A Shift from Market-Driven to Institution-Driven Regionalization in East Asia

The author examines the changing patterns of foreign trade in East Asia from several perspectives, including the geographical distribution of trading partners, the commodity composition of trade, patterns of comparative advantage, and the extent of both intra-industry trade and trade in parts. He discusses the factors behind the changing pattern of foreign trade with emphasis on the role of multinational corporations, and discusses trade policies in East Asia with a focus on the recent emergence of free trade agreements, which have had substantial impacts on the patterns of foreign trade and foreign direct investment (FDI). The author concludes that intra-regional trade expanded faster than extra-regional trade, resulting in an increase in intra-regional integration; the composition of trade shifted from non-manufacturing toward manufacturing, especially of machinery; intra-industry trade expanded faster than inter-industry trade; and trade in parts accounts for a large part of total trade (i.e. trade in parts and finished products) and the share is increasing. Finally all these observed changes in trade patterns owe much to the active involvement of multinational corporations in FDI and foreign trade within East Asia.