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Changes in the international specialization of food manufacturing industry in East Asia

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Abstract

There has been a tremendous advance in the negotiations of international trade and investments to promote the development of world economy since 2000. However, studies on the changes in the international specialization along with the rapid growth of new emerging economies are insufficient, especially for food manufacturing industry. Therefore, the objectives of our study are to understand the actual situation of the international specialization of food manufacturing in East Asia and to clarify the mechanism of its change in the structures of trade since the 21st century. The following results are obtained from our empirical analysis. First, the patterns of international specialization in East Asia’s food manufacturing industry have been changed in two broad ways since 2000, one is corresponded by China for intra-industry trade and the other is corresponded by Japan, South Korea, and Taiwan for the inter-industry trade. Second, FDI from Japanese food manufacturing industry has the characteristics of horizontal direct investment (in one-way trade), and its effect of promoting international division of labor through intra-industry trade in East Asia is expected to be insignificant. Third, against the backdrop of its domestic economic growth, China’s food manufacturing industry is growing and its intra-industry trade is advancing with countries both inside and outside of East Asia. Based on the above analytical results, a policy implication is drawn for Japanese food manufacturing sector to realize a sustainable development by building a food system which is mutually complementary in international specialization through two-way trade with the countries in East Asia, particularly with China.

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Notes

  1. Please refer to Grubel and Lloyd (1975) for intra-industry trade. As for the details of the method of Kiminami and Kiminami (1999, 2000), please see the section of Appendix.

  2. It uses ln ((x + a)/(1 – x + a)), where a = 0.01 because Value of IIT and IIM contains 0 and 1.

  3. As for the recent empirical studies on the determinants of Intra-industry trade, please see Sawyer et al. (2010), Kanada (2013) and Jambor (2014) for example.

  4. There are various classification methods in FDI, such as vertical, horizontal, and network type proposed by Baldwin and Okubo (2014). First, Vertical-FDI is an investment that a company establishes overseas subsidiaries and transfers part of the production and sales process, utilizing differences in labor and capital costs between the two countries. Next, Horizontal-FDI is an investment that replicates the same production and sales processes to overseas subsidiaries as they are in domestic countries. It tends to occur when transportation costs are high and trade barriers are large. In addition, network-type FDI is an investment with a pattern of importing some intermediate goods, processing and exporting the products. This type of FDI corresponding to the processing trade or inter-firm trade. In relation to the trade pattern, the stronger the trend of horizontal FDI, the more the export of intermediate goods and final products will decrease. In other words, the substitutional relationship between horizontal FDI and export is strong.

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Acknowledgements

This study was supported by JSPS KAKENHI Grant Number 25450319 (Empirical study on the dynamism of international food system: Focusing on Japan and China). We wish to express our gratitude to the supports.

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Correspondence to Lily Kiminami.

Appendix 1: Trade Indexes

Appendix 1: Trade Indexes

Following Kiminami and Kiminami (1999, 2000), the indexes which is used in this study are defined as follows.

Index of Intra-industry Trade (IIT) is shown in Eq. (2):

$${\text{IIT}}_{ABk} = (X_{ABk} + X_{BAk} - \left| {X_{ABk} - X_{BAk} } \right|)\text{/}\left( {X_{ABk} + X_{BAk} } \right) \times 100.$$
(2)

Denotation and Subscript indicate as follows:

X: value of imports; A: Country A; B: Country B; k: Industry k,

X ABk : Imports of country A from country B; X BAk : Imports of country B from country A,

X ABk  + X BAk : total trade between countries A and B in the kth industry’s goods,

\(\left| {X_{ABk} - X_{BAk} } \right|\): inter-industry trade between countries A and B in the kth industry’s goods,

\(X_{ABk} + \, X_{BAk} - \left| {X_{ABk} - X_{BAk} } \right|\): intra-industry trade between countries A and B in the kth industry’s products.

The value of IIT ABk is from 0 to 100 means that if bidirectional trade is performed in k industry, the value is becoming large.

Rate of Intermediate Inputs (IM) is shown in Eq. (3):

$${\text{IM}}_{ABk} = \left( {{\text{XI}}_{ABk} + {\text{XI}}_{BAk} } \right)/\left( {X_{ABk} + X_{BAk} } \right).$$
(3)

Index of Intra-industry Trade of Intermediate Goods (IIM) is shown in Eq. (4):

$${\text{IIM}}_{ABk} = \left( {{\text{XI}}_{ABk} + {\text{XI}}_{BAk} - \left| {{\text{XI}}_{ABk} - {\text{XI}}_{BAk} } \right|} \right)/\left( {{\text{XI}}_{ABk} + {\text{XI}}_{BAk} } \right) \times 100.$$
(4)

XI: Inputs of intermediate products in the same industry,

XI ABk : Imports of country A’s kth industry from country B’s kth industry,

XI BAk : Imports of country B’s kth industry from country A’s kth industry,

\({\text{XI}}_{ABk} + {\text{XI}}_{BAk}\): Total trade between countries A and B in the kth industry’s intermediate products,

\(\left| {{\text{XI}}_{ABk} - {\text{XI}}_{BAk} } \right|\): Inter-industry trade between countries A and B in the kth industry’s intermediate goods,

\({\text{XI}}_{ABk} + {\text{XI}}_{BAk} - \left| {{\text{XI}}_{ABk} - {\text{XI}}_{BAk} } \right|\): Intra-industry trade between countries A and B in the kth industry’s intermediate goods,

IM ABk indicates the ratio of total trade between countries A and B in the kth industry’s intermediate goods occupied to total trade between countries A and B in the kth industry’s final products. When this value is high, the trade in an upper and middle stream sector is relatively active, and when it is low, the trade of the final products is relatively active.

IIM ABk indicates the ratio of intra-industry trade of the kth industry’s intermediate goods occupied to the total trade.

Using these indexes, types of international trade can be classified (Table 8).

Table 8 Types of international trade

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Furuzawa, S., Kiminami, L. Changes in the international specialization of food manufacturing industry in East Asia. Asia-Pac J Reg Sci 1, 359–378 (2017). https://doi.org/10.1007/s41685-017-0035-3

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