U . S . , Japanese and Korean Foreign Direct Investment and the Various Modes of East Asian Trade

In this paper we document the growing importance of intra-East Asian trade of parts and components. Our empirical analysis shows that FDI does play an important and independent or exogenous role in facilitating the trade of parts and components in East Asia. This is true for aggregate FDI as well as FDI from individual countries, including investment from the United States, Japan and South Korea. Using Antras (2005) basic taxonomy, East Asia remains at Stage II of the product cycle of offshoring. Our empirical studies also show that FDI from Japan has a particularly strong influence on both trade in parts and components as well as trade in capital goods.