Formation And Deepen Of The Production Network In East Asia:Theoretical And Empirical Analyses

From the1960s to1990s, The "Geese-flying Pattern" has been sufficiently verified in East Asia, and created the "East Asian miracle".Since1990s, with the advancing in technology and reducing in transport costs, the pattern of international specialization is from inter-industry specialization, intra-industry specialization to intra-product specialization. In East Asia, the "Geese-flying Pattern" has been changed. The economy and trade relationship among the economies of East Asia is obviously a lot closer. A regional production network of East Asia based on intra-product specialization has taken shape effectively. In this context, the article researches on the formation and deepen of East Asia production network from intra-product specialization theory, and also tests the theoretical analysis based on the panel gravity model use the data of parts&components trade of East Asia.Chapterl introduces the background, literature review and the structure of this thesis. Then Chapter2reviews the theories of the intra-product specialization based on comparative advantage theory, new trade theory and imperfect contract theory. Chapter3is the part of theoretical analysis of this thesis. Based on the model of Feenstra (2003), it analyses East Asia production network theoretically. Firstly, every country participates in international specialization based on comparative advantage. Then the technology degree of the country is decided by its comparative advantage. Secondly, under the condition of "’Washington apples effect", impact of distance on trade cost is related to the technology degree of intermediate goods. The study indicates "Washington apples effect" of trade costs of intermediate goods is characterized by that the intermediate goods in lower technology degree has bigger distance elasticity. The geographic distance of the regional production network contributes to.the participation of the intra-product specialization of the developing countries. Meanwhile, the location of the developing countries contributes to the formation of East Asia production network. Moreover, the cross-border flows of the "complex inputs of capital and knowledge" can change the pattern of the intra-product specialization in the production network. It decreases intermediate goods exports from developed countries; meanwhile increases intermediate goods exports from developing countries. It makes the developing countries to reduce their dependence on the high technology degree intermediate goods from the developed countries. As a result of the cross-border flows of the "complex inputs of capital and knowledge", the technology degree of the developing countries in the production network is upgraded. Meanwhile, the inhibition of distance to the developing countries’participating in intra-product specialization is reduced. Finally, it is proved that, the proximity of economies from lower degree of technology makes an advantage of East Asia production network. However, this advantage is decreasing because of the cross-border flows of the "complex inputs of capital and knowledge".Chapter4makes a descriptive statistics of trade of goods, FDI and trade of services in East Asia. It is showed that the characteristic of the trade of goods of East Asia economies is not only globalization but also regionalization. The means of division of labor of economies in East Asia has been changed from Inter-industry specialization to Intra-industry specialization and Intra-product Specialization. In East Asia, the growth of parts and components implies the great development of the networked production. FDI and trade of services have also registered marked increases. The economies in East Asia gradually free from financial dependence on Japan. The NIEs are becoming the important sources of FDI in East Asia. The NIEs also play significant roles in the trade of services and producer services in East Asia. In developing countries, the trade barriers of services especially some policy restrictions for some industries throttle the trade of services.Chapter5examines the impact of regional character of geography, FDI and producer service trade on East Asia production network based on data of parts&components trade. It conducts the empirical panel data of parts&components trade of economies of East Asia years from2000to2009based on gravity equation. First of all, there is a difference of distance elasticity of parts&components trade among economies in East Asia production network. Generally, the high-income economies have a greater distance elasticity of their parts&components imports than exports. Conversely, the low-income economies have a greater distance elasticity of their parts&components exports than imports. Then it proves the existence of the "Washington apples effect" of parts&components trade by the gravity model of variance elasticity of distance. The parts&components in lower degree of technology are more sensitive to distance. Due to the obviously geographical superiority of East Asia production network, the distance resistance to parts&components trade is lessened. But the "Washington apples effect" is still effective. Furthermore, it is also proved that the cross-border flows of the "complex inputs of capital and knowledge", which represented by FDI and trade of producer service, make the exports of parts&components from the developed country decreasing, as well as the exports of parts&components from the developing countries increasing. For the degrees of technology in East Asia production network, it is showed that with the raise of FDI and trade of producer service, the low technology degree imports of parts&components by the developed country is increasing, as well as the high technology degree imports of parts&components by the developed country is decreasing. At last, for China, it is also certified that FDI and imports of producer service makes parts&components exports more globalization and less regionalization. The location advantage of East Asia production network will be weaker progressively since the FDI and trade of producer service.Chapter6draws the conclusions of the paper. The economies of lower degrees of technology are proximity to each other, which drives the East Asia production network performance, and makes the location advantage of the production network. However, FDI and producer service trade has increased with developing of the specialization in the production network. Therefore, the location advantage of East Asia production network has been undermined. In the future, East Asia production network will expand its space range, and gain the location advantage by integration of trade of goods, trade of service and also investment.