Asian Exports Research Articles

An empirical analysis of ASEAN's labor-intensive exports

This paper investigates the factors affecting the demand for ASEAN's labor-intensive exports. Results obtained using a panel data set including exports to 25 countries indicate that an appreciation in ASEAN countries would substantially reduce exports of clothing, furniture, and footwear. In addition, an increase in foreign income and an appreciation among competitors would raise ASEAN's exports. These results indicate that profit margins for labor-intensive manufactures are thin and that slow growth abroad will curtail ASEAN's exports. These findings imply that policymakers should seek to promote domestic and regional demand, expand the technological base, and consider exchange rate coordination to mitigate “beggar-thy-neighbor” policies.

Exports and the Global Crisis: Still Alive, Though not Quite Kicking Yet

This paper describes the severity of the declines of Asian exports during the recent global crisis and provides more detailed information on the hardest hit manufacturing and exporting industries. To do this, we use various sources of data, including Industrial Statistics of the United Nations Industrial Development Organization as well as the latest monthly unemployment and exports data available from official sources. We find severe declines of exports across most product categories, and that the worst-hit sectors often consist of larger, more productive firms relative to other manufacturing sectors. Some of these sectors also employ higher percentages of women workers in countries such as Indonesia and Malaysia. Nonetheless, although official unemployment rose across developing Asia, the level has yet to reach that of OECD countries. In further contrast to the jobless recovery facing some OECD countries, employment shows recent signs of stabilizing and even increasing. Finally, we conclude with a discussion on the recent upward trends in exports. While we see cautious optimism in the revival of exports, data indicates that Asian workers are not clearly out of the woods yet.

Trade Structure and the Transmission of Economic Distress in the High-Income OECD Countries to Developing Asia

This paper examines the structure and direction of developing Asia’s trade over the past two decades. The impacts on developing Asia of the economic slowdown in 2009-2010 in high-income countries of the Organization for Economic Cooperation and Development (OECD), which includes the European Union (EU), Japan, and United States (US) are projected through a computable general equilibrium model (CGE) of world trade and production. In addition, the impacts of fiscal stimulus and the rise of protectionist sentiments within developing Asia are examined. The expansion of intraregional trade in Asia reflects the role of the People’s Republic of China (PRC) as an assembly point and its reliance on demand from outside the region, the EU and the US in particular. The trade channel is crucial in transmitting economic distress from the OECD countries to developing Asia. The projection shows that developing Asia will continue to suffer from demand decline in OECD countries, with the PRC and India being the most impacted. Though Southeast Asia faces reduced exports to the OECD countries, its exports are reduced significantly to other Asian exporters, demonstrating the indirect trade linkages that now exist in the global economy. Fiscal stimulus from the largest economies (including PRC, EU, Japan, and US) could help boost trade and gross domestic product growth in developing Asia but it is not projected to offset entirely the negative impact from the global economic downturn. Protectionism has a negative impact on the countries and regions that take that course. Southeast Asia would be the most impacted by protectionism. If Southeast Asian countries were to raise their applied tariffs to the maximum most-favored nation bound rates under the World Trade Organization, the impact would be negative on real gross domestic product. Heavy manufactures followed by light manufactures, electronics, and textiles are most impacted.

Should Exports Be Globally Diversified or Regionally Integrated? Evidence from ASEAN+3 Experience

I. Introduction Since the early 1990s, many Asian countries, known as emerging economies, have begun to play a more significant role in the world economy. Since most Asian countries are export-oriented, many economists expected the Western economic downturn to have a significant contractionary effect on these economies. Export rebalancing policy was proposed, therefore, in order to deter the external risk. However, whether export market diversification has actually deterred, lowered or even retarded the effect of the global economic crash on Asian economies is still questionable. The ASEAN+3 regional cooperation was founded by the Association of Southeast Asia Nations (ASEAN), (1) together with the People's Republic of China, Japan and the Republic of Korea after the Asian financial crisis. It aims to further strengthen and deepen regional integration at various levels and in various areas. In particular, the ASEAN+3 economic cooperation was first developed in May 2000 with an aim to resolve mismatch problems which caused the Asian financial crisis. While maturity mismatch can be resolved domestically by improving corporate governance and management in the banking sector, currency mismatch can be resolved more efficiently by promoting local funds to finance local investments and development. Under the Asian Bond Market Initiative (ABMI) and the Chiang Mai Initiative (CMI), regional financial integration has been improved. This helps facilitate flows of funds and thus promotes trade of goods and services among member countries. Some member countries have bilateral agreements, such as a Free Trade Agreement (FTA) between ASEAN and Japan, FTA between Malaysia and Japan, and FTA between ASEAN and South Korea. However, the ASEAN+3 has not had an official regional FTA. While the member countries are discussing the deeper economic cooperation through an ASEAN+3 regional FTA, its potential impacts on each member economy and neighbouring economies have not been thoroughly evaluated. Some economists support more trade integration within the region, believing that it enhances the strength of the regional economy and simultaneously protects the region from external shocks such as the 2008 global financial crisis. Others argue that trade integration could increase economic vulnerability of member countries to the external factors, especially regional shocks such as the 1997 Asian financial crisis. For example, Olaberria and Rigolini (2009) show that high trade openness has made countries more vulnerable to external volatilities. In addition, Obiora (2009) finds that financial and trade linkages are the most important transmission channels of growth spillovers from the EU to the Baltics, thus causing the Baltics to face significant downside risk during the global economic downturn. The objective of this paper is to investigate whether ASEAN+3 economic cooperation has enhanced regional trade. If regional trade has already been promoted substantially, an official regional FTA may not add a significant impact to regional trade. Using data of ten Asian economies, namely China (CN), Hong Kong SAR (HK), Japan (JP), South Korea (KR), Taiwan (TW), the Philippines (PH), Thailand (TH), Indonesia (ID), Malaysia (MY) and Singapore (SG), the paper explores their export destinations and sectors to find whether the Asian exports are diversified or integrated. As one of its contributions, how the Asian export growth co-moves before and after the foundation of ASEAN+3 regional cooperation is analysed using correlation coefficients and multivariate vector autoregressive (VAR) models respectively. With an existence of regional trade integration, export growths of member countries are expected to be highly synchronized. Two VAR models are developed not only to investigate how the causality among the Asian export growth changes after the foundation of ASEAN+3, but also to evaluate whether the export growth of the economy is less affected by external shocks if its exports are more diversified and less related to regional exports. …

Evolution of Global Economy in the First Semester of 2009

Recent figures from the more developed NE Asian exporters show global manufacturing industries falling at a shocking rate, indicating possible double-digit declines in GDP in 2009. There have been worse than expected results in South America, with Brazil likely to see a fall of 3-5% in GDP. Mexico's results could be much worse. The economic and financial situation in Eastern Europe and Central Asia is deteriorating rapidly and dangerously. News from the US and Europe has also been poor but policy efforts may just about succeed in stabilizing these economies by mid-2009.

The Impact of Real Exchange Rate Flexibility on East Asian Exports

ABSTRACTThis paper estimates the impact of intra‐regional real exchange rate flexibility on East Asian exports. The hypothesis is that the impact would be negative for East Asian countries regardless of their exchange rate regimes. The results validate the hypothesis. The findings show that for Chinese exports the long‐run effect is as much as that of a real appreciation of renminbi. By contrast, for Japanese exports the effect is three times larger than that of a real appreciation of the yen. The findings imply that a regional currency basket mechanism would lessen the adverse effect of exchange rate flexibility and engineer a collective exchange rate adjustment for resolving the global payment imbalance against East Asia.

The Rise of China and East Asian Export Performance: Is the Crowding‐Out Fear Warranted?

This paper examines how China's emergence as a major trading nation is affecting export performance of its East Asian neighbours. Following a stage‐setting overview of trends and patterns of China's export performance, it probes China competition in third country markets and emerging patterns of imports. The East Asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China's rapid market penetration in traditional labour‐intensive manufactured goods has occurred mostly at the expense of the high‐wage East Asian countries, without crowding‐out the export opportunities of low‐wage countries in the region. More importantly, China's rapid integration into global production networks as a major assembly centre has created new opportunities for the other East Asian countries to engage in various segments of the value chain in line with their comparative advantage.

The Effect of a Collective Exchange Rate Adjustment on East Asian Exports

This paper estimates long-run effects of a collective exchange rate adjustment on multilateral exports from China, Japan, South Korea, and Taiwan. The findings show that a 1 percent generalized appreciation of all East Asian exchange rates would reduce East Asian exports by about 3 percent.

Has China Displaced Other Asian Countries' Exports?

This paper uses gravity modelling to explore whether and how the growth of China's exports is displacing exports of other Asian countries to third markets over the period 1990-2003. Chinese exports are defined both narrowly and more broadly to include exports from Hong Kong. We investigate whether the displacement effect on Asian exports differs when exports from Hong Kong and China are combined compared to the narrow case of Chinese exports only. Aggregate and disaggregated analyses are undertaken. In the latter, we explore whether the displacement effect varies across Asian countries and in trade with different types of countries. We find evidence of a displacement effect which is more pronounced in developed markets and stronger for Hong Kong and China combined. Further it is the high income Asian exporters that experienced a greater displacement effect. We also investigate whether China's development has generated any offsetting effects on its neighbours' exports to China itself and find that Chinese growth has indeed increased China's imports from the Asian countries in the sample and in particular Japan and Korea.

Information and Export Performance

Exporters’ performance in a given market may affect their exports to the rest of the world. Importers base their future transaction decisions upon the information revealed by exporter’s performance in other countries. This paper estimates significant effects from these information spillovers on the export patterns of fourteen developing countries, and somewhat smaller effects for a sample of exporters from six developed countries. On the other hand, it is in developed countries’ markets that the largest information spillovers are generated. Indeed, increases in market share in the United States allows for significant increases in exports to the rest-of-the world associated with information spillovers. But developing country markets could also generate important amounts of information for regional exporters. Hong Kong is the top market in terms of generating information for other East Asian exporters, and the Argentinean and Chilean markets play an important role for exporters from other Latin American countries.

A Firm‐level Examination of the Exports Puzzle: Why East Asian Exports Didn't Increase After the 1997–1998 Financial Crisis

We analyse a detailed panel dataset on Indonesian manufacturing firms to characterise the exports puzzle: the surprising absence of export‐led growth after the massive currency devaluation during the 1997–1998 Asian financial crisis. Our results show that, consistent with trade theory predictions following better terms of trade, entry into export markets increased dramatically. In conflict with the same predictions, however, many pre‐crisis exporters quit exporting. Thus stagnant export growth cannot be attributable to a lack of entrepreneurial ambition or activity amongst would‐be exporters. Rather, it apparently resulted from constraints prohibiting continued exporting by pre‐crisis exporters. Managerial reports of perceived constraints reveal little about why so many firms ceased exporting. However, ‘better’ firms, as proxied by foreign ownership, involvement in research and development, or investment in training, were more likely to continue exporting post‐crisis.

The dynamics of manufacturing competitiveness in South Asia: An analysis through export data

The outstanding export performance of South Asian countries (and India in particular) over the nineties have prompted some observers to see in it the roots of an export-led growth similar to that of the Southeast Asian neighbors. We employ an export unit values (UVs) cum real competitiveness analysis to the manufacturing sector of four South Asian countries (with a particular focus on India), in order to investigate the determinants of this apparent success. Shifts towards higher UVs relative to technology leaders serve as the most appropriate indication of underlying structural changes, which are manifested in technology closing up processes among countries. According to our indices, the export competitiveness of South Asian countries (except Pakistan) seems to have slightly improved relative to the Southeast Asian comparators, but not relative to OECD. The South Asian export growth has been mainly driven by relative quantity expansion through a reduction in relative costs rather than relative quality increase. Such expansion has been concentrated in natural resource, standard-technology-intensive (in India) and labor-intensive sectors (in Bangladesh). On the other hand, the more technology-intensive sectors in India still suffer from a significant gap relative to Thailand, which has not been closing up in the last decade. These findings suggest some notes of caution in interpreting the recent good export performance of South Asian economies.

Dynamics of Manufacturing Competitiveness in South Asia: Analysis through Export Data

The outstanding export performance of South Asian countries (India in particular) over the 1990s has prompted some observers to see in it the roots of an export-led growth similar to that of its Southeast Asian neighbors. We employ export unit values (UVs) cum real competitiveness analysis to the manufacturing sector of four South Asian countries (with particular focus on India), in order to investigate the determinants of this apparent success. Shifts toward higher UVs relative to technology leaders serve as the most appropriate indication of underlying structural changes, and such change is manifested in technology closing-up processes among countries. According to our indices, the export competitiveness of South Asian countries (except Pakistan) seems to have slightly improved relative to its Southeast Asian comparators, but not relative to the Organisation for Economic Co-operation and Development. South Asian export growth has been mainly driven by relative quantity expansion through a reduction in relative costs rather than relative quality improvement. Such expansion has been concentrated in natural-resource-intensive, standard technology-intensive (in India), and labor-intensive sectors (in Bangladesh). On the other hand, the more technology-intensive sectors in India still suffer from a significant gap relative to Thailand, which has not been closing up in the last decade. These findings suggest some notes of caution in interpreting the recent good export performance of South Asian economies.

Textiles: The Post Quota Era

On 1st January, 2005, the quantitative restriction on textile imports was abolished. The major textile exporting countries such as China, India, Bangladesh, Pakistan and Sri Lanka, were ready to take full advantage of the quota-free era. During the first few months of 2005, China maintained its lead in textile exports to the United States (US) and Europe, two largest markets for Asian textiles. The other major Asian textile exporters, including India, were facing intense competition and a pricing pressure, since China was a low cost producer. In April, the US and the European Union countries complained against surging Chinese textile imports, which were disturbing their markets and resulting in unemployment, loss of jobs as well trade deficit. As a safeguard proceeding, the US re-imposed quota on cheap Chinese textile imports in May. In addition, India and some other countries brought dumping charges against China. In this situation, Indian textile exports were expected to grow, since India was the second largest textile exporter after China. However, lack of sufficient infrastructure and the increasing pricing pressure were regarded as the constraints for India. Therefore, it remained to be seen whether India could take advantage of the situation.

Exchange rates, exchange risk, and Asian export revenue

While depreciation may raise export revenue, associated exchange risk could offset any positive effect. The present paper investigates this net effect for eight Asian countries using a bivariate GARCH-M model that simultaneously estimates time varying risk. The fundamental result is that export markets react differently to exchange rates and associated risk. High degrees of risk apparently stimulate efforts to avoid its impact. Exchange risk has a dominating negative impact for the appreciating Japanese yen. Depreciation has no impact in Malaysia and Singapore, and exchange risk has a negative effect in Singapore. For the other five countries, depreciation stimulates export revenue but risk leads to a negative net effect in Taiwan.

China's Competitive Performance: A Threat to East Asian Manufactured Exports?

We examine China's competitive threat to East Asian neighbors in the 1990s, benchmarking performance by technology and market. Market share losses are mainly in low-technology products; Japan is the most vulnerable market. China and its neighbors are raising high-technology exports in tandem: international production systems here are leading to complementarity rather than confrontation. In direct trade with its neighbors, China is acting as an engine of export growth, with imports outpacing exports. This may change, however, as China climbs the value chain and takes over activities that have driven East Asian export growth even within integrated production systems.

The Asian Recession and Northern Labour Markets

The Asian recession saw an increase in the volume of mainly manufactured Asian exports. Other things equal, this would have disadvantaged the labour intensive end of northern (mainly USA and EU) manufacturing and hence the northern manufacturing workforce. Central to the crisis, however, was a redirection of investment away from Asia to the north, raising northern aggregate demand and hence employment in northern services. This paper examines the magnitudes of these two effects in a broader analysis of the real impacts of the Asian recession that is grounded in a global general equilibrium framework. Northern workers are found to be net beneficiaries in both the short and medium run.

EXPORT PROFILES OF SMALL LAND‐LOCKED COUNTRIES

World Bank demographic and country characteristic statistics identify 16 small landlocked countries that are similar to Lesotho. The authors attempt to determine what useful policy information can be derived from the recent trade performance of these comparators. Among questions they pose are whether the trade profiles of the comparators suggest potentially promising export ventures for Lesotho, do they indicate directions for a geographic diversification of trade, or do they suggest products in which Lesotho might acquire a comparative advantage. The authors also use U.S. partner country statistics to evaluate Lesotho's export performance in this major market. The U.S. data indicate Lesotho lost competitive export shares for about three-quarters of its major clothing products during the late 1990s. The data show these losses were primarily to the North America Free Trade Agreement (NAFTA) countries in the Caribbean. Lesotho was competing on basically equal terms and did not fare well. But it is generally held that the most efficient clothing exporters are in the Far East and not Latin America. Lesotho's difficulties in competing with the latter have worrisome implications for its ability to compete with East Asian exporters when the Multifiber Arrangement is phased out. The comparative advantage profiles of the landlocked comparator countries suggest Lesotho's options for a greatly needed export diversification may be wider than is assumed. One or more of the comparator countries developed a comparative advantage in 110 four-digit SITC (non-clothing) manufactures which are generally labor-intensive in production. Many of these goods should also be suitable for production and export by Lesotho. International production sharing often involves the importation and further assembly of components in developing countries. This activity can significantly broaden the range of new products in which a country can diversify. Statistics show many landlocked comparator countries have moved into component assembly operations, and it appears this activity could contribute to Lesotho's export diversification and industrialization. But the quality problems associated with Lesotho's trade statistics makes it impossible to determine the extent to which local production sharing is occurring. A special effort is needed to tabulate reliable statistics on Lesotho's current involvement in this activity. Finally, the authors attempt to determine how the commercial policy environment in Lesotho compares with that in other countries. Policymakers previously had difficulty in addressing this issue, but several recent efforts to compile comprehensive cross-country indices of the quality of governance and commercial policies now provide relevant information. These statistics suggest domestic commercial policies make Lesotho relatively less attractive to foreign investment than many other developing countries. Less than 20 percent of all Latin American countries have a domestic commercial environment judged to be inferior to that in Lesotho, while the corresponding share for East Asia is under 30 percent. Overall, almost 70 percent of all developing countries appear to pursue commercial policies that make them as, or more, attractive to foreign investment than Lesotho.

China and Emerging Asia: Comrades or Competitors?

We explore whether increases in China’s exports reduce exports of other emerging Asian economies. We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though often not significantly so), even after controlling for the effects of income growth of trading partners and real effective exchange rates. We also present results from a VAR estimation of aggregate trade equations on the relative importance of foreign income and exchange rates in the determination of Asian export growth. An important finding is that, while exchange rates do matter for export performance, the income growth of trading partners matters even more. In addition, we examine specific products and find evidence that a considerable shifting of trade patterns is taking place, consistent with a ‘flying geese’ pattern in which China and ASEAN-4 move into the product space vacated by the NIEs. Overall, our results suggest that China and emerging Asia are both comrades and competitors. Disclaimer: The views expressed here are those of the authors and should not be attributed to the Federal Reserve Board, the Federal Reserve Bank of Chicago, or the International Monetary Fund.

Changes in the foreign market competitiveness of East Asian exports

This article sets out to examine changes in the competitiveness of East Asian exports in the pre- and post-Asian financial crisis periods. The patterns of Taiwanese, ASEAN and Chinese exports are becoming increasingly convergent, with the highest degree of similarity being found in the US; this is therefore the market where competition is most intense. In the Japanese market, the degree of export similarity is relatively low, indicating a lower level of competition.