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

This study's primary purpose is to analyze empirical information on the nature, magnitude and motivation for international production sharing in East Asia. To accomplish this objective it utilizes a, heretofore, largely untapped data source on inter-and intra-regional trade in parts and components. The following are some of the main points emerging from these data; • East Asian trade in components is considerably greater than often recognized. Regional global exports of parts and components totaled $178 billion in 1996, while Asian imports of these products were about $12 billion lower. Components now constitute one-fifth of East Asian exports of manufactures • Asian imports of components, measured as a share of all manufactures, is growing considerably faster than in OECD Europe or North America. The value of Asian global imports of components rose more than nine-fold over 1985-1996. Almost three-quarters of all Asian imports of telecommunications equipment now consist of components for further assembly • Asian global exports of components grew faster than any other major product group over 1984-1996 when their exchange increased at an annual rate of 15 percent (as opposed to 11 percent for all products). Intra-regional trade outpaced the rapid expansion in global components exports as the share of this exchange in total trade almost doubled from 25 to 46 percent. • Available statistics (through 1997) indicate the recent Asian economic slowdown has not had a major detrimental impact on regional trade in parts and components. Although Japanese exports declined slightly in 1997, shipments from most other East Asian countries increased by between 9 to 16 percent. Since Asian trade in components has been such a dynamic leading sector in regional imports and exports there is an obvious interest in monitoring future changes in this exchange. To help analyze the motivation for the expansion of production sharing this study employs an empirical approach that can indicate whether a country has a comparative advantage in either the production or assembly of components. Traditionally revealed comparative advantage (RCA) analyses use export statistics to determine whether a country is at a comparative advantage in the production of a good. However, if these indices are calculated using import statistics for components they can show whether a country has a comparative advantage in the assembly of a product. The application of this empirical approach to import statistics for components reveals several important points: • Assembly operations are tending to migrated to the relatively …