08 0.52 0.11 1.01 0.53 Textile machinery, nes 0.13 0.40 0.00 0.07 0.02 0.01 0.06 0.00 0.00 0.41 1.03 Paper making machinery 0.00 0.00 0.00 0.08 0.04 0.00 0.03 0.00 0.00 0.53 1.38 Bookbinding machinery 0.01 0.00 0.00 0.09 0.01 0.00 0.48 0.00 0.00 0.09 1.73 Printing machinery 0.01 0.09 0.00 0.02 0.04 0.00 0.18 0.00 0.02 0.27 2.37 Grain milling machinery 0.41 0.00 0.00 0.02 0.08 0.00 0.70 0.00 0.13 0.41 0.00 Food processing machinery 0.14 0.01 0.00 0.01 0.06 0.00 0.04 0.00 0.05 0.17 0.00 Machines for special industries 0.01 0.01 0.00 0.20 0.03 0.00 0.16 0.00 0.00 0.26 3.49 Mineral working machinery 0.18 0.00 0.00 0.10 0.20 1.27 0.19 0.00 0.00 0.48 1.35 Special industry machines, nes 0.35 0.19 0.00 0.05 0.49 0.02 0.80 0.00 0.15 0.79 0.60 Metal working machine tools 0.14 0.03 0.00 0.07 0.03 0.00 0.53 0.77 0.05 0.64 1.76 Foundry equipment 0.10 0.00 0.00 0.00 0.34 0.00 0.01 0.00 0.20 4.69 0.00 Rolling mill parts 0.06 0.01 0.00 0.03 0.05 0.00 0.05 0.00 0.00 3.33 0.28 Refrigerating equipment 0.07 0.07 0.00 0.21 0.06 0.02 0.30 0.00 0.02 1.41 0.00 Pumps for liquids 0.04 0.02 0.00 0.09 0.13 0.01 0.53 0.00 0.02 0.65 2.61 Centrifuges and filters 0.03 0.08 0.00 0.03 0.06 0.00 0.89 0.00 0.75 1.01 0.46 Fork lift trucks 0.01 0.04 0.00 1.27 0.04 0.00 0.14 0.01 0.01 0.94 2.68 Lifting and loading machines 0.11 0.03 0.00 0.16 0.16 0.04 0.34 0.00 0.00 0.78 i.22 Power hand tools 0.03 0.00 0.00 0.00 0.07 0.00 0.54 0.00 0.00 0.74 2.96 Packing machinery 0.00 0.02 0.00 0.02 0.02 0.01 0.04 0.00 0.01 0.19 1.61 75 Appendix Table A19.6. Continued Hong Rep. of Taiwan, Component Product Group* China Kong Indonesia Korea Malaysia Philippines Singapore China Thailand Japan USA Non-Electric machinery 0.09 0.10 0.00 0.08 0.10 0.00 1.31 1.37 0.00 1.35 1.02 Office and adding machinery 0.05 3.53 0.00 0.44 0.11 0.00 1.61 0.60 0.61 1.02 3.02 Telecommunications equipment 0.31 2.47 0.03 1.21 0.65 0.10 1.39 2.15 0.03 2.87 1.22 Electric power machinery 0.12 18.40 0.00 0.74 0.91 0.00 1.05 4.03 0.00 1.57 0.59 Switchgear 0.13 0.94 0.00 0.28 0.54 0.26 3.58 1.28 5.38 1.51 1.22 Domestic electrical equipment 0.58 3.12 0.00 0.19 0.07 0.60 0.42 0.00 0.04 0.70 2.24 Electrothermic appliances 0.15 7.45 0.00 0.00 0.15 0.01 0.85 0.00 0.01 2.92 1.68 Electronic components, nes 0.07 1.47 0.02 1.22 8.54 1.54 7.85 0.00 0.00 2.91 2.39 Electronic accumulators 0.08 0.05 0.03 0.28 0.05 0.08 0.32 1.05 1.24 0.22 1.73 Electric lamps and bulbs 0.14 0.28 0.00 0.16 0.01 0.14 0.03 2.22 0.09 0.50 1.25 Eiectricai macninery, nes 0. 1 i 1.8Z 0.00 0.10 0.12 0.00 0.11 16.44 0.64 0.47 0.00 Motor vehicles and accessories 1.48 0.00 0.00 0.13 0.01 0.19 0.14 0.46 0.07 1.24 2.11 Carriages and cycles 1.18 0.00 0.02 0.40 0.02 0.00 0.49 6.94 0.24 4.68 0.10 Trailers and non-motor vehicles 0.02 0.00 0.00 1.06 0.06 0.00 0.11 0.68 0.00 0.08 0.65 Railroad equipment 0.22 0.00 0.00 0.30 0.01 0.00 0.01 0.01 0.06 0.94 2.14 Aircraft and helicopters 0.09 0.00 0.01 0.17 0.80 0.00 0.78 0.01 0.04 0.10 4.74 Chairs 0.20 0.01 0.02 0.11 0.12 0.13 0.18 0.00 0.18 0.15 0.00 Other furniture parts 0.67 1.00 0.17 0.31 0.24 18.20 0.26 20.12 0.00 0.07 0.00 Measuring or drawing machines 0.03 0.13 0.00 0.18 0.06 0.00 0.23 0.00 0.01 1.74 0.00 Still cameras, nes 0.04 2.92 0.00 0.71 0.63 0.00 0.37 2.36 0.03 5.79 0.89 Cameras under 16mm 0.19 0.00 0.00 0.17 6.74 0.00 6.56 0.00 0.00 4.64 0.25 Cameras under 16mm, nes 0.10 0.02 0.00 0.14 2.87 0.00 0.24 0.00 0.41 0.25 2.75 Unmounted optical elements 0.10 0.47 0.00 0.35 0.25 1.42 1.94 0.78 3.21 1.20 1.94 Clocks and watches 25.59 19.31 0.00 0.56 1.58 0.08 0.89 2.25 3.22 2.65 0.25 Umbrellas and canes 1.64 3.01 0.00 0.21 0.10 0.23 0.42 32.20 0.14 0.22 0.05 MEMO ITEM RCA For All Components 0.60 1.16 0.01 0.39 0.39 0.27 1.15 0.99 0.66 1.42 2.15 No. of Product Groups with 4 11 0 4 5 4 12 12 5 26 37 RCAs exceeding unity _II _ * See Table 17.1 for the SITC Revision 2 classification number of each component product group Source: Computed from United Nations SITC Revision 2 COMTRADE statistics 76 References Amjadi, Azita and Alexander Yeats (1995). 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"Does Mercosur's Trade Performance Raise Concerns About the Effects of Regional Trade Arrangements?," World Bank Economic Review, 12 (1), 1-28 Yeats, Alexander (1998b). "What Can Be Expected from African Regional Trade Arrangements," Policy Research Working Paper No. 2004, (Washington: World Bank, November). Yeats, Alexander (1999). "The East Asian Economic Crisis: Was the Region's Export Performance a Factor." A paper presented at the ASEM Regional Economists workshop From Recovery to Sustainable Development (September), held in Bali, Indonesia. Yusuf, Shahid and Simon Evenett (2002). Can East Asia Compete? Innovation for Global Markets, (Washington: World Bank and Oxford University Press). 79 Appendix 1 Hong-Kong's Re-Exports and Other East Asian Trade Data Problems A serious problem complicating analyses of the composition and geographic directions of East Asian intra-trade is the influence of nmajor entrepot centers, particularly Hong Kong, in the region. Entrepot centers consist of a country, or countries, that serve as an "intermediate way-point" or transshipment center for goods exchanged between two other countries. For example, a relatively high share of Chinese exports pass through Hong Kong before being re-exported to other destinations in East Asia, North America, Europe, or other locations. As a result of these transshipments a specific country, like China, may not be able to correctly identify the destinations of its exports in its own official trade data. The United States also serves as an important entrepot for some goods shipped from East Asia to Europe or Latin America. Statistics on entrepot trade reported by individual countries to the United Nations provide some indication as to the dimensions of this activity in East Asia. The overall global magnitude of entrepot activity is almost certainly larger as many countries fail to report their transshipments to the United Nations. As indicted below, Hong K.ong reported re-exports of $170 billion in 2001, which was almost 60 percent higher than the corresponding total transshipments of the other nine largest entrepot centers. Table Al. Major Global Entrepot Centers as Reflected in 2001 COMTRADE Statistics Re-Exports Re-Exports Entrepot Center (S million) Entrepot Center ($ million) Hong Kong, China 170,793.4 New Zealand 459.6 United States 65,003.2 Macau 416.6 Taiwan, China 3,457.0 Jordan 387.0 Saudi Arabia 970.7 Malta 199.9 Cyprus 591.3 Sri Lanka 85.3 Source: United Nations COMTRADE Statistics. Viewed somewhat differently, in 2001 Hong Kong's re-exports exceeded the total global merchandise exports of countries like Spain, Sweden, Switzerland, or Belgium. The importance of this point is further highlighted by the growth in Hong Kong's entrepot trade. From 1980 to 2001, Hong Kong's total transshipments increased more than 28 fold, or at an annual rate of approximately 17.5 percent which was about 11 percentage points higher than the corresponding growth rate for world trade (see the statistics presented below). Table A2. The Global Value of Hong Kong's Re-Exports in Selected Years Re-Exports Re-Exports Re-Exports Year ($ million) Year ($ million) Year ($ million) 1980 6,033 1995 143,925 1999 152,022 1985 13,459 1997 160,894 2001 179,147 1990 53,388 1998 150,276 2001 170,793 Source: United Nations COMTRADE Statistics. As indicated in the data thal. follow, the major destinations of Hong Kong's entrepot trade were geographically diversified in 2001, bat China received more than one-third of this exchange, while about one-fifth of the total went to the United States. As reported, four Asian countries, namely, Japan, Taiwan (China), Singapore, and the Republic of Korea received over $21 billion in Hong Kong's re-exports in the year 2001. The magnitude of East Asian re-exports makes it difficult for some exporting countries to correctly identify the true direction of regional and non-regional trade in their official statistics. 80 Table A3. Major Destinations of Hong Kong's Re-Exports in 2001 Re-Exports Share of Re-Exports Share of Destination ($ million) Total (%) Destination ($ million) Total (%) World 170,793 100.0 United Kingdom 6,056 3.5 China 63,809 37.4 Germany 5,870 3.4 United States 36,265 21.2 Taiwan, China 3,855 2.3 European Union (15) 24,213 14.2 Singapore 3,488 2.0 Japan 10,721 6.3 Korea, Rep. of 3,187 1.9 Source: United Nations COMTRADE Statistics. A second unrelated trade data problem is that some East Asian countries, particularly the Philippines, fail to properly report the composition of goods shipped from their own export processing zones (EPZs), and simply lump these exports into one highly aggregate SITC (931) category "special transactions." For example, between 1992 and 1995 the Philippines classified between 31 to 37 percent of its total exports in this "special transactions" category in spite of the very diverse nature of the goods being exchanged. Available export statistics could, therefore, be quite misleading as to the composition of the goods being shipped to regional and non-regional markets. A similar problem exists, to a lesser extent, in some other Asian countries trade data. While no fully satisfactory solutions exist for these problems, it is generally held that import statistics can provide far more accurate information on the direction and composition of trade than export data when entrepot activity is significant, or where countries are inappropriately utilizing the SITC 931 category "special transactions" for classifying export statistics. Importing countries are far more likely to know the correct origins, and composition, of their trade since there normally are important legal penalties for incorrectly specifying this information on customs vouchers. In contrast, entrepot centers normally have no legal or other obligation to inform the originating country of the true final destination of its exports. The potential importance of this point is reflected in official published trade statistics of the United States and China. For example, in 1998 China was able to identify only $37,984 million of its exports as destined for the United States, while the United States reported approximately $75,095 of imports from China. The discrepancy closely matches the $33,609 US re-export total reported by Hong Kong. For these reasons, import statistics will be used in this analysis to assess the geographic directions and composition of East Asian countries' exports. As an example, China, Thailand, or Malaysia's exports will be tabulated using the reported imports of its trading partners. An attraction of this approach is that import statistics are generally thought to be more accurate than export data since the former are used for the application of direct trade control measures like tariffs. It should be noted that there may be some slight differences in the levels of trade reflected in import and export statistics since the former are normally valued on a c.i.f. basis while the latter are reported in f.o.b. terms.39 A third East Asian data problem concerns countries that failed to report their official trade statistics to the United Nations, or report data very late and on an irregular basis. For example, Laos PDR has never reported statistics to UN COMTRADE, the last year of available data for Cambodia was 1972, and Vietnam stopped reporting trade statistics to the United Nations in 1989. Brunei and Mongolia have been consistent but late reporters in that 1998 is the last year for which United Nations statistics are available for the former. While the East Asian country coverage is complete in the very aggregate IMF 39 United Nations regulations for the compilation of trade data required that goods imported for re-export (without any significant further processing) not be included in a country's official import statistics. If this practice is not being followed fully it could impart a bias in East Asian trade data. Obviously, given its role as a major entrepot, the question is of primary concern in the case of Hong Kong. 81 Direction of Trade data (which only provides import and export totals), the lack of detailed UN COMTRADE statistics precluded sonie analyses of these non-reporting countries trade trends. Two other special data problems should be noted. China failed to report its trade statistics to the United Nations prior to 1987 so most detailed analyses of its trade performance could not be conducted earlier. Second, Singapore failed to report any trade with Indonesia after 1964, purportedly due to a high volume of illicit trade (smuggling) between the countries. As such, Singapore's imports from, and exports to, Indonesia had to be tabulated from the latter's reported UN trade statistics. 82 Appendix Table A4 East Asian Countries Largest Regional Exports in 2001 Exports Export Exports Export Countrv/SITC/Product (S 000 Share (%) Countrv/SITC/Product ($000) Share (%) BRUNEI MALAYSIA Total Exports 1,212,834 100.0 Total Exports 44,724,458 100.0 3330 Petroleum oils 829,020 68.4 7764 Electronic microcircuits 11,196,817 25.0 3413 Petroleum gases 156,373 12.9 7599 Parts of office machinery 5,339,691 11.9 8451 Jerseys and pullovers 53,463 4.4 3330 Petroleum oils 1,452,430 3.2 7932 Ships and boats 41,005 3.4 7524 Digital storage units 1,304,255 2.9 8462 Under garments of cotton 35,551 2.9 3413 Petroleum gases 1,254,136 2.8 8459 Knit outer garments 32,445 2.7 7763 Diodes and transistors 1,219,489 2.7 8452 Knit dresses and skirts 5,546 0.5 7649 Parts of telecom equipment 918,126 2.1 8441 Men's shirts of textile fabrics 5,538 0.5 7643 Radiotelephonic equipment 830,585 1.9 8973 Jewellery ofgold or silver 5,183 0.4 7788 Other electrical machinery 714,626 1.6 8439 Outer garments of textile fabric 4,371 0.4 4242 Palm oil 637,169 1.4 8429 Other outer garments 3,702 0.3 7768 Piezo-electric crystals 516,428 1.2 8435 Blouses of textile fabrics 1,555 0.1 7525 Peripheral electronic units 515,456 1.2 2820 Waste and scrap metal 1,446 0.1 7722 Printed circuits and parts 443,989 1.0 6954 Interchangeable tools 1,273 0.1 2483 Non-coniferous wood 441,139 1.0 6552 Knitted or crocheted fabrics 1,246 0.1 7761 Television picture tubes 434,629 1.0 CAMBODIA MONGOLIA Total Exports 153,549 100.0 Total Exports 242,697 100.0 2320 Natural rubber latex 23,883 15.6 2871 Copper ores 175,901 72.5 6341 Wood sawn lengthwise 20,669 13.5 6114 Bovine leather 8,446 3.5 6342 Plywood sheets 13,035 8.5 6115 Sheep and lamb skin leather 7,302 3.0 9710 Non-monetary gold 11,902 7.8 2687 Sheep's and lamb wool 7,001 2.9 0360 Crustaceans 6,534 4.3 2879 Other non-ferrous ores 6,939 2.9 8459 Other knit outer garments 5,720 3.7 6552 Knitted or crocheted fabrics 6,416 2.6 8452 Knit dresses or skirts 4,359 2.8 2111 Bovine & equine hides 4,685 1.9 8462 Under garments of cotton 4,346 2.8 8451 Jerseys and pullovers 3,384 1.4 2483 Non-coniferous wood 4,134 2.7 2683 Fine animal hair 2,742 1.1 7932 Ships and boats 4,075 2.7 2882 Other non-ferrous waste 2,417 1.0 8439 Other textile outer garments 3,650 2.4 8471 Clothing accessories 2,399 1.0 8435 Blouses of textile fabrics 3,048 2.0 2682 Sheep or lamb wool 1,895 0.8 0341 Fish, fresh 2,930 1.9 0577 Edible nuts 1,840 0.8 2820 Waste and scrap metal 2,679 1.7 3330 Petroleum oils 1,603 0.7 8441 Men's shirts of textile fabrics 2,484 1.6 8423 Trousers of textile fabric 1,546 0.6 CHINA PHILIPPINES Total Exports 124,282,677 100.0 Total Exports 1,472,7171 100.0 8942 Children's toys and games 5,804,360 4.7 7764 Electronic microcircuits 6,897,703 46.8 7599 Parts of office machinery 5,613,303 4.5 7599 Parts of office machinery 1,358,320 9.2 8510 Footwear 4,832,699 3.9 7524 Digital central storage units 1,169,871 7.9 7649 Parts telecom equipment 4,454,386 3.6 7763 Diodes and transistors 574,751 3.9 8451 Jerseys and pullovers 3,610,732 2.9 7768 Piezo-electric crystals 441,797 3.0 8310 Travel goods and handbags 3,130,025 2.5 7649 Parts of telecom equipment 292,435 2.0 7712 Other electric power machinery 2,517,265 2.0 6821 Copper alloys 266,434 1.8 7643 Radiotelephonic equipment 2,427,842 2.0 7788 Other electrical machinery 204,231 1.4 8459 Otherknitoutergarments 2,021,568 1.6 9710 Non-monetary gold 163,090 1.1 7638 Other sound recorders 1,957,036 1.6 0573 Bananas 155,865 1.1 83 Exports Export Exports Export Countrv/SITC/Product ($000) Share (%) Countrv/SITC/Product ($000) Share (%) CHINA, CONTINUED PHILIPPINES, CONTINUED 8439 Other textile outer garments 1,846,140 1.5 7522 Data processing machines 154,511 1.0 8462 Under garments of cotton 1,836,566 1.5 7525 Peripheral units 147,652 1.0 8939 Miscellaneous articles 1,798,534 1.4 7643 Radiotelephonic equipment 139,723 0.9 7525 Peripheral units 1,749,821 1.4 7849 Parts of motor vehicles 130,102 0.9 7788 Other electrical machinery 1,674,432 1.3 7162 Electric motors & generators 110,593 0.8 HONG KONG SINGAPORE Total Exports 19,596,694 100.0 Total Exports 38,076,065 100.0 7764 Electronic microcircuits 2,308,751 11.8 7764 Electronic microcircuits 7,573,415 19.9 7599 Parts of office machinery 996,219 5.1 7599 Parts of office machinery 1,946,760 5.1 7649 Parts of telecom equipment 303,804 4.1 7524 Digital storage units 1,925,296 5.1 6522 Woven cotton fabrics .529,720 2.7 3341 Motor spirits 1,342,493 3.5 7763 Diodes and transistors 510,115 2.6 3343 Gas oils 1,257,389 3.3 7788 Other electrical machinery :507,352 2.6 7768 Piezo-electric crystals 1,077,100 2.8 7721 Electrical switches and relays 464,961 2.4 3344 Fuel oils, nes. 950,199 2.5 7722 Printed circuits and parts 424,296 2.2 7788 Other electrical machinery 815,604 2.1 6552 Knitted fabrics 386,173 2.0 3342 Kerosene 813,982 2.1 9710 Non-monetary gold .383,418 2.0 7643 Radiotelephonic equipment 800,989 2.1 7712 Other electric power machinery :351,716 1.8 7763 Diodes and transistors 794,581 2.1 8451 Jerseys and pullovers :332,357 1.7 7649 Parts of telecom equipment 703,142 1.8 8710 Optical instruments & apparatus 320,268 1.6 7721 Electrical switches & relays 639,436 1.7 7643 Radiotelephonic equipment :284,785 1.5 3345 Lubricating oils 529,810 1.4 7768 Piezo-electric crystals :280,852 1.4 5831 Polyethylene 441,127 1.2 INDONESIA TAIWAN Total Exports 16,811,795 100.0 Total Exports 59,992,028 100.0 3330 Petroleum oils 1,881,283 11.2 7764 Electronic microcircuits 11,136,248 18.6 3413 Petroleum gases 1,810,170 10.8 7599 Parts of office machinery 3,389,585 5.7 3222 Other coal 979;430 5.8 5833 Polystyrene 1,756,548 2.9 2517 Chemical wood pulp 555,967 3.9 6531 Woven synthetic fabrics 1,508,580 2.5 2483 Non-coniferous wood 521,498 3.7 7768 Piezo-electric crystals 1,325,876 2.2 2871 Copper ores 457,154 2.7 7284 Specialized machinery 1,259,280 2.1 6342 Plywood sheets 426,793 2.5 7722 Printed circuits and parts 1,241,545 2.1 7649 Parts of telecom equipment 309,752 1.8 7788 Other electrical machinery 1,135,700 1.9 6415 Paper and paperboard 263,535 1.6 6552 Knit fabrics 1,084,495 1.8 5138 Poly carboxylic acids 246,201 1.5 6746 Iron sheets & plates 1,068,364 1.8 2472 Saw logs and veneer logs 245,375 1.5 6822 Copper alloys, worked 973,000 1.6 6821 Copper and copper alloys 233,243 1.4 7763 Diodes and transistors 955,906 1.6 6513 Cotton yarn :222,572 1.3 65.73 Coated textile fabrics 840,704 1.4 7599 Parts of office machinery :220,605 1.3 5834 Polyvinyl chloride 772,039 1.3 7525 Peripheral units & adapters :213,491 1.3 6514 Yarn of synthetic fibers 768,990 1.3 KOREA THAILAND TOTAL TRADE 52,510,660 100.0 Total Exports 22,020,395 100.0 7764 Electronic microcircuits 6,222,941 11.9 7599 Parts of office machinery 2,634,716 12.0 7643 Radiotelephonic equipment 3,151,544 6.0 7764 Electronic microcircuits 1,977,948 9.0 7525 Peripheral units & adapters 1,619,449 3.1 7524 Digital storage units 1,323,757 6.0 7649 Parts of telecom equipment 1,293,369 2.5 2320 Natural rubber latex 784,259 3.6 5112 Cyclic hydrocarbons 1,136,874 2.2 7162 Electric motors & generators 527,486 2.4 84 Exports Export Exports Export Countrv/SITC/Product ($000) Share (%) Countrv/SITC/Product ($000) Share (0A KOREA, CONTINUED THAILAND, CONTINUED 6531 Woven of synthetic fabric 1,081,540 2.1 5833 Polystyrene 456,030 2.1 5833 Polystyrene and its copolymers 1,052,887 2.0 7763 Diodes and transistors 444,933 2.0 3343 Gas oils 1,013,222 1.9 0422 Rice semi- or wholly milled 424,568 1.9 7768 Piezo-electric crystals. 974,947 1.9 7649 Parts of telecom equipment 371,159 1.7 7762 Other electric valves 926,614 1.8 0611 Beet and cane sugar 289,123 1.3 6746 Iron sheets & plates 889,304 1.7 7525 Peripheral units & adapters 281,982 1.3 5138 Polycarboxylic acids 880,417 1.7 0579 Fruit, fresh or dried 271,171 1.2 6114 Leather of bovine cattle 835,121 1.6 5832 Polypropylene 264,874 1.2 7599 Parts of office machinery 818,910 1.6 7768 Piezo-electric crystals 259,556 1.2 3344 Fuel oils, nes 803,474 1.5 7415 Air conditioning machines 207,987 0.9 LAOS VIETNAM Total Exports 102,230 100.0 Total Exports 4,062,245 100.0 2483 Non-coniferous wood 49,941 48.9 3330 Petroleum oils 1,664,199 41.0 2472 Saw logs and veneer logs 19,799 19.4 7721 Electrical switches 159,617 3.9 0011 Bovine animals. 5,124 5.0 0422 Rice semi- or wholly milled 152,894 3.8 2482 Sawn wood 4,014 3.9 0360 Crustaceans 144,843 3.6 2876 Tin ores. 2,828 2.8 7722 Printed circuits and parts 139,202 3.4 2875 Zinc ores 1,828 1.8 2320 Natural rubber latex 83,588 2.1 9310 Specialtransactions 1,715 1.7 8510 Footwear 71,356 1.8 3222 Other coal 1,713 1.7 7599 Parts of office machinery 47,595 1.2 7821 Motor vehicles and trucks 1,612 1.6 0579 Fruit, fresh or dried. 45,308 1.1 2471 Saw logs and veneer logs, nes 1,308 1.3 8219 Other furniture and parts 43,408 1.1 2924 Seeds used in perfumery 1,173 1.1 7761 Television picture tubes 40,475 1.0 0548 Vegetable roots & tubers 948 0.9 0548 Vegetable roots & tubers 38,629 1.0 2922 Shellac 849 0.8 3221 Anthracite coal 34,219 0.8 6342 Plywood sheets 808 0.8 0711 Coffee 30,945 0.8 2450 Fuel wood 704 0.7 5146 Oxygen-function compounds 29,613 0.7 Source: UN COMTRADE statistics. 85 Appendix Table A5 East Asia's Largest Four-Digit SITC (Rev. 2) Exports to Japan Export Export Value ($000) Share of Exports % Share SITC No. Product Description 1985 2001 1985 2001 Change TOTAL EXPORTS 35,006,728 145,002,541 100.00 100.00 0.00 7764 Electronic microcircuits 106,679 8,834,146 0.30 6.09 5.79 3413 Petroleum gases 6,496,234 8,618,857 18.56 5.94 -12.61 7599 Parts of office machinery 69,182 5,064,704 0.20 3.49 3.30 3330 Petroleum oils 7,791,853 3,385,009 22.26 2.33 -19.92 8451 Jerseys and pullovers 351,624 3,043,494 1.00 2.10 1.09 9310 Special transactions 627,818 3,005,086 1.79 2.07 0.28 7649 Parts of telecom equipment 111,016 2,967,883 0.32 2.05 1.73 7525 Peripheral units including adapters 18,829 2,805,570 0.05 1.93 1.88 7524 Digital central storage units 6 2,784,993 0.00 1.92 1.92 3341 Motor spirit and other light oils 1,261,262 2,457,621 3.60 1.69 -1.91 8510 Footwear 271,935 2,272,008 0.78 1.57 0.79 7523 Complete digital processing equipment 743 2,204,222 0.00 1.52 1.52 0360 Crustaceans 1,014,867 2,187,799 2.90 1.51 -1.39 8439 Other textile outer garments 59,719 2,060,961 0.17 1.42 1.25 7638 Other sound recorders 9,957 1,904,222 0.03 1.31 1.28 7611 Color television receivers 5,328 1,874,914 0.02 1.29 1.28 8462 Under garments of cotton 118,688 1,789,840 0.34 1.23 0.90 8942 Children stoys and games. 60,335 1,764,205 0.17 1.22 1.04 7522 Complete digital data processing machines 318 1,725,974 0.00 . 1.19 1.19 7731 Insulated electrical wire 8,006 1,686,788 0.02 1.16 1.14 6342 Plywood sheets 50,387 1,592,357 0.14 1.10 0.95 8310 Travel goods and handbags 40,519 1,575,179 0.12 1.09 0.97 8219 Other furniture and parts 118,901 1,544,285 0.34 1.07 0.73 3222 Other coal 187,646 1,422,334 0.54 0.98 0.44 7712 Other electric power machinery 44,865 1,416,974 0.13 0.98 0.85 7788 Other electrical equipment 62,384 1,314,368 0.18 0.91 0.73 7641 Electrical and telephonic line 9,749 1,310,827 0.03 0.90 0.88 8459 Other knit outer garments 150,074 1,303,814 0.43 0.90 0.47 0342 Frozen fish (excluding fillets) 353,075 1,235,742 1.01 0.85 -0.16 7721 Electrical switches and relays 46,761 1,216,875 0.13 0.84 0.71 0371 Fish, prepared or preserved 184,057 1,153,974 0.53 0.80 0.27 8939 Miscellaneous articles 31,687 1,116,852 0.09 0.77 0.68 8423 Trousers and breeches 68,621 1,050,003 0.20 0.72 0.53 8429 Other textile outer garments 46,843 995,424 0.13 0.69 0.55 0372 Crustaceans, prepared or preserved 74,692 850,360 0.21 0.59 0.37 7162 Electric motors & generators 6,452 835,783 0.02 0.58 0.56 8431 Coats and jackets of textile fabric 51,060 793,032 0.15 0.55 0.40 5989 Chemical products and preparations;, 64,855 792,767 0.19 0.55 0.36 8710 Optical instruments and apparatus 6,407 788,965 0.02 0.54 0.53 3342 Kerosene and other medium oils 327,742 767,845 0.94 0.53 -0.41 7763 Diodes and transistors 85,970 757,473 0.25 0.52 0.28 8983 Gramophone records 28,947 752,179 0.08 0.52 0.44 7849 Other parts of motor vehicles 19,932 751,297 0.06 0.52 0.46 8441 Men's shirts 80,656 739,647 0.23 0.51 0.28 8947 Other sporting goods 127,599 711,141 0.36 0.49 0.13 86 Appendix Table A5. Continued Export Export Value ($000) Export Share % Share SITC No. Product Description 1985 2001 1985 2001 Change 6584 Bed and table linen 45,908 705,861 0.13 0.49 0.36 6613 Building & monumental stone 116,286 699,534 0.33 0.48 0.15 7758 Electro-thermal appliances. 2,981 679,315 0.01 0.47 0.46 8211 Chairs and parts 43,798 661,937 0.13 0.46 0.33 7628 Other radio-broadcast receivers 9,295 652,912 0.03 0.45 0.42 0341 Fish, fresh or chilled 275,328 651,415 0.79 0.45 -0.34 8931 Articles for conveyance or packing 11,613 645,613 0.03 0.45 0.41 0149 Other prepared or preserved meat 7,297 632,877 0.02 0.44 0.42 8212 Furniture for medical establishments 50,913 621,310 0.15 0.43 0.28 8435 Blouses oftextile fabrics 35,261 619,880 0.10 0.43 0.33 0546 Vegetables, frozen 114,240 612,990 0.33 0.42 0.10 0114 Poultry& edible offal 68,021 596,610 0.19 0.41 0.22 7722 Printed circuits and parts 3,690 571,338 0.01 0.39 0.38 8811 Photographic cameras and parts 34,895 566,626 0.10 0.39 0.29 8472 Clothing accessories, knitted 50,773 564,388 0.15 0.39 0.24 2483 Wood of non-coniferous species 222,012 561,534 0.63 0.39 -0.25 7528 Off-line data processing equipment. 71 540,641 0.00 0.37 0.37 7591 Partsofofficemachinery 4,218 529,312 0.01 0.37 0.35 2871 Copper ores & concentrates 318,583 508,892 0.91 0.35 -0.56 3343 Gas oils 42,482 503,929 0.12 0.35 0.23 2320 Natural rubber latex 417,283 497,150 1.19 0.34 -0.85 0545 Other fresh or chilled vegetables 56,630 486,895 0.16 0.34 0.17 8422 Men's suits of textile fabrics 10,186 485,350 0.03 0.33 0.31 8434 Women's skirts of textile fabrics 8,917 481,079 0.03 0.33 0.31 6589 Other made-up textile articles 22,548 478,982 0.06 0.33 0.27 8720 Medical instruments and appliances 4,313 473,075 0.01 0.33 0.31 5823 Alkyds and other polyesters 3,905 472,020 0.01 0.33 0.31 7415 Air conditioning machines 1,094 459,305 0.00 0.32 0.31 8465 Corsets and brassieres 37,057 441,126 0.11 0.30 0.20 0565 Vegetables, prepared or preserved. 109,597 422,756 0.31 0.29 -0.02 2872 Nickel ores and concentrates 145,775 420,696 0.42 0.29 -0.13 7852 Bicycles, not motorized 1,457 407,022 0.00 0.28 0.28 7642 Microphones and loudspeakers 27,321 404,327 0.08 0.28 0.20 7768 Piezo-electric crystals 28,753 400,004 0.08 0.28 0.19 7621 Radio-broadcast receivers for motor 2,838 397,225 0.01 0.27 0.27 6997 Articles of iron or steel, nes. 16,815 396,891 0.05 0.27 0.23 6841 Aluminum and alloys 225,990 390,521 0.65 0.27 -0.38 3344 Fuel oils, nes. 1,561,453 372,788 4.46 0.26 -4.20 6727 Iron or steel coils 232,230 372,450 0.66 0.26 -0.41 7757 Electrical domestic appliances 8,395 370,636 0.02 0.26 0.23 0589 Fruit otherwise prepared or preserved 72,953 368,587 0.21 0.25 0.05 0573 Bananas, fresh or dried 289,915 358,916 0.83 0.25 -0.58 8481 Articles of apparel & clothing accessories 40,604 358,489 0.12 0.25 0.13 0344 Fish fillets, frozen 10,453 356,309 0.03 0.25 0.22 7284 Machines for specialized industries 13,051 352,524 0.04 0.24 0.21 7711 Electrical transformers 73,816 335,128 0.21 0.23 0.02 6911 Structures & parts of iron 758 315,483 0.00 0.22 0.22 87 Appendix Table A5. Continued Export Export Values ($000) Export Shares % Share SITC No. Product Description 1985 2001 1985 2001 Change 6974 Articles used for domestic purposes 9,854 315,023 0.03 0.22 0.19 6412 Printing paper& writingpaper 10,211 307,235 0.03 0.21 0.18 8851 Watches and watch movements 125,300 292,106 0.36 0.20 -0.16 5121 A-cyclic alcohols 61,395 289,481 0.18 0.20 0.02 6716 Ferro-alloys 51,302 284,961 0.15 0.20 0.05 7518 Office machines, nes. 1,915 284,182 0.01 0.20 0.19 7499 Other non-electric parts & accessories 10,672 284,032 0.03 0.20 0.17 0980 Edible products and preparations nes 85,948 282,651 0.25 0.19 -0.05 ALL ABOVE PRODUCTS 25,892,649 114,770,112 73.96 79.15 5.19 Source: UN COMTRADE statistics. 88 Appendix Table A6 East Asia's Largest Four-Digit SITC (Rev. 2) Exports to All Other Destinations (Totals Exclude Japan and all Regional Countries) Export Export Values ($000) Export Shares % Share SITC No. Product Description 1985 2001 1985 2001 Change TOTAL TRADE 96,868,507 572,884,033 100 100 -- 7764 Electronic microcircuits 3,767,804 33,851,396 3.89 5.91 2.02 7599 Parts of office machinery 1,940,788 30,882,450 2.00 5.39 3.39 8942 Children s toys and games. 3,176,701 22,689,247 3.28 3.96 0.68 7524 Digital central storage units 3,775 21,150,427 0.00 3.69 3.69 7525 Peripheral units & adapters 499,963 21,033,579 0.52 3.67 3.16 8510 Footwear 4,363,040 20,054,966 4.50 3.50 -1.00 7643 Radiotelephonic equipment 205,680 12,944,357 0.21 2.26 2.05 7810 Passenger motor cars 46,277 12,461,436 0.05 2.18 2.13 7638 Other sound recorders 673,100 10,267,198 0.69 1.79 1.10 7522 Complete digital data processing machines 79,055 10,163,693 0.08 1.77 1.69 8451 Jerseys and pullovers 1,981,580 9,778,780 2.05 1.71 -0.34 7641 Electric telephonic & telegraphic line 524,815 8,491,822 0.54 1.48 0.94 8310 Travel goods and handbags 1,797,510 8,010,007 1.86 1.40 -0.46 8219 Other furniture and parts 144,052 7,934,572 0.15 1.39 1.24 8439 Other outer garments of textile fabric 2,096,054 7,790,250 2.16 1.36 -0.80 7649 Parts oftelecom equipmnent 1,371,712 7,163,547 1.42 1.25 -0.17 9310 Special transactions 828,694 6,824,153 0.86 1.19 0.34 8939 Miscellaneous articles 924,218 6,647,579 0.95 1.16 0.21 7788 Other electrical machinery 838,549 5,773,110 0.87 1.01 0.14 8459 Other knit outer garments 1,453,389 5,667,265 1.50 0.99 -0.51 7712 Other electric power machinery 376,721 5,435,563 0.39 0.95 0.56 8124 Lighting fixtures and fittings 368,089 5,058,851 0.38 0.88 0.50 7758 Electro-thermal appliances 886,482 4,968,078 0.92 0.87 -0.05 7628 Other radio-broadcast receivers 926,202 4,800,235 0.96 0.84 -0.12 7528 Off-line data processing equipment 34,361 4,521,606 0.04 0.79 0.75 8211 Chairs and other seats 69,206 4,473,660 0.07 0.78 0.71 7721 Electrical switches and relays 360,300 4,203,768 0.37 0.73 0.36 3330 Petroleum oils 4,843,947 3,951,801 5.00 0.69 -4.31 8462 Undergarments of cotton 739,153 3,840,324 0.76 0.67 -0.09 7611 Color television receivers 760,313 3,695,114 0.78 0.65 -0.14 7722 Printed circuits and parts 150,445 3,546,071 0.16 0.62 0.46 7523 Complete digital processing equipment 206,756 3,535,136 0.21 0.62 0.40 8947 Other sporting goods 875,608 3,433,721 0.90 0.60 -0.30 8429 Other outer garments of textile fabric 631,698 3,366,823 0.65 0.59 -0.06 7731 Insulated electrical wire 431,565 3,356,268 0.45 0.59 0.14 7849 Other parts & accessories of motor vehicles 276,805 3,253,065 0.29 0.57 0.28 7763 Diodes and transistors 504,503 3,249,291 0.52 0.57 0.05 8973 Jewellery of gold or silver 543,046 3,223,597 0.56 0.56 0.00 7757 Electrical domestic appliances 303,264 3,076,607 0.31 0.54 0.22 8481 Apparel & clothing accessories 985,524 3,021,234 1.02 0.53 -0.49 8423 Trousers and breeches 991,124 2,931,993 1.02 0.51 -0.51 8983 Gramophone records 306,507 2,913,471 0.32 0.51 0.19 7415 Air conditioning machines 34,096 2,881,335 0.04 0.50 0.47 7642 Microphones and loudspeakers 291,483 2,788,223 0.30 0.49 0.19 89 Appendix Table A6. Continued Export Export Values ($000) Share of Exports % Share SlTC No. Product Description 1985 2001 1985 2001 Change 8441 Men's shirts of textile fabrics 1,478,649 2,734,354 1.53 0.48 -1.05 0360 Crustaceans 373,829 2,640,950 0.39 0.46 0.08 8482 Articles of apparel & clothing accessories 333,105 2,610,124 0.34 0.46 0.11 6940 Iron nails, screws or nuts 453,678 2,592,438 0.47 0.45 -0.02 6974 Articles used for domestic purposes, 386,945 2,447,315 0.40 0.43 0.03 7932 Ships and boats 505,534 2,442,720 0.52 0.43 -0.10 8811 Photographic cameras and parts 246,161 2,342,983 0.25 0.41 0.15 6531 Woven fabrics of synthetic thread 400,503 2,266,432 0.41 0.40 -0.02 8851 Watches and watch movements 918,582 2,249,557 0.95 0.39 -0.56 6991 Locksmiths wares 305,533 2,244,109 0.32 0.39 0.08 6552 Knitted or crocheted fabrics 80,830 2,217,994 0.08 0.39 0.30 8931 Articles forpacking goods 154,848 2,202,754 0.16 0.38 0.22 8435 Blouses oftextile fabrics 1,105,656 2,178,960 1.14 0.38 -0.76 7622 Radio-broadcast receivers portable, 848,625 2,098,678 0.88 0.37 -0.51 8999 Manufactured goods, nes 443,254 1,994,268 0.46 0.35 -0.11 7621 Radio-broadcast receivers 362,848 1,920,376 0.37 0.34 -0.04 6953 Other hand tools 400,370 1,903,802 0.41 0.33 -0.08 2320 Natural rubber latex 1,640,401 1,839,854 1.69 0.32 -1.37 7781 Batteries and accumulators 143,141 1,817,769 0.15 0.32 0.17 7492 Taps, cocks, and valves for pipes 148,368 1,803,174 0.15 0.31 0.16 7784 Tools for working in the hand 30,096 1,736,503 0.03 0.30 0.27 7518 Office machines, nes. 63,278 1,666,686 0.07 0.29 0.23 7512 Calculating machines 224,078 1,649,719 0.23 0.29 0.06 7853 Invalid carriages 122,116 1,645,571 0.13 0.29 0.16 8842 Spectacles and spectacle frames 241,981 1,644,279 0.25 0.29 0.04 8710 Optical instruments and apparatus 66,904 1,635,428 0.07 0.29 0.22 6522 Cotton fabrics, woven 438,971 1,628,092 0.45 0.28 -0.17 7852 Bicycles 309,908 1,602,118 0.32 0.28 -0.04 8720 Medical instruments and appliances 95,522 1,590,644 0.10 0.28 0.18 6960 Cutlery 275,116 1,563,716 0.28 0.27 -0.01 8997 Basketwork 401,974 1,537,049 0.41 0.27 -0.15 8484 Headgear and fittings thereof 230,083 1,532,610 0.24 0.27 0.03 6589 Other made-up articles of textile m 213,805 1,527,875 0.22 0.27 0.05 6672 Diamonds 234,149 1,508,847 0.24 0.26 0.02 4242 Palm oil 1,115,175 1,501,677 1.15 0.26 -0.89 8921 Books and pamphlets 193,529 1,482,159 0.20 0.26 0.06 7162 Electrical motors & generators 114,985 1,430,295 0.12 0.25 0.13 7821 Motor vehicles for transport of goods 7,852 1,399,303 0.01 0.24 0.24 6514 Yarn containing 85% synthetic fiber 222,401 1,347,880 0.23 0.24 0.01 6354 Domestic manufactures of wood 272,326 1,316,050 0.28 0.23 -0.05 8465 Corsets and brassieres 145,052 1,305,064 0.15 0.23 0.08 8431 Coats and jackets of textile fabric 661,393 1,302,918 0.68 0.23 -0.46 6251 Tires 212,359 1,301,097 0.22 0.23 0.01 6997 Articles of iron or steel, nes 227,706 1,285,928 0.24 0.22 -0.01 7782 Electrical filament lamps 160,025 1,281,035 0.17 0.22 0.06 7648 Telecommunications equipment 274,430 1,231,839 0.28 0.22 -0.07 0372 Crustaceans 205,302 1,209,928 0.21 0.21 0.00 90 Appendix Table A6. Continued Export Export Value ($000) Share of Exports % Share SITC No. Product Description 1985 2001 1985 2001 Change 6584 Bed and table linen 427,708 1,185,712 0.44 0.21 -0.23 8433 Women's dresses 382,486 1,180,933 0.39 0.21 -0.19 6342 Plywood sheets 690,936 1,166,016 0.71 0.20 -0.51 8972 Imitation jewellery 482,015 1,147,022 0.50 0.20 -0.30 5156 Hetero-cyclic compounds 120,608 1,132,206 0.12 0.20 0.07 5823 Alkyds and other polyesters 39,696 1,110,004 0.04 0.19 0.15 7768 Piezo-electric crystals 399,173 1,062,147 0.41 0.19 -0.23 7284 Machines for specialized purposes 136,405 1,044,894 0.14 0.18 0.04 8472 Clothing accessories, knitted 290,870 1,018,400 0.30 0.18 -0.12 ALL ABOVE PRODUCTS 63,075,227 453,565,924 65.11 79.17 14.06 Source: UN COMTRADE statistics. 91 Appendix Table A7 East Asia's Lairgest Four-Digit SITC (Rev. 2) Exports to ASEAN Markets Export Export Value ($000) Share of Exports (%) Share SITC No. Product Description 1985 2001 1985 2001 Change TOTAL TRADE 30,467,224 176,320,781 100.00 100.00 7764 Electronic microcircuits 2,744,942 19,562,977 9.01 11.10 2.09 7524 Digital central storage units 973 15,760,433 0.00 8.94 8.94 7599 Parts of office machinery 992,401 11,439,900 3.26 6.49 3.23 7525 Peripheral units & adapters 168,514 6,579,090 0.55 3.73 3.18 8510 Footwear 126,080 5,117,799 0.41 2.90 2.49 3330 Petroleum oils 3,423,297 3,805,147 11.24 2.16 -9.08 7638 Other sound recorders 93,470 3,689,712 0.31 2.09 1.79 7643 Radiotelephonic equipment 26,977 2,893,647 0.09 1.64 1.55 8451 Jerseys and pullovers 131,419 2,694,439 0.43 1.53 1.10 7641 Telephonic & telegraphic line 39,751 2,687,202 0.13 1.52 1.39 7522 Digital data processing machines 15,695 2,589,377 0.05 1.47 1.42 9310 Special transactions 288,520 2,537,726 0.95 1.44 0.49 8219 Other furniture 36,095 2,424,683 0.12 1.38 1.26 8439 Other textile outer garments 289,483 2,417,848 0.95 1.37 0.42 7628 Other radio-broadcast receivers 174,972 2,116,440 0.57 1.20 0.63 0360 Crustaceans 193,188 2,054,453 0.63 1.17 0.53 7649 Parts of telecom equipment 399,832 1,996,794 1.31 1.13 -0.18 7611 Color television receivers 226,023 1,951,955 0.74 1.11 0.37 7763 Diodes and transistors 280,414 1,941,438 0.92 1.10 0.18 8459 Other knit outer garments 161,222 1,886,344 0.53 1.07 0.54 2320 Natural rubber latex 1636,194 1,836,166 5.37 1.04 -4.33 7528 Off-line data processing equipment. 8,358 1,793,374 0.03 1.02 0.99 4242 Palm oil 1,091,180 1,500,634 3.58 0.85 -2.73 8482 Articles of clothing accessories 61,489 1,492,246 0.20 0.85 0.64 7712 Other electric power machinery 38,749 1,410,630 0.13 0.80 0.67 7788 Other electrical machinery and equipment 264,490 1,371,270 0.87 0.78 -0.09 8973 Jewellery of gold or silver 274,050 1,330,524 0.90 0.75 -0.14 8310 Travel goods and handbags 40,740 1,308,680 0.13 0.74 0.61 8211 Chairs and other seats and parts 31,156 1,286,372 0.10 0.73 0.63 8462 Under garments of cotton 151,607 1,253,061 0.50 0.71 0.21 7721 Electrical switches and relays 110,645 1,149,969 0.36 0.65 0.29 7523 Complete digital central processing 4,525 1,097,895 0.01 0.62 0.61 7621 Radio-broadcast receivers for motor 91,656 1,089,381 0.30 0.62 0.32 8423 Trousers of textile fabric 156,088 1,077,721 0.51 0.61 0.10 6342 Plywood consisting of sheets 509,364 1,060,208 1.67 0.60 -1.07 8429 Other outer garments of textiles 33,059 1,041,638 0.11 0.59 0.48 7415 Air conditioning machines 23,404 1,013,941 0.08 0.58 0.50 0372 Crustaceans, prepared 136,353 1,011,964 0.45 0.57 0.13 8942 Children s toys and indoor games. 201,670 994,062 0.66 0.56 -0.10 7731 Insulated electrical wire 34,624 974,509 0.11 0.55 0.44 7821 Motor vehicles for transport of goods 1,056 971,700 0.00 0.55 0.55 8441 Men's shirts of textile fabrics 222,075 861,982 0.73 0.49 -0.24 0371 Fish, prepared or preserved 252,257 836,694 0.83 0.47 -0.35 2483 Wood of non-coniferous species 741,446 733,705 2.43 0.42 -2.02 0422 Rice semi-milled or wholly milled, 241,410 704,146 0.79 0.40 -0.39 8720 Medical instruments and appliances 66,175 666,538 0.22 0.38 0.16 92 Appendix Table A7. Continued Export Export Value ($000) Share of Exports (%) Share SITC No. Product Description 1985 2001 1985 2001 Change 7722 Printed circuits and parts thereof 36,216 660,175 0.12 0.37 0.26 5156 Hetero-cyclic compounds 73,169 657,173 0.24 0.37 0.13 7810 Passenger motor cars 420 653,452 0.00 0.37 0.37 0711 Coffee 502,431 650,369 1.65 0.37 -1.28 8435 Blouses of textile fabrics 175,212 598,441 0.58 0.34 -0.24 8465 Corsets and brassieres 61,335 595,571 0.20 0.34 0.14 0589 Fruit otherwise prepared 308,442 579,511 1.01 0.33 -0.68 7642 Microphones and loudspeakers 22,259 570,156 0.07 0.32 0.25 5157 Sulfa compounds 16 551,423 0.00 0.31 0.31 2871 Copper ores 78 522,705 0.00 0.30 0.30 8939 Miscellaneous articles 41,203 504,072 0.14 0.29 0.15 8811 Photographic cameras and parts 16,924 503,072 0.06 0.29 0.23 7768 Piezo-electric crystals 275,893 495,900 0.91 0.28 -0.62 4243 Coconut (copra) oil 511,278 495,091 1.68 0.28 -1.40 9710 Non-Monetary gold 36,387 486,554 0.12 0.28 0.16 8983 Gramophone records 30,440 481,246 0.10 0.27 0.17 5146 Oxygen-function compounds 20,061 472,182 0.07 0.27 0.20 8931 Articles for packing goods 37,858 466,676 0.12 0.26 0.14 7758 Electro-thermal appliances. 196,482 465,516 0.64 0.26 -0.38 8743 Measuring appliances 15,333 454,283 0.05 0.26 0.21 8710 Optical instruments and apparatus 6,034 447,768 0.02 0.25 0.23 6353 Builders' carpentry products 40,818 426,881 0.13 0.24 0.11 3222 Other coal 141 424,692 0.00 0.24 0.24 6514 Yarn of synthetic fiber 37,533 423,539 0.12 0.24 0.12 7849 Other parts of motor vehicles 33,288 423,097 0.11 0.24 0.13 6531 Woven synthetic fabrics 14,779 412,161 0.05 0.23 0.19 5823 Alkyds and other polyesters 919 395,646 0.00 0.22 0.22 8947 Other sporting goods 11,062 393,187 0.04 0.22 0.19 5989 Chemical products and preparations, nes 31,539 388,309 0.10 0.22 0.12 5154 Organic-sulfur compounds 434 372,990 0.00 0.21 0.21 6354 Manufactures of wood for domestic use 43,305 370,153 0.14 0.21 0.07 8851 Watches and watch movements 97,139 369,941 0.32 0.21 -0.11 7781 Batteries and accumulators 40,279 367,815 0.13 0.21 .0.08 6612 Portland cement 34,700 360,741 0.11 0.20 0.09 7149 Parts of the engines & motors, nes 61,087 359,965 0.20 0.20 0.00 7162 Electric motors & generators 23,506 359,889 0.08 0.20 0.13 6672 Diamonds 47,471 357,218 0.16 0.20 0.05 0149 Other prepared or preserved meat 920 353,234 0.00 0.20 0.20 8748 Electrical measuring equipment 35,341 352,952 0.12 0.20 0.08 6974 Domestic use articles 5,194 344,395 0.02 0.20 0.18 8921 Books and pamphlets 47,817 334,606 0.16 0.19 0.03 8433 Women's dresses 54,719 332,814 0.18 0.19 0.01 6412 Printing paper 1,458 324,755 0.00 0.18 0.18 4244 Palm kernel oil 279,167 323,282 0.92 0.18 -0.73 5121 Alcohols 29,306 320,893 0.10 0.18 0.09 3344 Fuel oils, nes. 915,020 316,956 3.00 0.18 -2.82 2890 Ores of precious metals 2,328 312,334 0.01 0.18 0.17 93 Appendix Table A7. Continued Export Export Value ($000) Share of Exports (%) Share SITC No. Product Description 1985 2001 1985 2001 Change 7512 Calculating machines 23,299 299,556 0.08 0.17 0.09 0980 Edible products and preparations nes 34,000 293,628 0.11 0.17 0.05 6415 Paper and paperboard 1,895 292,834 0.01 0.17 0.16 8996 Orthopedic appliances 1,763 288,129 0.01 0.16 0.16 8431 Coats and jackets of textile fabric 103,330 285,709 0.34 0.16 -0.18 7723 Electrical resistors 15,751 283,043 0.05 0.16 0.11 7518 Office machines nes 4,330 282,105 0.01 0.16 0.15 Source: UN COMTRADE statistics. Policy Research Working Paper Series Contact Title Author Date for paper WPS3056 Avoiding the Pitfalls in Taxing Patrick Honohan May 2003 A. Yaptenco Financial Intermediation 31823 WPS3057 Teaching Adults to Read Better arid Helen Abadzi May 2003 H. Abadzi Faster: Results from an Experienent 80375 in Burkina Faso WPS3058 Working for God? Evaluating Service Ritva Reinikka May 2003 H. Sladovich Delivery of Religious Not-for-Profit Jakob Svensson 37698 Health Care Providers in Uganda WPS3059 Do Capital Flows Respond to Risk Cesar Calder6n May 2003 T. Tourougui and Return? Norman Loayza 87431 Luis Servwn WPS3060 World Market Integration through the Rui Albuquerque May 2003 T. Tourougui Lens of Foreign Direct Investors Norman Loayza 87431 Luis Serven WPS3061 Reciprocity in Free Trade Caroline Freund May 2003 P. Flewitt Agreements 32724 WPS3062 Labor Effects of Adult Mortality in Kathleen Beegle May 2003 E. de Castro Tanzanian Households 89121 WPS3063 Trade Liberalization, Firm Paolo Epifani May 2003 P. Flewitt Performance, and Labor Market 32724 Outcomes in the Developing World: What Can We Learn from Micro-Level Data? WPS3064 Trade Policy, Trade Volumes, and Ana M. Fernandes May 2003 A. Fernandes Plant-Level Productivity in Colombian 33983 Manufacturing Industries WPS3065 Ghost Doctors: Absenteeism in Nazmul Chaudhury May 2003 H. Sladovich Bangladeshi Health Facilities Jeffrey S. Hammer 37698 WPS3066 The Potential Demand for and Shreelata Rao Seshadri May 2003 H. Sladovich Strategic Use of an HIV-1 Vaccine P. Subramaniyam 37698 in Southern India Prabhat Jha WPS3067 The Mini-integrated Macroeconomnic Pierre-Richard Ag6nor May 2003 M. Gosiengfiao Model for Poverty Analysis: A Framework 33363 for Analyzing the Unemployment and Poverty Effects of Fiscal and Labor Market Reforms WPS3068 Poverty and Economic Growth in Heba El-laithy June 2003 P. Sader Egypt, 1995-2000 Michael Lokshin 33902 Arup Banerji WPS3069 International Migration, Remittances, Richard H. Adams, Jr. June 2003 N. Obias and the Brain Drain: A Study of 24 31986 Labor-Exporting Countries WPS3070 Are You Satisfied? Citizen Feedback Uwe Deichmann June 2003 Y. D'Souza and Delivery of Urban Services Somik V. Lall 31449 Policy Research Working Paper Series Contact Title Author Date for paper WPS3071 Survey Techniques to Measure and Ritva Reinikka June 2003 H. Sladovich Explain Corruption Jakob Svensson 37698 WPS3072 Diversity Matters: The Economic Somik V. Lall June 2003 V. Soukhanov Geography of Industry Location in Jun Koo 35721 India Sanjoy Chakravorty WPS3073 Metropolitan Industrial Clusters: Sanjoy Chakravorty June 2003 V. Soukanov Patterns and Processes Jun Koo 35721 Somik V. Lall WPS3074 The Gender Impact of Pension Estelle James June 2003 M. Ponglumjeak Reform: A Cross-Country Analysis Alejandra Cox Edwards 31060 Rebeca Wong WPS3075 Child Labor, Income Shocks, and Kathleen Beegle June 2003 E. de Castro Access to Credit Rajeev H. Dehejia 89121 Roberta Gatti WPS3076 Trade Reform in Vietnam: Philippe Auffret June 2003 K. Tomlinson Opportunities with Emerging Challenges 39763 WPS3077 Do More Transparent Governments Roumeen Islam June 2003 R. Islam Govern Better? 32628 WPS3078 Regional Integration in East Asia: Eisuke Sakakibara June 2003 S. Yusuf Challenges and Opportunities- Sharon Yamakawa 82339 Part l: History and Institutions WPS3079 Regional Integration in East Asia: Eisuke Sakakibara June 2003 S. Yusuf Challenges and Opportunities- Sharon Yamakawa 82339 Part II: Trade, Finance, and Integration WPS3080 Can Fiscal Rules Help Reduce Guillermo Perry June 2003 R. lzquierdo Macroeconomic Volatility in the Latin 84161 America and Caribbean Region? WPS3081 The Anatomy of a Multiple Crisis: Guillermo Perry June 2003 R. Izquierdo Why was Argentina Special and Luis Serv6n 84161 What Can We Learn from It? WPS3082 Financial Dollarization and Central Kevin Cowan June 2003 0. Do Bank Credibility Quy-Toan Do 34813 WPS3083 Mine Closure and its Impact on the Michael Haney June 2003 L. Marquez Community: Five Years after Mine Maria Shkaratan 36578 Closure in Romania, Russia, and Ukraine