Recent trade dynamics in Asia: Examples from specific industries

Several countries in East Asia have been upgrading production patterns and moving up the value chain, this paper looks at how this helps and offers new opportunities to less advanced countries to integrate in world trade. The paper uses a combination of techniques, from an analysis of disaggregated trade flows by country and sectors, to the calculation of trade intensity indices by country and sector, and value-added trade by sector. It finds combined evidence of forward and backward trade increasing between several neighbouring Asian economies and China, in the most labour-intensive industries in particular. Econometric analysis shows that relative unit labour costs are an explanatory factor of increased trade links. In cases, the intensification of trade links on the export side can relate to a strongly expanding local market (for example India for electronic products such as smartphones), but mostly the intensification of trade links takes place both on the import and export sides with markets which are much smaller than China (Vietnam, Bangladesh, etc.), and which experienced increased outward-processing activities as a result of China's production upgrade.

No: ERSD-2018-04

Authors: Marc Auboin and Floriana Borino

Manuscript date: February 2018

Key Words:

Investment; trade policy; business cycles

JEL classification numbers:

E22;F13;F44

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Disclaimer 

This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of its author. They are not intended to represent the positions or opinions of the WTO or its members and are without prejudice to members' rights and obligations under the WTO. Any errors are attributable to the author.

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