Mitsuyo Ando

Fragmentation and Agglomeration Matter: Japanese Multinationals in Latin America and East Asia

Abstract This paper analyzes micro data of Japanese multinational enterprises (MNEs) to investigate differences between Latin America and East Asia from various viewpoints of their corporate activities. One of the crucial factors to make a sharp contrast is the development of international production/distribution networks utilizing the benefit of fragmentation and agglomeration. Japanese firms have played an important role in developing international production/distribution networks in East Asia while they have not yet either constructed a critical mass of industrial clusters or formulated efficient vertical chains of production in Latin America, where proper international commercial policies are the key for success.

The Economic Analysis of International Production/Distribution Networks in East Asia and Latin America: The Implication of Regional Trade Arrangements

This paper applies an economic approach to empirically investigate differences in inward foreign direct investment (FDI) patterns between East Asia and Latin America and discusses the implication of regional trade arrangements. International production/distribution networks in East Asia effectively utilize the new economic logic of fragmentation, agglomeration, and optimal internalization and seem to greatly contribute to economic development. The paper examines statistical data for international trade as well as the activities of Japanese and U.S. multinational enterprises (MNEs) and argues that international production/distribution networks, particularly in machinery industries, are extensively developed in East Asia while remaining immature in Latin America.The impact of regional trade arrangements is substantially different depending on whether international production/distribution networks have already been developed or not. Our findings suggest that the impact of FTAA on FDI in Latin America by East Asian MNEs could be either positive or negative, depending on the content of FTAA and accompanying policies. If differentials between intra-regional tariffs and MFN-based tariffs are kept large, import-substituting FDI from East Asia may stagnate or even decrease. With a proper policy package to nurture international production/distribution networks, on the other hand, FDI from East Asia could be accelerated and contributed to deeper integration of Latin America.

The Impacts of East Asia FTA: A CGE Model Simulation Study

In light of the on-going discussions of the possibility of an East Asia FTA, this paper attempts to estimate the impacts of an East Asia FTA using a Computable General Equilibrium (CGE) model. Although most previous simulation studies on the impacts of FTAs focus only on the liberalization of trade in goods, our paper attempts to take into account other aspects of FTAs such as capital accumulation and trade and investment facilitation measures. Our simulation analysis finds that an ASEAN+3 FTA is the most desirable FTA of eight hypothetical FTAs in East Asia to all member countries at the macro level. At the same time, our results demonstrate the significant impacts of capital accumulation and various trade and investment facilitation and coordination programs. At the sectoral level, many sectors gain in terms of output and trade. Although some sectors in certain countries indeed lose in terms of output as a result of an ASEAN+3, most of them experience increases in both exports and imports, even if output declines. These results indicate that the larger the coverage in terms of membership as well as contents such as trade and FDI liberalization and facilitation, and economic cooperation is, the greater benefits can be accrued to the members.

Globalization and Domestic Operations: Applying the JC/JD Method to Japanese Manufacturing Firms*

Does outward foreign direct investment accelerate de-industrialization at home or generate domestic jobs and operations? This paper applies the job creation (JC)/destruction (JD) method to micro data of Japanese manufacturing firms and provides a birds eye view of the dynamism of globalizing firms in terms of domestic employment, domestic establishments, domestic affiliates, exports, and imports. It examines gross and net changes in domestic operations by multinational enterprises (MNEs) that expand operations abroad (expanding MNEs), compared with non-expanding MNEs and local firms, for the periods of 1998–2002, 2002–06, 2006–08, and 2008–10. It also conducts the Kolmogorov-Smirnov test to investigate whether the changes in domestic operations and trade by expanding MNEs are larger than those by other firm types. Major findings are the following: (1) gross changes in domestic employment and domestic operations are much larger than net changes, showing restructuring dynamism and firm heterogeneity; (2) de-industrialization or the shrinkage of the manufacturing sector is not relevant except for the period 1998–2002, though a slight declining trend in manufacturing activities is observed in recent years; (3) expanding multinational small- and medium-sized enterprises (SMEs) tends to enlarge domestic employment and domestic operations, compared with other types of SMEs; (4) expanding MNEs intensify headquarters activities; and (5) expanding multinational SMEs are likely to expand exports and imports more than other types of SMEs.

Evolution of Machinery Production Networks: Linkage of North America with East Asia

This paper investigates new developments in the pattern of machinery trade, with a focus on the extent and depth of production networks in North America. We pay particular attention to North Americas trade links with East Asia, which have intensified in the last two decades. Investigation of changes in total trade value and the growth of trade on the extensive margin both demonstrates the expanding fragmentation of production in North America as well as the strengthening of connections with Mexico. Our quantitative analysis, which is based on gravity estimation of trade volume and extensive margin trade responses, also provides evidence that U.S. imports of machinery from East Asia are especially strong, and further, that Mexicos role has changed, as it now provides a bridge for trade between East Asia and the United States. These new developments in the pattern of machinery trade reflect reductions in services link costs, the further evolution of production sharing in the U.S.–Mexico nexus, and the strengthening competitiveness of production networks based in East Asia.

Japanese manufacturing FDI and international production and distribution networks in East Asia

Introduction Shujiro Urata, Chia Siow Yue, and Fukunari Kimura 1. FDI Flows, their Determinants, and Economic Impacts in East Asia Shujiro Urata 2. Japanese Manufacturing FDI and International Production and Distribution Networks in East Asia Fukunari Kimura and Mitsuyo Ando 3. U.S. Firms and East Asian Development in the 1990s Robert E. Lipsey 4. Hong Kong as a Source of FDI: Experience and Significance Edward K. Y. Chen 5. The Role of Inward FDI: A Case Study of Foreign Firms in the Republic of Korea Taeho Bark and Hwy-Chang Moon 6. Inward FDI in Singapore: Policy Framework and Economic Impact Chia Siow Yue 7. Firm-Level Productivity and FDI in Taiwan Bee-Yan Aw 8. Foreign Investment and Development: Indonesias Experience Mari Pangestu and Titik Anas 9. FDI Inflows and Economic Development: The Postcrisis Experience of Malaysia Sieh Lee Mei Ling 10. FDI and Economic Development: The Case of the Philippines Myrna S. Austria 11. The Experience of FDI Recipients: The Case of Thailand Peter Brimble 12. FDI and Economic Development: The Case of Vietnam Tran Van Tho 13. The Experience of FDI Recipients: The Case of China Yu Yongding 14. Liberalization, FDI Flows, and Economic Development: The Indian Experience in the 1990s Nagesh Kumar

EXPANDING FRAGMENTATION OF PRODUCTION IN EAST ASIA AND DOMESTIC OPERATIONS: FURTHER EVIDENCE FROM JAPANESE MANUFACTURING FIRMS

This paper investigates the pattern of globalizing corporate activities of Japanese manufacturing firms and their domestic operations and international trade. More specifically, we compare changes in domestic operations and international trade of firms expanding operations in East Asia with those of firms not expanding operations in two contrastive periods, 1998–2002 and 2002–2006. In addition, we conduct analyses incorporating the information on the globalizing behavior in the former period for the latter period and analyses focusing only on non-MNEs or MNEs in line with the literature. Our study demonstrates that Japanese manufacturing firms with expanding operations in East Asia are more likely to increase domestic employment and the number of domestic affiliates and establishments as well as to intensify export/import activities with the region, particularly in the latter period, by effectively utilizing the mechanics of production process-wise division of labor in East Asia.

Economic obstacles to a Northeast Asian FTA

This book is an objective analysis combining both ‘insider’ and ‘outsider’ (most notably US) perspectives of Northeast Asian regionalism. It also usefully applies regional integration theories to the realities of the Northeast Asian situation and presents policy options for regional integration.

International Production/Distribution Networks in East Asia

Covering a wide range of aspects surrounding economic integration in East Asia, this well-researched text will appeal to undergraduate and postgraduate students of development studies, regional economics and Asian studies. It will be of particular value to those on courses concerned with economic and regional integration.

Impact of Recent Crises and Disasters on Regional Production Networks and Trade in Japan

This chapter sheds light on Japanese production networks and markets in machinery industries during crisis, focusing on the effects of the economic crisis and 3.11 disaster from the viewpoint of Japan’s exports. The chapter first decomposes changes in machinery exports into extensive and intensive margins and then examines the probability of trade declines and recoveries in order to capture the natures of international production/distribution networks under the crises (the 2008–2009 Global Financial Crisis and the 2011 Great East Japan Earthquake). It also discusses domestic activities as well as the impacts of the 2011 Thailand floods. Moreover, considering that the 2011 earthquake was not only a natural disaster but also a technological disaster that seriously affected Japan’s agriculture and food exports, I also investigate its impact on exports. Whether demand shock or supply shock, disasters and crises revealed the stability and robustness of production networks in machinery sectors. However, their negative impacts are severe and transmitted through production networks at the beginning. I conclude with various policy implications from research on these crises.