Empirical Decomposition Of Intra Industry Trade

Published Date: 02 Nov 2017

Abstract

This paper attempts to investigate the different patterns of IIT in the agri-food sector between Japan and East Asian countries from 1997 to 2005 at the HS 9-digit level. Our empirical results show that the large portion of agri-food trade between Japan and East Asian countries is still one-way trade while IIT, particularly the share of VIIT has not grown rapidly from 1997 to 2005. Particularly, the fact that Japan imports high-quality agri-food products more than exports reflects in the opposite direction of quality ladder story based on Flam and Helpman type vertically differentiated trade model. The weak positive relationship between the share of VIIT and the factor endowment may be a result of the rising share of foreign direct investment due to multinational corporations in agri-food trade.

Agri-Food Sector

1. Introduction

Recent studies on intra-industry trade (IIT) have brought to light rapid increases in vertical IIT (VIIT) and horizontal IIT (HIIT). Despite the potential importance of this issue and the fact that theory suggests that the determinants of VIIT and HIIT differ, most of previous empirical studies on IIT have focused on total IIT without distinguishing between VIIT and HIIT.

The motivation for this paper stems from the recent development in foreign direct investment (FDI) and the rapid expansion of processed food exports in many East Asian economies. We focus on the agriculture and food sector not only because this is an important sector within the region, but also because it is one of the most critical sectors for the success of future trade reform and economic integration.

In recent literature, the growing importance of the ASEAN Free Trade Agreement (AFTA) and its implications on the major trading partners have attracted a lot of attentions. It is particularly relevant when discussing future bilateral trade agreements where trade partners expect trade adjustments to take place within industries, rather than across industries.

This paper employs the bilateral share of IIT, VIIT, and HIIT between Japan and 8 East Asian countries (Indonesia, Malaysia, Philippines, Thailand, China, Singapore, Korea and Taiwan) over the period 1997-2005 and discusses the characteristics and determinants for each share of IIT patterns in agri-food sector.1

1 This paper defines ��agricultural goods�� basically according to Agreement on Agriculture (AOA) of WTO. AOA covers HS01 to 24 less fish and fish products, plus HS 290543 (mannitol), 290544 (sorbitol), 3301 (essential oils), 3501-3505 (albuminoidal substances, modified starches, glues), 380910 (finishing agents), 382360 (sorbitol n.e.p.), 4101-4103 (hides and skins), 4301 (raw furskins), 5001-5003 (raw silk & silk waste), 5101-5103 (wool & animal hair), 5201-5203 (raw

The rest of this paper is organized as follows. Section 2 presents the conceptual framework for the IIT and connects illustrative theoretical models with the empirical method. Section 3 provides detailed analysis of IIT for horizontally and vertically differentiated products and examines the nature and characteristics of agri-food trade patterns with 8 East Asian countries. Section 4 presents the results of the regression analysis. The last section concludes.

2. Conceptual framework for the intra-industry trade

2.1 Empirical decomposition of intra-industry trade

Although the Grubel-Lloyd IIT index is popular for its ease of computation, it has a flaw in being unable to distinguish between HIIT and VIIT; when in fact theory suggests that their determinants do differ. This has been reconfirmed in a number of empirical studies in recent years.2 HIIT refers to trade in similar products but different characteristics or attributes, while VIIT involves trade in similar products of different qualities and intra-firm, inter-processed trade (fragmentation). Krugman (1979) has demonstrated that HIIT is influenced by scale economies and preference diversity, while Falvey (1981) has shown that factor endowment determines VIIT. Moreover, Jones and Kierzkowski (1990) and Deardorff (2001a, 2001b) showed that location advantage with cost of service links determines either inter-industry trade or VIIT. Thus, IIT must be decomposed into horizontally and vertically differentiated products and analyzed separately. Confounding both may produce contradictory results.

In order to identify VIIT and HIIT, we adopt a threshold-based methodology

cotton, waste & cotton carded or combed), 5301 (raw flax), 5302 (raw hemp). In this

paper, we include fish and fish products while excluding additional products for avoid

digit-different mixing up.

See, for example, Fontagne and Freudenberg (1997).

used by major preceding studies, such as Abd-el-Rahman (1991), Greenaway et al. (1994, 1995), Fontagne and Freudenberg (1997), Fontagne et al. (1997), Fontagne and Freudenberg (2002), Fukao et al. (2003), Kimura and Ando (2003), and Ferto (2005). The basic idea is to give a definition of IIT which is closer both to reality and economic theory. On a conceptual framework, we start from the apprehension of IIT at the product level, and at the same time to distinguish between horizontal and vertical product differentiation. To operate on the concept of IIT in similar products, it is necessary to define what a product is empirically, what a similar product is, and what IIT is.

The detailed composition of classification is the best guarantee for avoiding the empirical problems of sectoral aggregation. The data we use are published by World Trade Atlas based on HS 9-digit level and are sufficiently detailed for products to be distinguished by their principle, technical characteristics. Products would differ clearly by their quality inside the item of aggregation level. Here, it is assumed that differences in prices (unit values) reflect quality differences. Therefore, products whose unit values are close are considered as similar. Trade in an item is considered to be IIT when the value of the minority trade flow represents at least 10% of the majority flow. If trade flows of a particular product with a partner country fulfill these criteria of similarity and overlap, we qualify imports as well as exports as IIT in similar products. We will decompose trade pattern into one-way trade, horizontal and vertical IIT by detailed commodity and discuss the changing trade patterns between Japan and 8 East Asian countries in the third section.

2.2 Connection with theoretical framework

In the past twenty years, a number of theoretical studies have discussed for country and industry specific influences on IIT. Table 1 presents the connection between empirical threshold decomposition method and theoretical framework of IIT based on nature of trade, theoretical foundation, market structure and determinants of trade.

Two of the most common assumptions made in theoretical models of HIIT are that trade is associated with imperfectly competitive product markets and that the output of relevant industries consists of sufficiently differentiated products. Both assumptions have important implications for the analysis of the gains from trade and trade policy. Spence (1976) , Dixit and Stiglitz (1977), Krugman (1979), Lancaster (1980) present a number of model of HIIT based on monopolistic competition markets. Empirical studies argued that HIIT plays a particularly large role in the trade in manufactured goods among advanced industrial nations. Over time, industrial countries have become increasingly similar in their levels of technology and in the availability of capital and skilled labor. Since major trading nations have become similar in technology and resources, there is often no clear comparative advantage within an industry, and much of international trade therefore takes the form of intra-industry specialization that is probably driven in large part by economies of scale and other reasons rather than inter-industry specialization driven by comparative advantage.

Shaked and Sutton (1984) shows the mechanism of vertical differentiation based on quality under imperfect competition (natural oligopoly). They point out that international trade takes the form of intra-industry specialization that driven by economies of scale which is likely to be of practical relevance to high technology industries where the main burden of quality improvement falls on fixed (R&D) costs, so that unit variable costs rise only slowly with quality.

As Falvey (1981) points out in his neo Heckscher-Ohlin model, commodities of the same statistical group but of different quality may be produced by using different mixes of factor inputs. Moreover, developed economies may export physical and human capital-intensive products of high-quality and import unskilled labor-intensive products of low-quality from developing economies. Through this mechanism, an increase in VIIT may have a large impact on factor demands and factor prices. VIIT is likely to be driven by differences in factor endowments. Consequently, we expect VIIT to be more pronounced between developing and developed economies. As being shown by Falvey and Kierzkowski (1987), the share of VIIT will be correlated with the average market size of the two countries in spite of a distinctly different pattern of specialization. Flam and Helpman (1987) developed a model of North-South trade based on vertical product differentiation in which the North exports high-quality and the South exports low-quality industrial products. Faster technical progress in the Southern industrial sector leads the North to introduce new high-quality products and the South to abandon low-quality products. Production of Northern low-quality products is shifted to the South. This is a sort of ��quality ladder�� story.

Durkin and Krygier (2000) finds evidence of a positive and significant relationship between differences in GDP per capita and the share of VIIT and support the view that IIT may be positively related to differences in relative wages. IIT that trade economists have recently referred to as ��intra-firm, inter-processed�� trade in relation to the fragmentation has been reconfirmed in a number of studies recently. While this type of IIT is often seen within the framework of multinational corporations, Northern firms can also make subcontracting arrangements with Southern counterparts, thereby enabling them to exploit economies of scale at various stages of production. Deardorff (2001b) discusses fragmentation across different cones that is maybe useful in understanding the pictures of vertical production chains. Fragmentation becomes economical when the cost of service links (SL) connecting production blocks (PB) is low enough. The emergence of IIT tends to be a concomitant of enhanced fragmentation.

As Helpman and Krugman (1985) points out, there still exist higher barriers against intra-regional trade in East Asia than in the EU and NAFTA. These barriers are likely to reduce IIT within East Asia. On the other hand, there is a huge income gap among countries in East Asia. Probably this gap enhances VIIT because of the differences in labor costs and other factor prices. At the same time, this gap is likely to reduce HIIT because of the differences in industrial structure and preferences.

2.3 Relevance to agri-food intra-industry trade between Japan and East Asia

The developments of international trade in the whole East Asia reveal that the large portion of trade pattern is still inter-industry trade, which presents a sharp contrast with European trade where IIT has a substantial share.3

Fukao et al. (2003) finds that a major pattern is still inter-industry trade while VIIT with vertical foreign direct investment (FDI) increases its importance in East Asia. Their analysis reveals that, although still much lower than in the EU, IIT, and particularly VIIT, in East Asia has grown rapidly in importance in overall intra-regional trade. This is especially the case in the electrical machinery industry and the general and precision machinery industry. However, while for most EU countries, the share of IIT remained almost constant during the period from 1996 to 2000, it expanded quickly for East Asian countries. Their empirical results imply that in the East Asian region FDI played a significant role in the rapid increase of VIIT in recent years. Moreover, they find the largest part of total IIT growth in the region is attributable to the growth of VIIT and not of HIIT that have relatively large share in the EU region.

However, there are relatively few papers that focus on the IIT nature of agri-food trade, despite its growing importance especially towards closer economic integration between East Asian countries. Ferto (2005) reviews some of the empirical studies on agri-food trade particularly in the latter half of the 1990s (Chang et al., 2001; Christodolou, 1992; Hirschberg et al., 1994; Pieri et al., 1997; Qasmi and Fausti, 2001; Sun and Koo, 2002; Ferto, 2005) relating to the sign and significance of GDP per capita.

See, for example, Fontagne and Freudenberg (2002).

3. Measurement of Vertical and Horizontal Intra-industry Trade

The previous section reviews various kinds of trade models. This section provides detailed analysis of IIT for horizontally and vertically differentiated products and examines the nature and characteristics of agri-food trade patterns between Japan and 8 East Asian countries.

3.1 The threshold decomposition method

Following Abd-el-Rahman (1991), Greeenaway et al. (1994, 1995) and so on, we decompose bilateral trade flows between Japan and 8 East Asian countries by classifying each detailed commodity category into one of the following patterns: (a) inter-industry trade (one-way trade), (b) horizontal IIT (HIIT), and (c) vertical IIT (VIIT).

Three steps are required to obtain the share of each type of trade for the sector concerned, by using the threshold-based index. First, we have to identify whether bilateral trade of commodity j is one-way trade or intra-industry trade.

Min( XMij , ij )

. 0.1 (3.1)

Max( XM, )

ij ij

where Xij : value of Japan��s exports of commodity j to economy i, Mij : value of Japan��s imports of commodity j from economy i. Bilateral trade of commodity j is regarded as one-way trade when equation (3.1) holds and as IIT

otherwise.

Second, we then have to distinguish whether IIT of commodity j is horizontal IIT or vertical IIT. IIT of commodity j is regarded as horizontal IIT when the following equation (3.2) holds and as vertical IIT otherwise: 119

Agri-Food Sector

1 UVij X

. M . 1.25 (3.2)

1.25 UV

ij

where UVij X : average unit value of Japan��s exports of commodity j to economy i,

UVij M : average unit value of Japan��s imports of commodity j from economy i.

Finally, the share of each trade type in a broader commodity category is

calculated as:

.( Xij n + Mij n )

j (3.3) .( Xij + Mij ) j

where n denotes one of the three trade types, i.e., ��one-way trade�� (OWT)

��horizontal intra-industry trade�� (HIIT) and ��vertical intra-industry trade��

(VIIT) .

For our analysis, we chose to indentify one-way trade or intra-industry trade

by using the threshold 10% due to empirically classification like previous papers

employ.4 We chose to identify HIIT mainly by using the range of relative

4 Fontagne and Freudenberg (1997) not only gives some detailed theoretical foundations of the empirical measurement of IIT but also debates traditional GL type measures and their shortcomings due to biases arising from aggregation. They pointed out that criteria referred to above are based on the degree of overlap in trade and on differences in unit values. Inevitably, the thresholds of 10% for trade overlap and 15% for unit value differences are to a large extent arbitrary. One of the possibilities would have been to apply e.g. different similarity criteria for different product groups 15, but applying one and the same criteria to all products leads to more understandable results. Sensitivity tests showing how trade types can be influenced by the choice of different thresholds were showed in Table 3 of Fontagne and Freudenberg (1997), p.35. The reasoning behind this is that below 10%, minority flows cannot be considered significant as they do not represent a structural feature of trade. Of course, any other threshold (20% might be a good candidate as well) could have be used. But in fact, what matters here is not so much which value is chosen as threshold, but that one is chosen. The problem associated with the interpretation of

export/import unit values of 1/1.25 (i.e., 0.8) to 1.25. Although most previous studies in Europe mainly use a 15% threshold to distinguish between horizontally and vertically differentiated products, we employ a 25% threshold as a rather strict definition for VIIT.5 For the analysis on trade patterns, we use the World Trade Atlas published by the Global Trade Information Services, Inc. This dataset provides us with bilateral trade data of almost all the countries including Taiwan at the HS 9-digit level. For the calculation of the IIT, we use importing countries�� data.

Unit values of imports are obtained at the HS 9-digit level by dividing import values by the corresponding quantities, which are also available from the World Trade Atlas. Following Kimura and Ando (2003), bilateral export data are used for commodities that have discordance in units of quantities of imports between two countries when we distinguish IIT between HIIT and VIIT. Some commodities with discordant units still remain even after adjustment, but such commodities become much smaller than the case without adjustment.6

the GL indicator is that the majority flow (exports or imports, whichever is larger), is both of an intra- and inter-industry nature. Trade types avoid this problem: both exports and imports will be either inter-industry or intra-industry. Graph 5 in Fontagne and Freudenberg (1997), p.40 is a synthesis of the approaches following GL measures as well as those following Abd-el-Rahman (1991). Greenaway et al. (1994, 1995) focus on the extent of trade overlap, in the line of GL index, which interprets IIT as the balanced part of trade flows . In these "traditional" approaches, the majority flow is both of intra- and inter-industry nature: the dividing line is thus within the majority flow. In contrast, trade types reject the traditional dividing line between intra and inter-industry trade. If the minimum (arbitrary) threshold of overlap is attained, both exports and imports are part of two-way trade, be it in horizontal or vertical differentiation, otherwise both flows are considered as part of one-way trade. Basically, these two approaches are supplementary rather than substitutes, since each one tries to answer a specific question. GL related indicators yield information on the intensity of overlap in trade, whereas the approach proposed here measures the relative importance of each of the three trade types in all trade.

5 We also employ a 15% threshold, but do not change significantly.

6 Among intra-industry trade, trade of commodities with discordant units even after the adjustment with export data is categorized into ��not classified.��

3.2 Comparison of changing trade patterns between Japan and East Asia

Next, Table 2 and Table 3 are summarized tables of share and values for threshold decomposition of trade between Japan and 8 East Asian countries. Commodities are classified into three types of trade at the HS 9-digit level and are aggregated in each type. These tables tell us various stories of agri-food trade, but here we would like to emphasize three points.

First, one-way trade is still dominant in agri-food trade between Japan and each East Asian country. It seems natural for Japan-China trade (99.53% for 9-years average) to be relatively large one-way trade in our samples because of large differences in development stages and income levels between them. However, large shares of one-way trade for Japan-Taiwan (99.48% for 9-years average) and Japan-Korea (99.15% for 9-years average) may be unexpected. On the other hand, Japan imports from partner��s countries more than exports to them besides the case of Japan and Singapore. This result means that most of traded agri-food even between developed countries are dominated by one-way trade.

Second, the share of HIIT are lower than those of VIIT despite the fact that we find the share of HIIT is larger than the share of VIIT in the case of 9-years average for Japan-Philippine and Japan-Thailand. That is, most of trade in differentiated agri-food is according to the difference in quality of goods.

Third, as for the unit value of exported vertically differentiated goods, it seems to follow quality-ladder story only in case of Japan-Singapore and Japan-Taiwan. That is, it is considered that developed countries export high quality products and imports low quality ones. However, it does not seem to follow in case of agri-food trade between Japan and the other East Asian countries. The share of the agri-food exported by the other partners with more expensive unit value is larger than that by Japan. This contrast implies that quality on agri-food can be less approximated by stages of economic development as found in Ferto (2005).

Although these aggregated numbers are useful for examining how many traded agricultural goods in a mass are differentiated or not, the numbers mask detailed pictures on each agricultural product. Therefore, we present the disaggregated figures in Table 4.

From this table, we can find statistically that many differentiated products in some agri-food are traded between Japan and East Asian countries. In the case of Japan��s significant share of high-quality exports which are larger than partner��s share are as follows. The sign I > J in column ��One-way�� implies Indonesia is larger than Japan in export for listed aggregated industry. The sign J > I in column ��Intra-industry�� implies Japan��s share of high-quality exports which are larger than Indonesia��s share based on export (F.O.B) unit value and vice versa.

1.

Japan-Indonesia: HS130239000 (Mucilages and thickeners, derived from vegetable products, n.e.s.), HS150410000 (Fish-liver oils and their fractions, not chemically modified), HS151530000 (Castor oil and its fractions, not chemically modified) and HS2203000000 (Beer made from malt).

2.

Japan-Malaysia: HS22029002000 (Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, containing apple juice) and HS190590100 (Arare, Senbei and other bakers' wares, of rice).

3.

Japan-Philippine: HS120999000 (Other seeds, fruit and spores, of a kind used for sowing).

4.

Japan-Thailand: HS121300000 (Cereal straw and husks, unprepared) and HS151530000 (Castor oil and its fractions, not chemically modified).

5.

Japan-China: HS180500000 (Cocoa powder, not containing added sugar or other sweetening matter) and HS151419000 (Low erucic acid rape or colza oil and its fractions thereof, not chemically modified).

6.

Japan-Singapore: HS151710000 (Margarine, excluding liquid margarine) and HS220300000 (Beer made from malt).

Intra-Industry Trade Patterns between Japan and East Asian Countries in the Agri-Food Sector

Table 4. Share of Each Trade between Japan and East Asian Countries

Unit: Thousand US dollars, %

Japan and Indonesia 1997-2005 Share Value

In dustry One-way Intra-industry Total

Expor t Vertical (Export) Hori-zontal Not Class

I>J J>I I>J J>I

0101-0106 L IVE AN IMALS 28. 67 71. 33 0.00 0.00 0.00 0. 00 100.00 258551

0201-0210 MEAT 98.87 1.13 0.00 0.00 0.00 0.00 100.00 2837

0301-0307 F ISH AN D SEAF OOD 98. 96 0. 25 0.59 > 0.01 0.20 0. 00 100.00 756918

0401-0410 DAIRY, EGGS,HON EY,ETC 87. 66 12. 34 0.00 0.00 0.00 0. 00 100.00 338

0501-0511 OTHER OF AN IMAL ORIGIN 94. 96 3. 86 1. 19 > 0. 00 0. 00 0. 00 100. 00 3194

0601-0604 LIVE TREES AN D P LAN T S 99. 68 0. 32 0. 00 0. 00 0. 00 0. 00 100. 00 2293

0701-0714 VEGETABLES 98. 76 1. 23 0.00 < 0.01 0.00 0. 00 100.00 4778

0801-0814 EDIBL E FRUIT AND N UTS 74. 02 25. 98 0.00 0.00 0.00 0. 00 100.00 1012

0901-0910 SPICES,COFFEE AND TEA 99. 35 0. 09 0. 02 < 0. 36 0. 17 0. 00 100. 00 98334

1001-1008 CEREAL S 7. 85 92. 15 0. 00 0. 00 0. 00 0. 00 100. 00 23378

1101-1109 MIL L IN G; MAL T ; ST ARCH 81. 00 19. 00 0. 00 0. 00 0. 00 0. 00 100. 00 3692

1201-1214 MISC GRAIN ,SEED, FRUIT 77. 68 21. 73 0.21 0. 38 0.00 0. 00 100.00 5173

1301-1302 L AC;VEGETABL SAP, EXT RCT 67.01 12.99 3. 11 < 16.89 0.00 0.00 100. 00 3379

1401-1404 OTHER VEGETABLE 97. 79 2. 04 0.00 0.17 0.00 0. 00 100.00 1952

1501-1522 F AT S AND OILS 69. 51 29. 27 0. 00 < 1.23 0.00 0. 00 100.00 7539

1601-1605 PREP ARED MEAT, F ISH, ET C 99. 63 0. 37 0. 00 0.00 0.00 0. 00 100. 00 149327

1701-1704 SU GARS 90. 31 9. 61 0.00 < 0.08 0.00 0. 00 100.00 6572

1801-1806 COCOA 99. 40 0. 26 0.00 < 0.16 0.17 0. 00 100.00 7558

1901-1905 BAKIN G RELATED 69. 18 30. 82 0.00 0.00 0.00 0. 00 100.00 7125

2001-2009 PRESERVED FOOD 97. 28 2. 72 0. 00 0. 00 0. 00 0. 00 100. 00 17681

2101-2106 MISCELL AN EOU S FOOD 60. 99 38. 95 0.00 0. 00 0. 00 0. 07 100. 00 12485

2201-2209 BEVERAGES 90. 24 8. 70 0. 00 < 1. 07 0. 00 0. 00 100. 00 12057.70435

2301-2309 FOOD WASTE; ANIMAL FEED 90.31 9.68 0.00 0.00 0.02 0.00 100.00 23390.35348

2401-2403 TOBACCO 99. 39 0. 00 0. 00 0. 00 0. 00 0. 61 100. 00 1147. 663507

T otal 83. 51 15. 95 0. 33 < 0.09 0.12 0. 00 100.00 1410712. 469

Japan and Malaysia 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Ver tic al (Export) Hori-zontal Not Class

M>J J>M M>J J>M

0101-0106 L IVE AN IMALS 45. 19 54. 81 0.00 0.00 0.00 0. 00 100.00 709262

0201-0210 MEAT 99.48 0.52 0.00 0.00 0.00 0.00 100.00 2938

0301-0307 F ISH AN D SEAF OOD 96. 08 3. 55 0.00 < 0.14 0.22 0. 00 100.00 80580

0401-0410 DAIRY, EGGS,HON EY,ETC 74. 30 25. 70 0.00 0.00 0.00 0. 00 100.00 268

0501-0511 OTHER OF AN IMAL ORIGIN 88. 28 11. 72 0. 00 0. 00 0. 00 0. 00 100. 00 97

0601-0604 LIVE TREES AN D P LAN T S 99. 93 0. 07 0. 00 0. 00 0. 00 0. 00 100. 00 20405

0701-0714 VEGETABLES 63. 91 36. 09 0.00 0.00 0.00 0. 00 100.00 177

0801-0814 EDIBL E FRUIT AND N UTS 21. 47 78. 53 0.00 0.00 0.00 0. 00 100.00 212

0901-0910 SPICES,COFFEE AND TEA 98. 78 1. 19 0. 00 0. 00 0. 03 0. 00 100. 00 22178

1001-1008 CEREAL S 56. 86 43. 14 0. 00 0. 00 0. 00 0. 00 100. 00 45

1101-1109 MIL L IN G; MAL T ; ST ARCH 81. 99 18. 01 0. 00 0. 00 0. 00 0. 00 100. 00 4666

1201-1214 MISC GRAIN ,SEED, FRUIT 84. 32 15. 68 0.00 0. 00 0.00 0. 00 100.00 1658

1301-1302 L AC;VEGETABL SAP, EXT RCT 9.71 90.29 0. 00 0.00 0.00 0.00 100. 00 710

1401-1404 OTHER VEGETABLE 94. 27 5. 73 0.00 0.00 0.00 0. 00 100.00 503

1501-1522 F AT S AND OILS 98. 86 0. 86 0.28 > 0.00 0.00 0. 00 100.00 239847

1601-1605 PREP ARED MEAT, F ISH, ET C 86. 11 13. 84 0. 00 < 0.05 0.00 0. 00 100. 00 9750

1701-1704 SU GARS 52. 03 47. 97 0. 00 0.00 0.00 0. 00 100.00 897

1801-1806 COCOA 99.92 0.08 0.00 0.00 0.00 0.00 100.00 13672

1901-1905 BAKIN G RELATED 80. 22 17. 94 0.00 < 1.84 0.00 0. 00 100.00 6765

2001-2009 PRESERVED FOOD 93. 68 6. 32 0. 00 0. 00 0. 00 0. 00 100. 00 5116

2101-2106 MISCELL AN EOU S FOOD 56. 08 43. 92 0.00 0. 00 0. 00 0. 00 100. 00 14314

2201-2209 BEVERAGES 66. 18 28. 21 0. 00 < 5. 61 0. 00 0. 00 100. 00 6931

2301-2309 FOOD WASTE; ANIMAL FEED 60. 70 39.30 0.00 0.00 0.00 0.00 100.00 4088

2401-2403 TOBACCO 49. 91 1. 20 48. 89 > 0. 00 0. 00 0. 00 100. 00 5541

T otal 64. 06 35. 57 0. 29 > 0.05 0.02 0. 00 100. 00 1150621

Kuo-I Chang, Chung-Hsuan Wei

Table 4. Share of Each Trade between Japan and East Asian Countries

Unit: Thousand US dollars, %

Japan and Philippine 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Ver tic al (Export) Hori-zontal Not Class

P>J J>P P>J J>P

0101-0106 LIVE AN IMALS 30. 70 69. 30 0.00 0.00 0.00 0. 00 100.00 6302821

0201-0210 MEAT 95.30 4.70 0.00 0.00 0.00 0.00 100.00 8408

0301-0307 F ISH AN D SEAF OOD 94. 06 1. 75 0.18 > 0.02 3.99 0. 00 100.00 1411446

0401-0410 DAIRY,EGGS,HON EY,ETC 5. 46 94. 54 0.00 0.00 0.00 0. 00 100.00 1483

0501-0511 OTHER OF AN IMAL ORIGIN 83. 10 15. 30 0.00 < 1.59 0.00 0. 00 100. 00 9006

0601-0604 LIVE TREES AN D P LAN T S 99. 70 0. 14 0. 00 < 0. 16 0. 00 0. 00 100. 00 9480

0701-0714 VEGETABL ES 99. 85 0. 15 0. 00 0. 00 0. 00 0. 00 100. 00 191618

0801-0814 EDIBLE FRUIT AND NUTS 99.99 0.01 0.00 0.00 0.00 0.00 100.00 4276101

0901-0910 SPICES,COFFEE AND TEA 6. 16 89. 38 4. 46 > 0. 00 0. 00 0. 00 100. 00 1409

1001-1008 CEREAL S 98. 95 1. 05 0. 00 0. 00 0. 00 0. 00 100. 00 1059

1101-1109 MIL L IN G; MAL T ; ST ARCH 57. 93 42. 07 0. 00 0. 00 0. 00 0. 00 100. 00 5148

1201-1214 MISC GRAIN ,SEED, FRUIT 61. 60 33. 49 0. 00 < 4. 91 0. 00 0. 00 100. 00 32306

1301-1302 LAC; VEGETABL SAP , EXT RCT 94. 16 5. 84 0. 00 0. 00 0. 00 0. 00 100. 00 13913

1401-1404 OTHER VEGETABL E 99. 05 0. 95 0.00 0.00 0.00 0. 00 100.00 6570

1501-1522 F AT S AND OILS 99. 16 0. 66 0.00 < 0.18 0.00 0. 00 100.00 236339

1601-1605 P REP ARED MEAT , F ISH, ET C 94. 15 5. 83 0. 00 < 0.02 0.00 0. 00 100. 00 144513

1701-1704 SUGARS 97.66 2.34 0.00 0.00 0.00 0.00 100.00 47882

1801-1806 COCOA 45. 32 54. 68 0.00 0.00 0.00 0. 00 100.00 14820

1901-1905 BAKING RELATED 58. 91 41. 09 0.00 0.00 0.00 0. 00 100.00 22797

2001-2009 PRESERVED FOOD 99. 46 0. 54 0. 00 0. 00 0. 00 0. 00 100. 00 205310

2101-2106 MISCELLAN EOU S FOOD 66. 41 33. 59 0. 00 0. 00 0. 00 0. 00 100. 00 104421

2201-2209 BEVERAGES 67. 85 30. 14 0. 08 < 0. 44 1. 49 0. 00 100. 00 59504.69058

2301-2309 FOOD WASTE; ANIMAL FEED 91.59 7.77 0.64 > 0.00 0.00 0.00 100.00 62428.67902

2401-2403 TOBACCO 0. 20 0. 30 0. 00 0. 00 0. 00 0. 00 100. 00 0

Total 65. 30 34. 22 0.02 > 0.02 0.43 0. 00 100.00 13196428.76

Japan and Thailand 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Ver tic al (Export) Hori-zontal Not Class

T>J J>T T>J J>T

0101-0106 L IVE AN IMALS 53. 93 46. 07 0.00 0.00 0.00 0. 00 100.00 8124387

0201-0210 MEAT 99.98 0.02 0.00 0.00 0.00 0.00 100.00 1913755

0301-0307 F ISH AN D SEAF OOD 90. 13 7. 59 0.86 > 0.00 1.42 0. 00 100.00 6289278

0401-0410 DAIRY, EGGS,HON EY,ETC 94. 93 4. 27 0.16 < 0.64 0.00 0. 00 100.00 29929

0501-0511 OTHER OF AN IMAL ORIGIN 98. 41 1. 57 0. 00 < 0. 02 0. 00 0. 00 100. 00 95557

0601-0604 LIVE TREES AN D P LAN T S 99. 95 0. 02 0. 00 0. 00 0. 03 0. 00 100. 00 296754

0701-0714 VEGETABL ES 99. 82 0. 18 0. 00 0. 00 0. 00 0. 00 100. 00 607052

0801-0814 EDIBL E FRUIT AND N UTS 87. 54 12. 46 0.00 0.00 0.00 0. 00 100.00 107757

0901-0910 SPICES,COFFEE AND TEA 97. 28 2. 72 0. 00 < 0. 01 0. 00 0. 00 100. 00 252619

1001-1008 CEREAL S 99. 97 0. 03 0. 00 0. 00 0. 00 0. 00 100. 00 368018

1101-1109 MIL L IN G; MAL T ; ST ARCH 77. 19 22. 77 0. 00 0. 00 0. 05 0. 00 100. 00 229808

1201-1214 MISC GRAIN ,SEED, FRUIT 75. 92 18. 02 0.00 < 6. 06 0.00 0. 00 100.00 121710

1301-1302 L AC;VEGETABL SAP, EXT RCT 94.79 4.26 0. 00 < 0.95 0.00 0.00 100. 00 81047

1401-1404 OTHER VEGETABLE 98. 68 1. 32 0.00 0.00 0.00 0. 00 100.00 29243

1501-1522 F AT S AND OILS 83. 65 14. 25 0. 17 < 1.38 0.56 0. 00 100.00 78982

1601-1605 PREP ARED MEAT, F ISH, ET C 99. 66 0. 34 0. 00 0.00 0.00 0. 00 100. 00 5859280

1701-1704 SUGARS 99.35 0.65 0.00 0.00 0.00 0.00 100.00 1412242

1801-1806 COCOA 93. 03 4. 39 2.59 > 0.00 0.00 0. 00 100.00 47358

1901-1905 BAKIN G RELATED 97. 13 2. 60 0.00 < 0.27 0.00 0. 00 100.00 747848

2001-2009 PRESERVED FOOD 99. 54 0. 46 0. 00 0. 00 0. 00 0. 00 100. 00 910601

2101-2106 MISCELL AN EOU S FOOD 84. 36 14. 96 0.00 < 0.58 0.10 0. 00 100.00 669703

2201-2209 BEVERAGES 90. 14 8. 41 0. 64 > 0. 48 0. 33 0. 00 100. 00 285522

2301-2309 FOOD WASTE; ANIMAL FEED 96. 69 3. 13 0.08 > 0.02 0.08 0. 00 100.00 1693343

2401-2403 TOBACCO 91. 09 8. 91 0. 00 0. 00 0. 00 0. 00 100. 00 27887

T otal 84. 36 15. 09 0. 19 > 0.06 0.31 0. 00 100.00 30279681

Intra-Industry Trade Patterns between Japan and East Asian Countries in the Agri-Food Sector

Table 4. Share of Each Trade between Japan and East Asian Countries

Unit: Thousand US dollars, %

Japan and China 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Ver tic al (Export) Hori-zontal Not Class

C>J J>C C>J J>C

0101-0106 LIVE AN IMALS 22. 94 77. 06 0.00 0.00 0.00 0. 00 100 2059644

0201-0210 MEAT 99. 84 0. 12 0.00 < 0.04 0.00 0. 00 100 262057

0301-0307 F ISH AN D SEAF OOD 91. 68 6. 17 1.75 > 0.14 0.25 0. 00 100 1257549

0401-0410 DAIRY,EGGS,HONEY,ETC 98.67 1.31 0.00 0.00 0.02 0.00 100 45938

0501-0511 OTHER OF AN IMAL ORIGIN 99. 41 0. 48 0.11 > 0.01 0.00 0. 00 100 195582

0601-0604 LIVE TREES AN D P LAN T S 94. 16 3. 37 0. 00 < 2. 42 0. 00 0. 05 100 29895

0701-0714 VEGETABL ES 99. 95 0. 04 0. 00 0. 00 0. 01 0. 00 100 1032639

0801-0814 EDIBLE FRUIT AND N UTS 99. 88 0. 11 0.01 > 0.00 0.00 0. 00 100 170804

0901-0910 SPICES,COFFEE AND TEA 99. 24 0. 73 0. 00 < 0. 03 0. 00 0. 00 100 182957

1001-1008 CEREAL S 99. 98 0. 02 0. 00 0. 00 0. 00 0. 00 100 126277

1101-1109 MIL L IN G; MAL T ; ST ARCH 70. 52 29. 17 0. 00 < 0. 28 0. 02 0. 02 100 9118

1201-1214 MISC GRAIN ,SEED, FRUIT 96. 57 2. 23 0.00 < 1. 12 0.07 0. 00 100 331233

1301-1302 L AC; VEGET ABL SAP,EXT RCT 92. 07 3. 27 0.02 < 3.95 0.69 0. 00 100 28708

1401-1404 OTHER VEGETABL E 99. 40 0. 60 0.00 0.00 0.00 0. 00 100 27417

1501-1522 F AT S AND OILS 67. 15 25. 63 0.33 < 6.58 0.29 0. 03 100 17338

1601-1605 P REP ARED MEAT , F ISH, ET C 99. 54 0. 46 0. 00 0.00 0.00 0. 00 100 1676732

1701-1704 SU GARS 78. 67 20. 75 0.00 < 0.32 0.04 0. 21 100 14047

1801-1806 COCOA 75. 01 5. 39 2. 94 < 14.12 2.54 0. 00 100 9412

1901-1905 BAKING RELATED 94. 09 5. 75 0.00 < 0.16 0.00 0. 00 100 152322

2001-2009 PRESERVED FOOD 99. 80 0. 20 0. 00 0. 00 0. 00 0. 00 100 739194

2101-2106 MISCELL AN EOU S FOOD 62. 19 37. 20 0.00 < 0.31 0.17 0. 14 100 135481

2201-2209 BEVERAGES 92. 29 3. 52 1. 42 > 1. 03 1. 75 0. 00 100 80721

2301-2309 FOOD WASTE; ANIMAL FEED 96. 86 3. 14 0.00 0.00 0.00 0.00 100 179031

2401-2403 TOBACCO 97. 35 0. 34 0. 00 < 2. 31 0. 00 0. 00 100 18398

Total 79. 42 20. 10 0. 27 > 0.14 0.06 0. 00 100 8782492

Japan and Singapore 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Ver tic al (Export) Hori-zontal Not Class

S>J J>S S>J J>S

0101-0106 L IVE AN IMALS 23. 11 76. 89 0.00 0.00 0.00 0. 00 100.00 1862573

0201-0210 MEAT 18. 86 81. 14 0. 00 0.00 0.00 0. 00 100.00 258

0301-0307 F ISH AN D SEAF OOD 81. 79 17. 05 0.28 < 0.52 0.35 0. 00 100.00 52679

0401-0410 DAIRY, EGGS,HON EY,ETC 50. 82 49. 18 0.00 0.00 0.00 0. 00 100.00 572

0501-0511 OTHER OF AN IMAL ORIGIN 26. 06 73. 94 0. 00 0. 00 0. 00 0. 00 100. 00 54

0601-0604 LIVE TREES AN D P LAN T S 99. 80 0. 19 0. 00 < 0. 01 0. 00 0. 00 100. 00 9659

0701-0714 VEGETABLES 0. 54 99. 46 0.00 0.00 0.00 0. 00 100.00 778

0801-0814 EDIBL E FRUIT AND N UTS 1. 67 98. 33 0.00 0.00 0.00 0. 00 100.00 1075

0901-0910 SPICES,COFFEE AND TEA 60. 63 37. 95 0. 00 < 1. 42 0. 00 0. 00 100. 00 3986

1001-1008 CEREAL S 3. 63 96. 37 0. 00 0. 00 0. 00 0. 00 100. 00 239

1101-1109 MIL L IN G; MAL T ; ST ARCH 0. 14 99. 86 0. 00 0. 00 0. 00 0. 00 100. 00 8024

1201-1214 MISC GRAIN ,SEED, FRUIT 21. 16 78. 51 0.20 > 0. 12 0.00 0. 00 100.00 1529

1301-1302 L AC; VEGET ABL SAP,EXTRCT 20. 42 77. 83 0.00 < 1.75 0.00 0. 00 100.00 455

1401-1404 OTHER VEGETABLE 80. 04 19. 96 0.00 0.00 0.00 0. 00 100.00 192

1501-1522 F AT S AND OILS 65. 52 27. 28 0. 00 < 7.19 0.01 0. 00 100.00 17204

1601-1605 PREP ARED MEAT, F ISH, ET C 3. 83 96. 17 0. 00 0.00 0.00 0. 00 100. 00 6183

1701-1704 SU GARS 9. 51 90. 49 0. 00 0.00 0.00 0. 00 100. 00 3229

1801-1806 COCOA 95. 63 2. 24 0.00 < 0.81 1.31 0. 00 100.00 73568

1901-1905 BAKIN G RELATED 90. 56 8. 88 0.00 < 0.55 0.00 0. 00 100.00 80561

2001-2009 PRESERVED FOOD 15. 98 84. 02 0. 00 0. 00 0. 00 0. 00 100. 00 1153

2101-2106 MISCELL AN EOU S FOOD 74. 12 25. 88 0.00 0. 00 0. 00 0. 00 100. 00 51980

2201-2209 BEVERAGES 23. 27 64. 61 0. 00 < 3. 28 8. 83 0. 00 100. 00 6712

2301-2309 FOOD WASTE; ANIMAL FEED 35. 14 64.86 0.00 0.00 0.00 0.00 100.00 2148

2401-2403 TOBACCO 0. 00 99. 99 0. 00 0. 00 0. 00 0. 00 100. 00 14621

T otal 31. 04 68. 74 0. 01 < 0.13 0.08 0. 00 100. 00 2199431

Kuo-I Chang, Chung-Hsuan Wei

Table 4. Share of Each Trade between Japan and East Asian Countries

Unit: Thousand US dollars, %

Japan and Korea 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t Vertical (Export) Hori-zontal Not Class

K>J J>K K>J J>K

0101-0106 LIVE AN IMALS 26. 86 73. 14 0.00 0.00 0.00 0. 00 100.00 1387171

0201-0210 MEAT 99. 58 0. 42 0.00 0.00 0.00 0. 00 100.00 125459

0301-0307 F ISH AN D SEAF OOD 85. 86 13. 11 0.96 > 0.02 0.04 0. 00 100.00 795623

0401-0410 DAIRY,EGGS,HON EY,ETC 64. 83 31. 42 0.00 0.00 3.76 0. 00 100.00 1861

0501-0511 OTHER OF ANIMAL ORIGIN 65. 80 34. 13 0. 07 0. 00 0. 00 0. 00 100. 00 9303

0601-0604 LIVE TREES AN D P LAN T S 98. 01 1. 67 0. 08 < 0. 19 0. 05 0. 00 100. 00 17013

0701-0714 VEGETABLES 99. 39 0. 55 0.00 0.00 0.06 0. 00 100.00 84592

0801-0814 EDIBLE FRUIT AND N UTS 99. 85 0. 02 0.02 > 0.01 0.10 0. 00 100.00 72861

0901-0910 SPICES,COFFEE AND TEA 85. 29 14. 34 0. 11 0. 26 0. 00 0. 00 100. 00 7424

1001-1008 CEREAL S 83. 83 16. 17 0. 00 0. 00 0. 00 0. 00 100. 00 35

1101-1109 MIL L IN G; MAL T ; ST ARCH 55. 15 33. 89 0. 00 < 10. 96 0. 00 0. 00 100. 00 923

1201-1214 MISC GRAIN ,SEED, FRUIT 84. 08 12. 43 1. 89 > 1. 48 0. 11 0. 01 100. 00 102796

1301-1302 L AC; VEGET ABL SAP,EXT RCT 85. 61 12. 91 0.00 < 0.81 0.67 0. 00 100.00 45746

1401-1404 OTHER VEGETABL E 91. 53 7. 74 0.00 < 0.73 0.00 0. 00 100.00 927

1501-1522 F AT S AND OILS 10. 18 69. 32 7.35 < 13. 15 0.00 0. 00 100.00 14780

1601-1605 P REP ARED MEAT , F ISH, ET C 96. 21 1. 81 1. 47 > 0.05 0.46 0. 00 100. 00 161935

1701-1704 SU GARS 26. 23 63. 87 0.00 < 1.97 7.92 0. 00 100.00 13914

1801-1806 COCOA 89. 62 6. 54 0.96 < 2.88 0.00 0. 00 100.00 24368

1901-1905 BAKING RELATED 93. 19 4. 74 0.02 < 2.03 0.02 0. 00 100.00 69370

2001-2009 PRESERVED FOOD 95. 11 4. 89 0. 00 0. 00 0. 00 0. 00 100. 00 88374

2101-2106 MISCELLAN EOU S FOOD 63. 16 36. 38 0. 00 < 0. 03 0. 00 0. 42 100. 00 104412

2201-2209 BEVERAGES 93. 92 2. 91 0. 22 < 2. 52 0. 42 0. 00 100. 00 110490

2301-2309 FOOD WASTE; ANIMAL FEED 47.33 52.28 0.28 > 0.06 0.00 0.04 100.00 29359

2401-2403 TOBACCO 0. 91 96. 32 2. 71 > 0. 00 0. 07 0. 00 100. 00 39198

Total 60. 77 38. 38 0. 45 > 0.29 0.10 0. 01 100. 00 3307934

Japan and Taiwan 1997-2005 Share Value

Industry One-way Intra-industry Total

Expor t T>J J>T Vertical (Export) Hori-zontal Not Class

T>J J>T

0101-0106 LIVE AN IMALS 41. 41 58. 59 0.00 0.00 0.00 0. 00 100.00 1656210

0201-0210 MEAT 98. 29 1. 70 0.01 > 0.00 0.00 0. 00 100.00 41231

0301-0307 F ISH AN D SEAF OOD 97. 09 2. 75 0.00 < 0.17 0.00 0. 00 100.00 749323

0401-0410 DAIRY,EGGS,HON EY,ETC 58. 73 40. 98 0.11 < 0.18 0.00 0. 00 100.00 3226

0501-0511 OTHER OF AN IMAL ORIGIN 95. 59 4. 23 0.18 > 0.00 0.00 0. 00 100.00 78658

0601-0604 LIVE TREES AN D P LAN T S 87. 96 2. 30 7. 99 > 1. 06 0. 62 0. 08 100. 00 33436

0701-0714 VEGETABLES 87. 89 10. 64 0.70 > 0.67 0.10 0. 00 100.00 75657

0801-0814 EDIBLE FRUIT AND N UTS 67. 52 31. 43 0.08 < 0.84 0.12 0. 00 100.00 60991

0901-0910 SPICES,COFFEE AND TEA 92. 98 7. 02 0. 00 0. 00 0. 00 0. 00 100. 00 21918

1001-1008 CEREAL S 8. 45 91. 55 0. 00 0. 00 0. 00 0. 00 100. 00 466

1101-1109 MIL L IN G; MAL T ; ST ARCH 5. 06 94. 94 0. 00 0. 00 0. 00 0. 00 100. 00 2432

1201-1214 MISC GRAIN ,SEED, FRUIT 51. 86 38. 72 7. 37 > 1. 95 0. 00 0. 10 100. 00 19576

1301-1302 LAC;VEGETABL SAP, EXTRCT 61.67 33.47 0. 66 < 4.20 0.00 0.00 100. 00 6602

1401-1404 OTHER VEGETABL E 88. 86 1. 90 0.00 < 9.24 0.00 0. 00 100.00 2216

1501-1522 F AT S AND OILS 30. 80 49. 76 14.96 > 2.37 2.11 0. 00 100.00 9112

1601-1605 P REP ARED MEAT , F ISH, ET C 65. 62 34. 23 0. 00 0.00 0.16 0. 00 100. 00 105540

1701-1704 SU GARS 8. 08 88. 66 0.00 < 3.26 0.00 0. 00 100.00 11857

1801-1806 COCOA 0. 30 96. 30 3.41 > 0.00 0.00 0. 00 100.00 7504

1901-1905 BAKING RELATED 23. 06 67. 46 0.00 < 9.09 0.38 0. 00 100.00 40748

2001-2009 PRESERVED FOOD 72. 93 27. 03 0. 04 > 0. 00 0. 00 0. 00 100. 00 19182

2101-2106 MISCELL AN EOU S FOOD 27. 28 71. 97 0.08 < 0.66 0.01 0. 00 100.00 73615

2201-2209 BEVERAGES 6. 29 92. 52 0. 00 < 0. 91 0. 28 0. 00 100. 00 61207

2301-2309 FOOD WASTE; ANIMAL FEED 39.74 57.89 2.27 > 0.08 0.00 0.01 100.00 13766

2401-2403 TOBACCO 0. 07 99. 93 0. 00 0. 00 0. 00 0. 00 100. 00 128027

Total 56. 81 42. 67 0. 21 < 0.28 0.03 0. 00 100. 00 3222502

7.

Japan-Korea: HS150420000 (Fats and oils and their fractions, of fish, other than liver oils) and HS110900000 (Wheat gluten, whether or not dried).

8.

Japan-Taiwan: HS140110000 (Bamboos) and HS190590100 (Arare, Senbei and other bakers�� wares, of rice).

In the opposite case of Japan��s significant share of high-quality imports which are larger than Japan��s share are as follows.

1.

Japan-Indonesia: HS050800100 (Shells, unworked or simply prepared but not cut to shape) and HS030342000 (Yellowfin tunas (Thunnus albacares), excluding fillets and other fish meats, livers and roes, frozen), HS030375000 (Dogfish and other sharks, excluding fillets and other fish meat, livers and roes, frozen).

2.

Japan-Malaysia: HS240220000 (Cigarettes containing tobacco).

3.

Japan-Philippine: HS090210000 (Green tea (not fermented) in immediate packings of a content not exceeding 3 kg).

4.

Japan-Thailand: HS180631000 (Chocolate and other food preparations containing cocoa, in blocks, slabs or bars, filled, weighing not more than 2 kg).

5.

Japan-China: HS030311000 (Pacific salmon : Sockeye salmon (red salmon) (Oncorhynchus nerka), excluding fillets and other fish meat, livers and roes, frozen), HS030321000 (Trout (Salmo trutta, Oncorhynchus mykiss, Oncorhynchus clarki, Oncorhynchus aguabonita, Oncorhynchus apache and Oncorhynchus chrysogaster ), excluding fillets and other fish meat, livers and roes, frozen) and HS220900000 (Vinegar and substitutes for vinegar obtained from acetic acid).

6.

Japan-Singapore: HS120930000 (Seeds of herbaceous plants cultivated principally for their flowers, of a kind used for sowing).

7.

Japan-Korea: HS240220000 (Cigarettes containing tobacco), HS160416000 (Anchovies, prepared or preserved, whole or in pieces),

and HS030346 (Southern bluefin tunas (Thunnus maccoyii), excluding fillets and other fish meat, livers and roes, frozen).

8. Japan-Taiwan: HS151800000 (Animal or vegetable fats and oils and their fractions), HS060210000 (Unrooted cuttings and slips), and HS120600000 (Sunflower seeds).

We find that Japan significantly import more high-quality fishery products from trading partners due to recent high quality fishery products battle in international markets. Furthermore, the share of HIIT are still small, but they are larger than the share of VIIT for the case of Japan-Philippine and Japan-Thailand (Japan-Philippine: 0.04 (0.02+0.02) < 0.43, Japan-Thailand: 0.25 (0.19+0.06) < 0.31). In the case of Japan-Philippine and Japan-Thailand, fishery products of Bonito (HS030343000) are intra-industry transacted horizontally. In the case of Japan-Singapore and Japan-Korea, the share of HIIT are larger than the share of VIIT in Beverages (HS2201-HS2209) and Sugars (HS1701-1704), respectively.

4. Determinants

The relationship between factor endowments and the share of VIIT, HIIT and IIT arising from theory would be examined for Japan��s trade with 8 East Asian countries in agri-food products, respectively. The data set includes 8 East Asian countries and 9 years (1997-2005). �@However, there are no trade data of Japan-Malaysia of 2005 for VIIT and no HIIT between Japan and trading partners for 13 samples. Therefore, observations are 71, 59 and 72 for VIIT, HIIT and IIT, respectively. The difference in factor endowments is usually measured in empirical studies by bilateral in per capita GDP.7 Therefore, we test the factor

In the model of Flam and Helpman (1987), the number of varieties exported by the low-productively country depends on the relative wage, differences in technology and the extent to which income distribution overlap. The volume and share of intra-industry trade may be positively related to differences in the relative wage and , to the

133

Agri-Food Sector

endowments hypothesis controlling for distance between Japan and its trading partners. In addition, we include direct measure of factor endowment corresponding to land. Following Ferto (2005), we test the equation based on Flam and Helpman (1987) by following specification employing panel regression:

IITijt n =�\0 +�\1ln DGDPCijt +�\2 ln GDPit +�\3 ln GDPjt +�\4 DISTANCEijt

+�\5 DLANDijt + vij +�`ijt (4.1)

where n denotes one of the three IIT share, i.e., ��VIIT�� ��HIIT�� and ��IIT�� ; j is Japan , i is trading partner, and t is time. DGDPCijt denotes the difference in per capita GDP between i nad j calculated from database of Asian Development Bank .

GDPit and GDPjt are the GDP in i nad j, both from database of Asian Development Bank. DISTANCEijt is the distance between Tokyo and the capital city of i, calculated from CEPII database. DLANDijt denotes the

difference in arable land in one thousand hectares between Japan and trading partners calculated from FAO database. The expected signs for total VIIT: �\ ,�\ ,�\ >0 and �\ ,�\ <0.

125 34

The est imated resu lt s using t he d ep endent vari ab le for the share of VIIT, HIIT, and IIT are listed in Table 5, respectively . The random effects model gave the best results in terms of statistical significance for the share of VIIT. In VIIT, the positive relationship between differences in the factor endowments

extent that differences in GDP per capita and the relative wage are correlated, differences in per capita GDP. Durkin and Krygier (2000), p.762 utilizes GDP per capita to proxy for the capital/labor ratio. They examine the relationship between per capita GDP differences and bilateral intra-industry trade shares and find a positive and significant relationship between GDP per capita differences and the trade shares only in the regressions on the vertically differentiated shares. Ferto (2005), p.127 also applies bilateral inequality in per capita GDP to measure the differences in factor endowments.

and the share of VIIT are obtained. The estimated coefficients of GDPi and GDPj have the expected signs and are significant, while the DISTANCE and DLAND variables have unexpected signs but significant. However, the results become insignificant in the share of HIIT and IIT. The weak positive relationship between the share of VIIT (also HIIT and IIT) and the factor endowment may be a result of the rising share of foreign direct investment due to multinational corporations in agri-food trade. Despite many previous papers pointed out the important role of foreign direct investment, we still could not find suitable data mining methods to fit the VIIT and agricultural or food foreign direct investment data in same disaggregated industry level. Particularly, agricultural or food foreign direct investment should be considered to be a cause of the rising share of VIIT with several particular trading partners and requires further examination.

5. Concluding remarks

This paper attempts to investigate the different patterns of IIT in the agri-food sector between Japan and East Asian countries from 1997 to 2005 at the HS 9-digit level. Our empirical results show that the large portion of agri-food trade between Japan and East Asian countries is still one-way trade while IIT, particularly the share of VIIT has not grown rapidly from 1997 to 2005. Particularly, the fact that Japan imports high-quality agri-food products more than exports reflects in the opposite direction of quality ladder story based on Flam and Helpman type vertically differentiated trade model. The weak positive relationship between the share of VIIT (also HIIT and IIT) and the factor endowment may be a result of the rising share of foreign direct investment due to multinational corporations in agri-food trade. This may caused by famous restaurants located in large cities, who import high-quality agri-food products from East Asian countries as Michelin guide Tokyo 2009 features 30 hotels and 173 restaurants in Tokyo. Thirty six restaurants were given two stars, and nine restaurants were given three stars. Moreover, Shimada et al. (2006) points out the adverse imports or indirect imports activities of large multinational corporations in the agribusiness and agri-food products industry like Mitsubishi Syouji, Mitsui Bussan, Sumitomo Syouji, Itocyu Syoujyi and so on are determinant driving forces, stimulating the two-way international food trade and foreign direct investment. Particularly, agricultural or food foreign direct investment should be considered to be a cause of the rising share of VIIT with several particular trading partners and requires further examination. Several previous papers show that there are remarkable differences between the effect of abolition of import tariffs and entire elimination of all import barriers including non-tariff barriers. This suggests the effect of Preferential Trading Arrangements formation if two-way agri-food trade plays a significant role in reducing not only import tariffs but also nontariff barriers between Japan and East Asian Countries.