Hostname: page-component-77c89778f8-7drxs Total loading time: 0 Render date: 2024-07-20T02:24:27.976Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  20 January 2017

Fukunari Kimura  and
Mitsuyo Ando
Fukunari Kimura
Affiliation:
Keio University
Mitsuyo Ando
Affiliation:
Keio University
Get access Rights & Permissions [Opens in a new window]

Abstract

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.

Type
Research Article
Information
Business and Politics , Volume 7 , Issue 1 , April 2005 , pp. 1 - 36
Copyright
Copyright © V.K. Aggarwal 2005 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ando, Mitsuyo and Kimura, Fukunari. 2004. “The Formation of International Production/Distribution Networks in East Asia.” Forthcoming in International Trade (NBER-East Asia Seminar on Economics, Volume 14), edited by Ito, Takatoshi and Rose, Andrew. Chicago: The University of Chicago Press. Also, appeared in NBER Working Paper 10167.Google Scholar
Arndt, Sven. W., & Kierzkowski, Henryk. 2001. Fragmentation: New Production Patterns in the World Economy. Oxford: Oxford University Press.CrossRefGoogle Scholar
Baldwin, Robert E. and Kimura, Fukunari. 1998. “Measuring U.S. International Goods and Services Transactions.” In Geography and Ownership as Bases for Economic Accounting, edited by Baldwin, Robert. E., Lipsey, Robert. E., and Richardson, David. J. Chicago: The University of Chicago Press.CrossRefGoogle Scholar
Business Council on Facilitation of Trade and Investment, Japan (BCFTI). 2002. “Barriers to Trade and Investment in the World.” October. In Japanese (available at http://www.jmcti.org).Google Scholar
Casanova, Lourdes. 2003. “Multinational Strategies in Latin America: Comparing East Asian, European and North American Multinationals.” Presented at the international conference organized by the Integration and Regional Programs Department, Inter-American Development Bank (IADB) Research Project: “FTAA and Transpacific Business Linkages: Implications for Japan and East Asia.” held in Tokyo, Japan on December 10, 2003.Google Scholar
Cheng, Leonard K. and Kierzkowski, Henryk. 2001. Global Production and Trade in East Asia. Boston: Kluwer Academic Publishers.CrossRefGoogle Scholar
Deardorff, Alan. V., 2001a. “Fragmentation in Simple Trade Models.” North American Journal of Economics and Finance, 12: 121–137.CrossRefGoogle Scholar
Deardorff, Alan V. 2001b. “Fragmentation across Cones.” In Fragmentation: New Production Patterns in the World Economy, edited by Arndt, Sven W. and Kierzkowski, Henryk. Oxford: Oxford University Press.Google Scholar
Ekholm, Karolina; Forslid, Rikard; Markusen, James. 2003. “Export-Platform Foreign Direct Investment”. Presented at Hitotsubashi Conference on International Trade and FDI, “WTO and Globalization: Theoretical and Empirical Investigations on International Trade and FDI”, held in Tokyo, Japan on December 12–14, 2003 (The former version of this paper is in NBER Working Paper No. 9517).CrossRefGoogle Scholar
Fujita, Masahisa; Krugman, Paul; and Venables, Anthony J. 1999. The Spatial Economy: Cities, Regions, and International Trade. Cambridge: The MIT Press.CrossRefGoogle Scholar
Jones, Ronald. W. and Kierzkowski, Henryk. 1990. “The Role of Services in Production and International Trade: A Theoretical Framework.” In The Political Economy of International Trade: Essays in Honor of Robert E. Baldwin, edited by Jones, Ronald W. and Krueger, Anne O. Oxford, Basil Blackwell.Google Scholar
Kaburagi, Shinji; Izuishi, Shirou; Toyoda, Takeshi; and Suzuki, Mayumi. 2002. “2001 nendo Kaigai Chokusetsu Toushi Ankeeto Chousa Kekka Houkoku (dai 13 kai) (The Report on the 13th Questionnaire Survey of Foreign Direct Investment in the 2001 F/Y).” Journal of Research Institute for Development and Finance, 9 (January): 35–98. In Japanese.Google Scholar
Kimura, Fukunari. 1998. “Japanese Multinationals and Regional Integration in Asia.” In Asia & Europe: Beyond Competing Regionalism, edited by Fukasaku, Kiichiro, Kimura, Fukunari, and Urata, Shujiro. Brington: Sussex Academic Press.Google Scholar
Kimura, Fukunari and Ando, Mitsuyo. 2003. “Fragmentation and Agglomeration Matter: Japanese Multinationals in Latin America and East Asia.” North American Journal of Economics and Finance, Vol. 14, Issue 3: 287–317.CrossRefGoogle Scholar
Kimura, Fukunari and Ando, Mitsuyo. 2004. “Two-dimensional Fragmentation in East Asia: Conceptual Framework and Empirics”. Forthcoming in the special issue, ‘Outsourcing and Fragmentation: Blessing or Threat?’, of International Review of Economics and Finance.CrossRefGoogle Scholar
Kimura, Fukunari and Baldwin, Robert E. 1998. “Application of a Nationality-Adjusted Net Sales and Value Added Framework: The Case of Japan.” In Geography and Ownership as Bases for Economic Accounting, edited by Baldwin, Robert. E., Lipsey, Robert. E., and Richardson, David. J. Chicago: The University of Chicago Press.Google Scholar
Krugman, Paul. 1991. “Increasing Returns and Economic Geography.” Journal of Political Economy 99: 183–199.CrossRefGoogle Scholar
Krugman, Paul. 1995. Development, Geography, and Economic Theory. Cambridge: The MIT Press.CrossRefGoogle Scholar
Lipsey, Robert. E. 2003. “U.S. Firms and East Asian Development Since 1990.” Presented at the second workshop on “Foreign Direct Investment and Economic Development: Lessons from East Asian Experience” sponsored by World Bank Institute (WBI) under the Brain Trust Program (funded by the Government of Japan) held in Bali, Indonesia on November 30 and December 1, 2003.Google Scholar
Markusen, James. 2003. “Regional Integration and Third-Country Inward Investment.” Presented at the international conference organized by the Integration and Regional Programs Department, Inter-American Development Bank (IADB) Research Project: “FTAA and Transpacific Business Linkages: Implications for Japan and East Asia.” held in Tokyo, Japan on December 10, 2003.Google Scholar
Marugami, Takashi; Toyoda, Takeshi; Kasuga, Tsuyoshi; and Suzuki, Mayumi. 2003. “2002 nendo Kaigai Chokusetsu Toshi Ankeeto Chosa Kekka Hokoku (dai 14 kai) (The Report on the 14th Questionnaire Survey of Foreign Direct Investment in the 2002 F/Y).” Journal of Research Institute for Development and Finance, 14 (January): 4–82. In Japanese.Google Scholar
U.S. Department of Commerce (Economics and Statistics Administration/Bureau of Economic Analysis). 2002. U.S. Direct Investment Abroad: Preliminary Results From the 1999 Benchmark Survey. Washington, D.C.: U.S. Government Printing Office.Google Scholar
World Bank. 2002. World Development Report 2002: Building Institutions for Markets. Washington, D.C.: World Bank.Google Scholar