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Whither IIT in East Asia?

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  • Intra-Industry Trade / Grubel-Lloyd Index / Fragmentation / Electronics / China
  • Communication


Osaka City University Economic Review Vol. 46 (March 2011) Whither liT in East Asia? Masanaga Kumakura Abstract Extensive intra-industry trade (IIT) in East Asia is widely attributed to grow- ing cross-border production sharing and regional production networks. Neverthe- less, East Asia's IIT is heavily concentrated in a subset of electronic goods and much less prevalent in other manufacturing industries. Moreover, the relation- ship between the electronics industry and regional IIT is changing rapidly, due primarily to the emergence of China as a major producer of information technol- ogy equipment. This paper analyzes the dynamics of IIT in East Asia during the past three decades and discusses its future prospects. JEL Classification: Fl4, Fl5, F23 Keywords: Intra-industry trade, Grubel-Lloyd index, Fragmentation, Electron- ics, China L Introduction The rapid growth of intra-regional trade in East Asia during the past three decades has been accompanied by an even more conspicuous expansion of intra-industry trade (liT). The existing literature stresses the role of international production shar- ing, and attendant trade in intermediate goods, as the engine of liT in the region (IMF 2007). A number of observers note that extensive liT in intermediate goods is a unique feature of East Asia that reflects increasing integration of manufacturing activity in the region (Ando 2006; Wakasugi 2007). Nevertheless, East Asia's liT has been and still is heavily concentrated in a rela- tively narrow range of electronic products. As will be discussed in this paper, the rapid spread of liT in East Asia during the 1980s and the 1990s was driven primar- ily by fragmentation trade in information and communications technology (ICT) hardware and semiconductor devices, with relatively limited contributions from other industries. Moreover, the past trend of increasing cross-border production shar- ing in the electronics industry has reversed itself recently, due primarily to ind

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