Analysis of Intra- and Inter-regional Trade in East Asia:Comparative Advantage Structures and Dynamic Interdependency in Trade Flows

Abstract

This paper analyses the trade relationships within East Asia and between East Asia and the US and Japan, with particular emphasis on the structural changes that occurred during the 1990s. The main purpose of the analysis is to gain a better understanding of the potential global impact of these changes. The analysis of revealed comparative advantage patterns underlines the strong trading position of East Asia in the ICT sector, with the simultaneous gain in "comparative advantage" on the export and on the import side during the 1990s suggesting an increasing role of East Asian countries as a processing and production center. In order to study the consequences of the increasing internationalization of the production process in East Asia a VAR of inter- and intra-regional trade flows is estimated. The main finding is that there are quantitatively significant indirect international transmission channels of country-specific shocks along the international production chain, with substantial differences in the exposure to such shocks between Japan and the US.

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