Are Exports of China, Japan and Korea Diverted in the Major Regional Trading Blocs?

In recent years China, Japan and Korea, the three major economies in East Asia, have been gearing up their efforts to sign free trade agreements with many different regions and countries. One of the main reasons for this is that they fear that with a regionalism movement rising in every corner of th...

Full description

Saved in:
Bibliographic Details
Published inWorld economy Vol. 31; no. 7; pp. 841 - 860
Main Authors Lee, Hyun-Hoon, Koo, Chung Mo, Park, Euijeong
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.07.2008
Subjects
China
East Asia
Economic bloc
Economic models
Exports
Exports and Imports
Free trade
International Economic Organizations
International economic relations
International trade
Japan
Peoples Republic of China
Protectionism
Regional trade
Regionalism
South Korea
Studies
Trade agreements
Trade diversion
Trade flows
South Korea
China
Japan
Online AccessGet full text

Cover

More Information
Summary:In recent years China, Japan and Korea, the three major economies in East Asia, have been gearing up their efforts to sign free trade agreements with many different regions and countries. One of the main reasons for this is that they fear that with a regionalism movement rising in every corner of the world, their exports are discriminated against and diverted in the trading blocs of other nations. The main purpose of this paper is to investigate whether this is a real fear. We utilise the gravity equation augmented with dummy variables for regional trading blocs in three different specifications. One is the static, standard gravity model to examine the effect of regional blocs on the ‘level’ of exports from these three countries in 2003; the second is the fixed effects and random effects panel models for the period 1993–2003; and the third is the dynamic, partial‐adjustment model to examine the effect of blocs on the ‘changes’ in exports between 1993 and 2003. The results show that trade diversion is observed only for China's exports in EU, EFTA and EAEC, but no diversion effect is observed for Japan's and Korea's exports in any of the major trading blocs. On the other hand, trade creation is observed for exports from China in ASEAN, for exports from Japan in ASEAN, CACM, CARICOM, EAEC, EU and NAFTA, and for exports from Korea in ASEAN, CACM, EAEC and MERCOSUR. Thus, Japan's and Korea's fear of discrimination and trade diversion is ungrounded, while China's fear is grounded only to a limited extent.
Bibliography:istex:4B499462FE2FABC9B290165731D052D932FABF96
ark:/67375/WNG-RH1077CH-L
ArticleID:TWEC1105
Earlier versions of this paper were presented at the 5th Asia‐Pacific Economic Forum (APEF), Kangwon National University, Chuncheon, Korea, July 2006, the Asia‐Pacific Economic Association (APEA) 2006 Conference, University of Washington, Seattle, USA, July 2006, and the Asian Economic Panel (AEP) Annual Meeting, Brookings Institute, Washington DC, USA, April 2007. We thank Alan Deardorff, Fukunari Kimura, Charles Harvie, Tran Van Hoa, Robert Scollay, Wing Thye Woo, Kaliappa Kalirajan, Prema‐Chandra Athukorala, and the conference participants for their valuable comments and suggestions. The comments and helpful criticism from the referees of this journal are also gratefully acknowledged. All errors are our own.
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ObjectType-Article-1
ObjectType-Feature-2
ISSN:0378-5920
1467-9701
DOI:10.1111/j.1467-9701.2008.01105.x