Trends and Evolution of Trade Patterns in East Asia

Mona Haddad

Regional Trade Coordinator

East Asia Region, World Bank

Emerging East Asian economies have seen share of global trade more than triple

Emerging East Asia : Share of World Trade

0.0

5.0

10.0

15.0

20.0

Emerging East Asia Intra-Regional Trade

Trade with each other growing even faster

East Asian Export Markets (% share in total exports of 8 economies *)

0

10

20

30

40To USATo JapanTo China+HKTo East Asian 8

* Indonesia, Korea, Malaysia, Philippines, Singapore, Taiw an (China), Thailand, Vietnam. 2003 is Jan-Sept.

Changing regional patterns of trade

(share of export to trading partner in total export) Trading partner

East Asia China Japan 1990-94 2000-04 1990-94 2000-04 1990-94 2000-04 East Asia 44.1 49.0 6.4 11.1 8.6 8.2 Indonesia 62.0 56.9 3.6 5.4 32.9 21.0 Malaysia 54.7 54.2 2.5 5.3 13.6 11.5 Philippines 36.1 53.7 1.2 4.2 17.4 16.4 Singapore 48.2 56.4 2.0 6.1 7.8 7.0 Thailand 41.7 48.3 1.5 5.3 17.3 14.7 Vietnam 49.0 9.6 15.7 China 60.5 45.3 15.8 14.3 Hong Kong 47.0 55.5 29.9 39.3 5.4 5.4 Taiwan 42.7 55.2 0.0 10.3 11.3 9.2 Korea 40.8 46.6 4.2 15.6 15.7 9.8 Japan 34.6 43.1 3.7 10.0

Source: DOTS, IMF

Commodity composition of trade in East Asia(percentage share in total trade)

EA China Japan 1990-94 2000-04 1990-94 2000-04 1990-94 2000-04

Export composition Agriculture 7 4.1 13.7 5.2 1.1 1 Mining, fuels 5.4 5.1 6.4 4.1 1.3 1.7 Total manufacture 86.1 88.7 78.5 90.1 95.8 93 Machinery 46.6 53.6 17.4 40.6 71.6 67.1 Textiles, garment 12.7 9.1 29.1 18.3 2.1 1.5

Import composition Agriculture 12.9 8.9 9.3 7.7 23.3 15.6 Mining, fuels 15.4 16.8 7.7 13.7 27.9 25.5 Total manufacture 68.8 72.7 82.3 77.9 45.7 56.7 Machinery 34.3 41.8 42 45 16.9 27.6 Textiles, garment 7.3 5.4 9.4 4.4 6.6 6.5

The importance of machinery (share of parts and components in total export)

0 20 40 60 80

J apan China

Hong Kong Korea

Taiwan AFTA

Indonesia Malaysia

Philippines Singapore

Thailand

South Asia NAFTA

USA Mexico

MERCOSUR EU

Eastern Europe World

percent

Intra-regional trade is concentrated:Production networks are major determinant…

and China is increasingly a central player

Share of 2001 intraregional trade accounted for by 30 largest 4-digit

SITC exports

Telecom Eqpm.

5%

Electrical Mach.21%Textiles &

Cloth.6%

Othe Top 3013%

Others49%

Office Mach.

6%

Share of 5-digit SITC parts and components in top 30 exports

Others72%

Parts & components

in top 3028%

Share of components in China's imports relative to share of components in world trade

0.5

1

1.5

2

2.5

Office Mach. TelecomEquipm.

ElectricalMach.

RC

A

1996 2001

Share of components in China's exports relative to share of components in world trade

0

0.5

1

1.5

2

Office Mach. TelecomEquipm.

ElectricalMach.

RC

A1996 2001

Export similarity index

0.0 0.2 0.4 0.6 0.8 1.0

Indonesia

Malaysia

Philippines

Singapore

Thailand

China

Hong Kong

Taiwan

Korea

J apan

with EA region: 2000-04

with EA region: 1990-94

average correlation coeffi cient of export composition

FDI plays a key role in boosting exports

0

200

400

600

800

1000

1200

1400

1600

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

FDI inflow stock

exports

GDP

Exports, FDI inflows, and GDP in Developing East Asia1985=100

0

5

10

15

20

25

30

35

40

45

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

exports

FDI inflow stock

Exports and FDI as a share of GDP percent

China’s processing exports by foreign enterprises

(share in total China exports)

30

35

40

45

50

55

60

1988 1990 1992 1994 1996 1998 2000 2002

percent

New developments and challenges

• Growing role of China in the region

• Increasing dependence on production sharing networks

• Rise of regional and bilateral trade agreements in the region

• Low-income countries trying to catch up

Regional trading arrangements Elements for success:

• Greatest gains are dynamic– Deeper integration agenda: Agriculture and sensitive

sectors; Services liberalization; Trade facilitation and logistics

• Bringing along low-income countries• Keeping RTAs as stepping stone to global

integration• Avoiding spaghetti bowl effect

RTAs in East Asia

Brunei

Cambodia

Thailand

Malaysia

Philippines

Myanmar

Laos

Indonesia

Singapore

Vietnam

ASEAN

AFTA

New Zealand

Japan

Australia

EFTA

US

Chile

Korea

China

Hong Kong

Macau

Taiwan

Panama

Mexico

India

FTAs in action as of April 2006

Brunei

Cambodia

Thailand

Malaysia

Philippines

Myanmar

Laos

Vietnam

Indonesia

Singapore

ASEAN

AFTA

China

Australia

New Zealand

Chile

Japan

Korea

Canada

Mexico

IndiaSri Lanka

Qatar

Panama

Peru

Kuwait

US

EFTAHong Kong

FTAs under negotiation as of April 2006

Thank you