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

Abstract

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. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd.

Intra-Continental and Intercontinental Service Trade in the Travel and Tourism Industry

“…One kind of international trade association WTO (Dummy) consisting of two or more economies such as the EU, NAFTA, ASEAN and bilateral free trade agreements (Frankel and Wei, 1998;Fayed and Fletcher, 2002;Carrère, 2006;Kimura and Lee, 2006;Baier et al, 2007;Coe et al, 2007;Lee et al, 2008;Lennon, 2008;Walsh, 2008) We further modify Deardorff's (1998) specified gravity model as Trade ijt = (pcGDP it pcGDP jt ) α E θ ij with a static panel data framework. Trade ijt denotes the bilateral trade flows between country i and country j at time t. E ij represents the barriers to trade and other exogenous variables as reported in Table 1.…”

“…The currency appreciation of the destination country, however, depresses international tourist arrivals. In the context of the gravity approaches to international trade (Tinbergen, 1962;Anderson, 1979;Bergstrand, 1985Bergstrand, , 1989Helpman and Krugman, 1985;Deardroff, 1998;Eaton and Kortum, 2002;Harrigan, 2002;Serlenga and Shin, 2004;Brun et al, 2005;Cheng and Wall, 2005;Antonucci and Manzocchi, 2006;Batra, 2006;Coe et al, 2007;Lejour and de Paiva Verheijden, 2007; Melitz, 2007;Khadaroo and Seetanah, 2008;Jan and Jarko, 2009, among others), bilateral trade flows depend, both theoretically and empirically, not only on economic mass (or country size), population, geographical distance and distribution infrastructures, but also on a common language, a common land border (adjacency) and regional trade agreements (RTAs) (Frankel and Wei, 1998;Carrère, 2006;Baier et al, 2007;Lee et al, 2008). The recent empirical literature (François, 2001;Park, 2002;Grünfeld and Moxnes, 2003;Naudé and Saayman, 2005;Kimura and Lee, 2006;Lejour and de Paiva Verheijden, 2007;Lennon, 2008;Walsh, 2008;Head et al, 2009) has further studied the determinants of bilateral trade in services within a gravity framework.…”

“…Furthermore, the relationships between ex-colonies and their colonizers and among countries with the same colonizer promote bilateral trade flows due to high cultural or historic similarities (Batra, 2006;Melitz, 2007;Wong, 2007). RTAs impact bilateral trade flows positively by reducing traffic and non-traffic trade barriers (Eichengreen and Irwin, 1998;Frankel and Wei, 1998;Fayed and Fletcher, 2002;Frankel and Rose, 2002;Batra, 2006;Carrère, 2006;Baier et al, 2007;Lee et al, 2008), whereas Grünfeld and Moxnes (2003) derive opposite results. Hence, the effect of RTAs may be ambiguous.…”

What do we know about Korean Outward Foreign Direct Investment? Applying Spatial Models

“…It signed its first free trade agreement (FTA) with Chile in October 2002. Later, it signed a FTA with Singapore in August 2005 and with ASEAN in December 2005 (Lee, Koo, & Park, 2008). It further signed a FTA with the European Union (EU) in July 2011, the USA in March 2012, and China in December 2015.…”

“…It further signed a FTA with the European Union (EU) in July 2011, the USA in March 2012, and China in December 2015. Korea intends to make use of the proliferation of regional trading blocs to increase its exports through OFDI (Lee et al, 2008). To this end, our paper takes the worldwide economic integration trend into account when Korea MNEs decide their OFDI.…”