Francis Ng

Production Sharing in East Asia: Who Does What for Whom, and Why?

The authors analyze empirical information on the nature and magnitude of, and motivation for, international production sharing in East Asia. To do so, they use a largely untapped source of data on inter- and intra-regional trade in parts and components. Some of their findings: East Asian trade in components is considerably greater than often recognized. Regional global exports of parts and components totaled

Major Trade Trends in East Asia: What are Their Implications for Regional Cooperation and Growth?

178 billion in 1996, and imports of those products about

Reducing Agricultural Tariffs Versus Domestic Support: What's More Important for Developing Countries?

12 billion less. Components now constitute one-fifth of East Asian exports of manufactures. Imports of components, measured as a share of all manufactures, are growing considerably faster in East Asia than in OECD Europe or North America. The value of East Asian global imports of components rose more than ninefold over the period 1985-96. Almost three-quarters of all East Asian imports of telecommunications equipment are components for further assembly. East Asian global exports of components grew faster then any other major product group over 1984-96, when their exchange increased 15 percent a year (compared with 11 percent for all products ). Although Japanese exports declined slightly in 1997, shipments from most other East Asian countries increased 9 to 16 percent. Why did production sharing expand? Analyses of traditionally revealed comparative advantage use export statistics to determine whether a country has a comparative advantage in the production of a good. The same indices, calculated using import statistics for components, can show whether a country has a comparative advantage in the assembly of a product. Using statistics on component imports, the authors find that: Japan, Singapore, and Taiwan (China)--which are exiting most assembly operations--increased their specialization in the manufacture of components. Assembly operations, which are labor-intensive, tend to migrate to low-wage East Asian countries. Indonesia, Malaysia, and Thailand have the broadest and most mature assembly capacity for components. But no East Asian country has developed its domestic assembly operations as much as Mexico, which has a comparative advantage in 70 percent of all component groups. Collectively, East Asian countries are strengthening their comparative advantage in the production of components; the results are mixed for assembly operations.

The Evolution of Agricultural Trade Flows

This studys empirical findings have positive implications for further efforts to expand East Asian regional trade and cooperation initiatives. Since the mid-1980s regional intra-trade has grown at a rate roughly double that of world trade, and at a rate far higher than the intra-trade of the North America Free Trade Agreement (NAFTA) member countries or the European Union. Evidence based on intra-industry trade ratios or statistics on international production sharing show economic linkages and the interdependence of East Asian economies have considerably strengthened over the past two decades. On a global scale, East Asia (excluding Japan) now originates 19 percent of world trade, which is approximately the same share as the NAFTA member countries.

Open Economies Work Better! Did Africa's Protectionist Policies Cause its Marginalization in World Trade?

High levels of protection and domestic support for farmers in industrial countries significantly affect many developing countries, both directly and through the price-depressing effect of agricultural support policies. High tariffs--in both rich and poor countries--and domestic support may also lower the world price of agricultural products, benefiting net importers. The authors assess the impact of reducing tariffs and domestic support in a sample of 119 countries. Least developed countries (LDCs) are disproportionately affected by agricultural support policies. More than 18 percent of LDC exports are subject to domestic support in at least one World Trade Organization (WTO) member, as compared to only 9 percent of their imports. For other developing countries the figures are around 4 percent for both their exports and imports. So, the prevailing pattern of trade suggests the world price-reducing effect of agricultural domestic support policies may induce a welfare loss in LDCs. The authors develop a simple partial equilibrium model of global trade in commodities that benefit from domestic support in at least one WTO member. The simulation results suggest there will be large differences between LDCs and other developing economies in terms of the impact of a 50 percent cut in tariffs as compared to a 50 percent cut in domestic support. Developing countries as a group would suffer a welfare loss from a cut in support, while LDCs would experience a small gain. For both groups of countries, tariff reductions by WTO members--including own liberalization--will have a positive effect on welfare. The results show both the importance of focusing on tariffs as well as subsities, and the need for complementary actions to allow a domestic supply response to occur in developing countries if world prices rise

Who are the Net Food Importing Countries

Earlier research showed that during the 1980s and 1990s most of the global agricultural trade expansion took place among the industrial countries and among countries within trade blocs. These were also periods of declining agricultural prices. These prices increased during the 2000s, there were continuous trade reforms, and many developing countries started to support their agricultural sectors. This paper analyzes trade flows during the past two decades, and tries to measure whether all these developments have changed the trade balances and the share of different groups within the global trade flows. In addition, it looks at the trade balances on food to see the impact of these changes on net food importing countries. In conclusion, unlike the case with manufacturing, developing countries have not been able to increase their export shares in agriculture as significantly. They have maintained their trade shares by primarily expanding exports to other developing countries.

Turkey's Evolving Trade Integration into Pan-European Markets

In the mid-1950s sub-Saharan Africa accounted for 3.1 percent of global exports. By 1990 this share had fallen to 1.2 percent. The authors of this report find that Africas extensive loss of competitiveness played a key role in its decline in world trade. If Africa had merely retained its 1962-64 OECD (Organization for Economic Cooperation and Development) market shares, its exports now would be 75 percent higher. Africas problem was two-pronged: (1) it experienced declining market shares for its major export products, which, in turn, were of declining relative importance in world trade; and (2) it was unable to diversify its export base. Empirical evidence developed by the authors shows that external protection has not played a major role in this decline; in fact, OECD trade preferences gave Africa an advantage over many exporters. Trade restrictions and domestic policy interventions often create a bias against tradables, especially exports, that prevents the achievement of otherwise attainable growth rates. Import barriers in Africa are far higher than in developing countries with faster export growth, and appear to work against potential export products. If the region is to reverse its unfavorable export trends, it must adopt trade and structural adjustment policies that help make it competitive and help African exporters capitalize on foreign trade opportunities.

Distortionary Effects of State Trading in Agriculture: Issues for the Next Round of Multilateral Trade Negotiations

The purpose of this paper is to update the information on net food importing countries, using different definitions of food, separating countries by their level of income, whether they are in conflict and whether they are significant oil exporters. The study also estimates the changes in net food importing status of these countries over the last two and a half decades, and, most important, the study measures the relative importance of these net food imports in the import basket of the countries. Our results show that while many low-income countries are net food importers, the importance and potential impact of the net food importing status has been highly exaggerated. Many low-income countries that have larger food deficits are either oil exporters or countries in conflict. Food deficits of most low-income countries are not that significant as a percentage of their imports. Our results also show that only 6 low-income countries have food deficits that are more than 10 percent of their imports. Last two decades have seen a significant improvement in the food trade balances of low-income developing countries. SSA low-income countries are an exception to this trend. On the other hand, there are a group of countries which are experiencing civil conflicts which are large importers of food, and these countries can not meet their basic needs. They also need special assistance in the distribution of food within their boundaries. Therefore, one should modify the WTO Ministerial Declaration, and focus on these conflict countries rather than the broad net food importers.

China and Central and Eastern European Countries: Regional Networks, Global Supply Chain, or International Competitors?

Summary: This is an empirical paper seeking to identify the mode of Turkey’s integration into global markets in general and pan-European markets in particular as revealed in its trade performance. The analysis provides empirical support to the following observations. First, thanks to steady expansion of trade in goods and services since the mid-1980s, Turkey has become highly integrated into the world economy. Second, Turkey’s export performance in 1996-2004 in EU markets bears strong similarities to the aggregate performance of new EU members from Central Europe (EU-8). Similarities include dynamics, similar factors responsible for the increased presence in EU markets, factor content and the role of ‘producer-driven’ network trade. Turkey, together with Hungary, Czech Republic, Slovak Republic, Slovenia, Estonia and Poland, stands as one of the top performers in ‘producer-driven’ network trade indicating participation in a new global division of labor based on production fragmentation. The available evidence suggests an economic success story in the making. Export expansion owes a lot to improved policy environment and domestic liberalization. It is rather telling that the recent expansion has coincided with the implementation of most of the provisions of EU-Turkey CU Agreement, the completion of the removal of tariffs on trade in industrial products among the pan-European parties to the Pan European Agreement Cumulation of the Rules of Origin and improved macroeconomic stability after the 2001 crisis.

Integration of markets vs. integration by agreements

The Uruguay Round agreements on agriculture were intended to move member countries toward a fair and market-oriented agricultural trading system. But in practice, state trading enterprises with monopoly power or exclusive rights in agricultural trade in major products still prevail in many countries. And significant price distortions still exist in trade in products subject to state trading. The Uruguay Round agreements on agriculture were intended to move member countries toward a fair and market-oriented agricultural trading system. By progressively reducing domestic government support and export subsidies, converting nontariff barriers to tariffs, and reducing barriers to market access, members were committed to reducing distortions in world agricultural trade and in preventing new distortions from arising. But state trading enterprises with monopoly power or exclusive rights in agricultural trade in major products are still prevalent in both industrial and developing countries. In many countries, the operations of these state trading agencies tend in practice to nullify the intended objectives of the concessions on market access reached in the Uruguay Round. And there are still significant price distortions in trade in products subject to state trading. This paper - a product of the Development Research Group - is part of a larger effort in the group to evaluate the progress of trade liberalization and their effects on developing countries.