An empirical analysis of East Asian computer and electronic goods exports

Abstract

For the last 15 years, computers and electronic goods have been the leading export categories from East Asia to the rest of the world. They are produced within regional production and distribution networks. Japan, South Korea and Taipei, China, construct technology-intensive parts and components and ship them to China and ASEAN for processing by lower-skilled workers and reexport. This paper presents evidence that exchange rate appreciations in countries supplying parts and components to East Asian assembly economies would curtail these sophisticated exports, while exchange rate appreciations in assembly economies would not. The evidence also indicates that decreases in income in importing countries would significantly reduce computer and electronic goods exports.

Keywords:

• global supply chain
• exchange rate elasticities
• East Asia

JEL classifications:

• F32
• F41

Acknowledgements

I thank Masahisa Fujita, Atsuyuki Kato, Akira Kawamoto, Masahiro Kawai, Ginalyn Komoto, Mario Lamberte, Kozo Oikawa, Robert Owen, Kiichiro Sato and Ryuhei Wakasugi for extremely valuable comments. Any errors are my responsibility. I began this paper while working at the Research Institute of Economy, Trade and Industry (RIETI). I thank RIETI for providing an excellent research environment.

Notes

1. Koopman et al. (2008) used input-output tables from 1997 to 2002. The rapid increase in wages over the last decade indicates that China's value-added has increased since then. I am indebted to an anonymous referee for this point.

2. Bénassy-Quéré et al. (2009) argue that global rebalancing will be accompanied by a depreciation of the dollar over time.

3. Indonesia is excluded because it plays a small role in the computer industry. Singapore is excluded because its role in entrepôt trade may complicate attempts to estimate exchange rate elasticities.

4. Electronic components correspond to the ISIC classification number 321. Data on electronic components come from the CEPII-CHELEM database.

5. Computers and office equipment correspond to the ISIC classification number 300.

6. I am indebted to an anonymous referee for this point.

7. These goods correspond to SITC classification numbers 75 (excluding 751.3 and 759.1), 761-4, 772, 773, 778 and 813, and the HS classification numbers 8469-73, 8505-8508, 8511-13, 8517-22, 8525-39, 8543-48 and 9505 (excluding .30).

8. The countries are Argentina, Australia, Austria, Belgium, Bangladesh, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Greece, Italy, Japan, the Netherlands, New Zealand, Norway, Poland, Saudi Arabia, South Korea, Spain, Sweden, Switzerland, Taipei, China, Turkey, the UK and the US.

9. Garcia-Herrero and Koivu (2007) posit that China's WTO accession began affecting China's trade after it became certain that China would join the WTO in the beginning of 2000. The WTO dummy variable is thus set equal to 1 beginning in 2000.

10. Results using other DOLS specifications are similar and are available on request.

11. Another perspective is that the US trade deficit reflects overconsumption by Americans due to the strong dollar. A depreciation of the dollar will help the US by raising the price of imports and lowering the price of exports. I am indebted to an anonymous referee for this point.