Comparing Japan, the US, and Chinas Roles in Trade Relationships with Emerging East Asian Countries during the Last Three Decades

Abstract

The expansion of trade relationships among East Asian economies along with the high economic growth rate in these countries within the last three decades has demonstrated their accomplishment in transferring the benefits of trade into their economies and increasing their production capacities. The 1985 Plaza Accord and the revaluation of Japans yen, Chinas transition over the last three decades, and the banking crisis in 1997 to 1998 are among the main events affecting the influence of Japan, the US, and China in East Asia. This study analyzes the pattern of trade relationships in the Emerging East Asian (EEA) economic network in the past three decades and the role of Japan, the US, and China in the region over the mentioned period. The analysis is based on the real data of Asian input–output tables from 1985 to 2005 while estimating those of 2012. The trend of the Leontief coefficients from1985 to 2012 illustrates that the concentration of suppliers has changed gradually due to the emergence of China, South Korea, and Taiwan as new regional suppliers in addition to Japan and the US since 2005. However, China, to some extent, has managed to outperform Japan and the US in the region. Determinants, such as Export-Platform Foreign Direct Investment (FDI) and the resulting knowledge and technology transfers, are analyzed as the drivers of the evolution of Chinas role in the region. The Contribution Ratios(CR) of final demand of Japan and the US to EEA countries value added, have decreased during 1985 to 2012, whereas the CR of China has drastically increased during the same period. The results corroborate that the share of export to the GDP index overestimates the share of external demands to the value added in EEA countries. This finding supports the notion that the total export is prone to double counting in East Asian economies.