CCAS Public Lecture (co-hosted with Faculty of Policy Studies)
"Economic Integration and Cooperation in East Asia:
Its Role and Directions"

on Wednesday, January 16, 2008 10:45am-12:15pm
at Rinkokan 301, Doshisha University

Prof. Fukunari Kimura, Keio University

Prof. Shigeyuki Abe, Doshisha University

Professor Fukunari Kimura of Keio University presented interesting insights on "Economic Integration and Cooperation in East Asia: Its Role and Direction" on January 16, 2008. This lecture was sponsored by CCAS and Faculty of Policy Studies.
A summary of his presentation is given below.

Prof. Kimura began by reviewing the current status of production activities and FDI developments in Asia. He noted that the secret behind East Asia's growth lies in its FDI-export linkages. Moreover, most of the intra-industry trade that is occurring in East Asia is "vertical" rather than "horizontal"; that is, East Asia engages heavily in machinery parts and components trade, which propels this "vertical" trade. Kimura's study revealed that this type of trade is, in fact, progressing among the vastly different income-level countries. As such, Prof. Kimura notes that although many bilateral and regional FTAs have already been concluded and are under current negotiation, East Asia is already operating under an FTA; this is because the networking that is taking place requires low tariff rates and easy access. He further added that among the many FTA attempts that have been made, AFTA today is perhaps one of the cleanest and most effective regional trade arrangements in the world.

With regard to economic cooperation issues, Prof. Kimura points out that the above networking is key for development. Thus, cooperation should be tuned to serve countries of varied income levels. Concretely speaking, he suggests that the most important objective for countries such as Cambodia, Laos and Myanmar is to establish an industrial network by promoting FDI and involving local firms. However, the policy should be different for the Philippines, Indonesia and Vietnam which already have some networking. Rather for these countries, the suggestion is to have policy reform to further develop and enhance fragmentation and agglomeration and to concentrate more heavily on establishment and growth of production blocks. For the ASEAN forerunners, Thailand and Malaysia, cooperation should focus on further development of fragmentation and agglomeration.

In his closing remarks, Prof. Kimura warned about Japan's "hollowing-out." It is often emphasized that cross-border outsourcing reduces domestic employment, and consequently, weakens the basis of a domestic country's industrial structure. Hence, he suggest that the Japanese government seriously re-evaluate the strengths and weakness of Japan, and set up a comprehensive policy package to improve its own investment climate as a competing industrial location.

In addition to the above policy implications arising from his analysis, Prof. Kimura warned the audience that current international economic theory such as comparative advantage cannot explain what is occurring in East Asian trade today. He urged that international production/distribution networks in East Asia need to be explored further and an adequate theory needs to be developed.

The audience of more than 300 enjoyed Prof. Kimura's lecture and stayed on to participate in a Q&A session. In addition to this, a dozen students lined up to spend an additional half-hour to ask questions of Prof. Kimura and his work.


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