Localization and overseas R&D activity: the case of Taiwanese multinational enterprises in China

This study investigates the determinants of overseas research and development (R&D) and the influences of various aspects of localization on affiliates' R&D intensity. Using a dataset of Taiwanese multinational enterprises (MNEs) in China, the empirical estimations find that MNEs with a larger firm size, more R&D expenditure, and a higher outward foreign direct investments intensity tend to undertake R&D. Host regions' characteristics, particularly market size and R&D resources, do matter for attracting MNEs to conduct R&D locally. Crucially, affiliates' R&D intensity is related to the degree of localization. The degree of market localization and localization of the R&D network has a positive association with affiliates' R&D intensity. From the perspective of R&D policy, a country with healthy R&D infrastructures helps attract the establishment of R&D labs of MNEs.     

Measuring Barriers to International Division of Labor in East Asia*

International fragmentation has developed dramatically in East Asia since the 1990s. The purpose of the present paper is to measure border barriers in transactions of intermediate goods in East Asian countries. We find that the barriers in each country have steadily declined since 1985. The barriers in China and Taiwan have declined remarkably since the 1980s, whereas those in Indonesia experienced a slight increase in the 1980s. These results are qualitatively unchanged even if we control the effect of agglomeration on intra‐national inputs.     

Tariff scheme choice

Review of World Economics - This paper examines the determinants of the probability that an exporter chooses between a most-favored nation (MFN) scheme and multiple regional trade agreement (RTA)...     

How does import processing time impact export patterns?

We examine how import processing time, which is one of the major obstacles in international trade, affects export patterns at the establishment level. Investigating the effect of such time costs on export patterns reveals how smoothness or sluggishness in operations at one stage affects all stages in an international production network. We first discuss the effects of import processing time on exports, export shipment frequency and exports per shipment from a theoretical standpoint. We employ highly detailed customs data for Thailand from 2007 to 2011 to empirically investigate our theoretical predictions. Import processing time is measured using the difference between the dates on which import shipments arrive in ports and when they were released from the container yard. Results suggest that longer import processing times reduce total exports, particularly as a result of decreasing export frequency; this testifies to the importance of time costs in international trade. It is also revealed that negative effects of import processing time on exports per shipment appear in some specific instances, such as in the case of sea transportation. These results imply that the time spent in one stage has significant effects on both upstream and downstream stages in international production networks.     

SPATIAL DISTRIBUTION OF INDUSTRIAL PRODUCTION: A COMPARISON OF EAST ASIA AND EUROPE

Inspired by the observed contrasting patterns of geographical distribution of the electric machinery industry in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships in industry sizes among countries within a region by use of spatial econometric techniques. The results indicate that, while the size of the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.     

Does firm size matter in exporting and using FTA schemes?

In this paper, we empirically compare the role of firm size when exporting with that when using free trade agreement (FTA) schemes. We employ a unique survey providing detailed information on FTA use by Japanese affiliates in ASEAN, India, and Oceania. Our findings from the analysis on Japanese affiliates in ASEAN are as follows. First, firm size matters in both decisions on exporting and on using FTA schemes. In particular, firm size is more quantitatively important in decisions on FTA use than on exporting. Second, firms with experience in utilizing FTAs for exporting have an approximately 40% higher probability of using an FTA for exporting to a new country. Third, larger-sized firms use a larger number of FTA schemes.     

How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis

This study investigates the effect of foreign direct investments (FDI) on home productivity using plant-level data rather than firm-level data. Our results are consistent with the theoretical predictions. Horizontal FDI (HFDI) does not have a significantly positive effect on home productivity in plants that have the same activities abroad. In contrast, vertical FDI (VFDI) significantly enhances productivity in plants with an input–output relationship with activities relocated abroad. Furthermore, focusing on FDI in East Asia, the productivity improvements at home through VFDI are even greater, which might be caused by significant differences in factor prices between Japan and host countries.     

Trade Creation Effects of Regional Trade Agreements: Tariff Reduction versus Non‐tariff Barrier Removal

This study uses the most disaggregated tariff line‐level trade data in a large number of countries in the world to empirically decompose the trade creation effects of regional trade agreements (RTAs) into those owing to tariff reduction and those owing to non‐tariff barrier (NTB) removal. Specifically, utilizing our detailed dataset, we employ the standard gravity equation and identify those effects by estimating the trade creation effects of RTAs for ineligible and eligible products for RTA preferential schemes separately. Our major findings are as follows. First, for the whole sample, there are significantly positive trade creation effects owing to tariff reduction while the effects for NTB removal are weak. Second, the trade creation effects of tariff reduction and NTB removal are substantially large in the case of trade among low‐income countries but weak among high‐income countries.     

Impacts of common rules of origin on FTA utilization

This study empirically examines the impacts of sharing rules of origin (RoOs) with other ASEAN?+?1 free trade agreements (FTAs) on ASEAN–Korea FTA/ASEAN–China FTA utilization in Thai exports in 2011. Our detailed empirical analysis suggests that the harmonization of RoOs across FTAs plays some role in terms of reducing the costs yielded through the spaghetti bowl phenomenon. In particular, the harmonization to “change-in-tariff classification (CTC) or regional value content (RVC)” will play a relatively positive role in not seriously discouraging firms’ use of multiple FTA schemes. In contrast, harmonization to “CTC” or “CTC and RVC” hinders firms from using those schemes.