South Korea s Trade Intensity With ASEAN Countries and Its Changes Over Time*

Transcription

1 International Review of Business Researc Papers Vol. 8. No.4. May Pp Sout Korea s Trade Intensity Wit ASEAN Countries and Its Canges Over Time* Seung Jin Kim** Tis paper analyzes ow Korea s trade intensity wit te major five ASEAN countries (i.e., Indonesia, Malaysia, Pilippines, Singapore, and Tailand) canged from 2003 to For tis purpose, trade intensity index, trade complementarity index, and special country bias index between Korea and tese five major ASEAN countries were measured by a trade intensity index model developed by Yamazawa (1970). Te OECD trade matrix was used as data. Korea's trade intensity wit Indonesia was found to decrease from 6.99 in 2003 to 6.74 in 2008 due to te decrease in Korea's special country bias wit Indonesia from 6.64 in 2003 to 6.06 in 2008, even if Korea s trade complementarity wit Indonesia increased from 1.05 in 2003 to 1.11 in Terefore Korea's special country bias wit Indonesia sould be enanced by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Indonesia. It was also found tat trade intensity between Korea and oter four major ASEAN countries (i.e., Malaysia, Pilippines, Singapore, and Tailand) sowed an exactly opposite pattern of te above trade intensity between Korea and Indonesia. Here again, Korea's special country bias wit tese four ASEAN countries sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and tese four ASEAN countries. JEL Codes: F11, F13 and F14 1. Introduction Te Korean economy as experienced dramatic canges during te last four decades. From a typical, underdeveloped agrarian economy, Korea emerged on te world stage as one of te front runners among te NIEs (newly industrializing economies). Tis outstanding economic acievement is truly remarkable considering te poor endowment of natural resources and te small domestic market. For tis reason, te economic development strategy of Korea as been frequently referred to as a suitable model for oter countries on te road to development. In 2010 Korean exports to Indonesia rose to US$ 8.90 billion (i.e., 1.9% of Korea s total exports) and Korean imports from Indonesia reaced US$ billion (i.e., 3.3% of Korea s total imports). Consequently, Korea suffered from US$ 5.09 billion trade deficit wit Indonesia. Likewise, Korean exports to Malaysia in 2010 rose to US$ 6.11 billion (i.e., 1.3% of Korea s total exports) and Korean imports from Malaysia reaced US$ 9.53 billion (i.e., 2.2% of Korea s total imports). Accordingly, Korea suffered from US$ 3.42 billion trade deficit wit Malaysia. On te oter and, Korean exports to Pilippines in 2010 rose to US$ 5.84 billion (i.e., 1.3% of Korea s total exports) and Korean imports from Pilippines reaced US$ 3.49 billion (i.e., 0.8% of Korea s total imports). Consequently, Korea enjoyed * Tis work was supported by Hankuk University of Foreign Studies Researc Fund of **Prof. Seung Jin Kim, Dept. of International Economics and Law, Hankuk University of Foreign Studies, 270 Imundong, Dongdaemunku, Seoul , Korea. seunjkim@ufs.ac.kr

2 US$ 2.35 billion trade surplus wit Pilippines, wic accounted for 5.7% of Korean trade surplus wit te wole world. Likewise, Korean exports to Singapore in 2010 rose to US$ billion (i.e., 3.3% of Korea s total exports) and Korean imports from Singapore reaced US$ 7.85 billion (i.e., 1.8% of Korea s total imports). Accordingly, Korea enjoyed US$ 7.39 billion trade surplus wit Singapore, wic accounted for 17.9 % of Korean trade surplus wit te wole world. In 2010 Korean exports to Tailand rose to US$ 6.46 billion (i.e., 1.4% of Korea s total exports) and Korean imports from Tailand reaced US$ 4.17 billion (i.e., 1.0% of Korea s total imports). Consequently, Korea enjoyed US$ 2.29 billion trade surplus wit Tailand, wic accounted for 5.6% of Korean trade surplus wit te wole world. Tis paper analyzes ow Korea s trade intensity wit te five major ASEAN countries (i.e., Indonesia, Malaysia, Pilippines, Singapore, and Tailand) canged over time for te last five years (i.e., from 2003 to 2008). For tis purpose, Section 2 will briefly survey a trade intensity index model developed by Yamazawa (1970) and Kim (2004) and metodology and researc design of tis paper will be suggested in Section 3. Section 4 will measure a trade intensity index, a trade complementarity index, and a special country bias index between Korea and te five major ASEAN countries for te last five years by using te OECD trade matrix (2011). On top of tis, tis paper will also analyze te determinants of Korea s trade complementarity wit te major ASEAN countries over te periods at bot sectoral and aggregate levels (te analysis on te determinants of trade complementarity at a sectoral level was never attempted in te previous papers and accordingly tis paper is te first attempt wic tries to analyze te determinants of trade complementarity at bot sectoral and aggregate levels so far). Furtermore, Korea's promising and potential exportable products to te five major ASEAN countries will be identified, wic is also te first attempt of tis paper. Section 5 will summarize major empirical results and conclude te paper wit a few remarks. 2. Literature Review 2.1 Trade Intensity, Trade Complementarity, and Special Country Bias i According to te Heckscer-Olin type of two-country-two-product-two-factor model, trade patterns between countries will be determined by te comparative advantage structures between te two countries, determined by factor intensities of two products and factor endowment ratios of two countries. In te multi-country model, owever, various oter factors are found to play important roles in determining trade patterns among tose countries, as will be elaborated below. Two alternative models ave been developed for analyzing te world trade flows. One is a gravity model ii and te oter is a trade intensity index model. Te trade intensity index model (Yamazawa, 1970; Kim, 2004 and 2007) concentrates on te structure of departures of actual trade flows from trade flows estimated in gravity 64

3 model. Te index of intensity of country i's export trade wit country j (in sort, trade intensity index) is defined by I = i. /. j (1) were is country i s export to country j, and i.( j i j volume of world trade respectively. iii ),. j ( i ), and ( ) represent te total export of country i, total import of country j, and te total Tis trade intensity index can be decomposed into trade complementarity index (C ) and special country bias index (B ). Te country i's trade complementarity to country j (C ) is obtained by replacing te expected value of trade ( x ) for te actual one ( ) in te equation (1). C =. / i. j (2) Te divergence between te expected value of trade and te actual value defines te degree of special country bias as follows. B = = 1 / ) ( B (3) were B / is te degree of special country bias in te trade of commodity (B = ) and B turns out to be a weigted armonic mean of B. Te first line of equation (3) gives a decomposition of trade intensity into two components (i.e., I = C B ) wic is te basic formula for our analysis. 2.2 Determinants of Trade Complementarity iv To find te determinants of trade complementarity (C ), it can be decomposed as follows: C = ( ) S i R j (4) were S i = i. i. /, R j =. j. j / S i and R j are te sares of commodity in country i's total exports and country j's total imports respectively bot divided by commodity 's sare in world total trade, wic measure te degrees of country i's export specialization and country j's import specialization in commodity respectively. It sould be noted tat S i and R j also 65

4 measure country i s revealed comparative advantage (Balassa, 1965) and country j s revealed comparative disadvantage in commodity respectively. Te degree of concentration or diversification of country i's export specialization and country j's import specialization is affected by suc important aspects of comparative advantage as te size of a country, skewed resource endowments, etc Tey can be measured in terms of standard deviations of specialization indexes from teir mean (i.e., unity), wic are square roots of te variances defined as follows. σ 2 (S i ) = σ 2 (R j ) = ( ) ( ) (S i - 1) 2 (R j - 1) (5) Covariance of te indices of country i's export specialization and tose of country j's import specialization is defined as follows. COV (S i, R j ) = ( ) (S i - 1) (R j - 1) = ( ) = C - 1 S i R j - 1 or C = COV (S i, R j ) (6) Te correlation coefficient between te specialization structure of exports and imports, wic is a measure of te degree of matc of te two patterns neutral from te degree of concentration or diversification, can be obtained as follows. r = C O V ( S i, R j) ( S ) ( R ) (7) i j Since Korea's promising and potential exportable products to te five major ASEAN countries were not identified in te past studies, we will firstly attempt to find tem in tis paper. 3. Metodology and Model To calculate a trade intensity index, a trade complementarity index, and a special country bias index between Korea and te five major ASEAN countries for te last five years by adopting a trade intensity index model developed by Yamazawa (1970) and Kim (2007), te OECD (2011) trade matrix is used. As sown in Table 1, our basic sample of industries for te manufacturing sector consists of 35 industries at a SITC 2-digit level, wic is an optimal sample size for our researc. Te classification of manufactured products by factor intensity and end uses is also listed in Table 2. 66

5 On top of tis, tis paper will also analyze te determinants of Korea s trade complementarity wit te major ASEAN countries over te periods at bot sectoral and aggregate levels (te analysis on te determinants of trade complementarity at a sectoral level was never attempted in te previous papers and accordingly tis paper is te first attempt wic tries to analyze te determinants of trade complementarity at bot sectoral and aggregate levels so far). Furtermore, Korea's promising and potential exportable products to te five major ASEAN countries will be identified, wic is also te first attempt of tis paper. Table 1: List of 35 Industries in Manufacturing Sector SITC Code Name of Industry SITC Code 51 Organic Cemicals 71 Name of Industry Power Generating Macinery And Equipment 52 Inorganic Cemicals 72 Specialized Macinery 53 Dyeing, Tanning And Coloring Materials 73 Metal Working Macinery 54 Medicinal and Parmaceutical Pro ducts 74 Oter Industrial Macinery and Parts 55 Essential Oils and Perfume Materials Fertilizers Plastics in Primary Forms 77 Office Macines And ADP Equipment Telecommunications And Sound Recording Apparatus Electrical Macinery, Apparatus And Appliances, n.e.s. 58 Plastics in Non-primary Forms 78 Road Veicles 59 Cemical Materials and Products, n.e.s. 79 Oter Transport Equipments 61 Leater, Leater Manufactures And Dressed Furskins 81 Prefabricated Buildings, Sanitary, Heating and Ligting Fixtures, n.e.s. 62 Rubber Manufactures, n.e.s. 82 Furniture and Parts Tereof 63 Cork and Wood Manufactures (excluding Furniture) 64 Paper and Paper Manufactures Textile Yarn, Fabrics and Related Products Non-metallic Mineral Manufactures, n.e.s. 67 Iron and Steel Non-ferrous Metals 69 Manufactures of Metal, n.e.s. 83 Travel Goods, Handbags, etc. Articles of Apparel And Cloting Accessories 85 Footwear Professional and Scientific Instruments, n.e.s. Poto Apparatus, Optical Goods, Watces and Clocks Miscellaneous Manufactured Articles, n.e.s. 67

6 Table 2: Classification of Manufactured Products by Factor Intensity and End Uses SITC 2 digit Code 1) Labor-Intensive Products ) Capital/Tecnology-Intensive Products ) Nondurable Consumer Products ) Durable Consumer Products ) Capital Goods ) Labor-Intensive Intermediate Products ) Capital-Intensive Intermediate Products Source: Ministry of International Trade and Industry, Government of Japan, Wite Paper on International Trade (1986: ). 4. Findings 4.1 Korea s Trade Intensity, Trade Complementarity and Special Country Bias wit te Five Major ASEAN Countries Korea's trade intensity, trade complementarity, and special country bias wit te major ASEAN countries in te manufacturing sector for te period of are displayed in Table 3. Te results sow tat Korea's trade intensity wit Indonesia decreased from 6.99 in 2003 to 6.74 in 2008, wic advocates tat Indonesia became less important as Korea's major trading partner over te last five years. Tis is totally due to te following two facts. One is tat Korea's trade complementarity wit Indonesia increased from 1.05 in 2003 to 1.11 in 2008, wic means tat Korea's export structure and an Indonesian import structure became more complementary wit eac oter for te period of Te oter is tat Korea's special country bias wit Indonesia decreased from 6.64 in 2003 to 6.06 in 2008 despite of te increase in Korea s foreign direct investment (FDI in sort ereafter) to Indonesia from US$ million in 2003 to US$ million in Table 3: Korea s Trade Intensity, Trade Complementarity, and Special Country Bias Wit Indonesia, Malaysia, Pilippines, Singapore, Tailand in te Manufacturing Sector: 2003, 2008 Year Indonesia Malaysia Pilippines Singapore Tailand Trade Intensity Trade Complementarity Special Country Bias Table 3 also tells us tat Korea's trade intensity wit Malaysia increased from 3.85 in 2003 to 4.11 in 2008, wic proves tat Malaysia also became more important as Korea's major trading partner over te last five years. Tis is totally due to te 68

7 following two facts. One is tat Korea's trade complementarity wit Malaysia decreased from 1.51 in 2003 to 1.38 in 2008, wic means tat Korea's export structure and a Malaysian import structure became less complementary wit eac oter for te last five years. Te oter is tat Korea's special country bias wit Malaysia increased from 2.56 in 2003 to 2.97 in 2008, wic migt be partly due to te increase in Korea s FDI to Malaysia from US$ 43.7 million in 2003 to US$ million in Korea's trade intensity wit Pilippines also increased from 4.32 in 2003 to 5.99 in 2008, wic proves tat Pilippines also became more important as Korea's major trading partner over te last five years. Tis is totally due to te fact tat Korea's trade complementarity wit Pilippines decreased from 1.59 in 2003 to 1.35 in 2008, wic means tat Korea s export structure and Pilippines import structure became less complementary wit eac oter for te last five years, even if Korea s special country bias wit Pilippines increased from 2.72 in 2003 to 4.43 in 2008 due to te increase in Korea s FDI to Pilippines from US$ 16.7 million in 2003 to US$ million in Table 3 also tells us tat Korea s trade intensity wit Singapore was found to ave increased from 2.94 in 2003 to 4.79 in 2008 due to (a) te decrease in Korea s trade complementarity wit Singapore from 1.33 in 2003 to 1.22 in 2008, wic means tat Korea's export structure and a Singaporean import structure became less complementary wit eac oter for te last five years and (b) te increase in Korea s special country bias wit Singapore from 2.20 in 2003 to 3.94 in 2008, wic migt result from te increase in Korea s FDI to Singapore from US$ million in 2003 to US$ million in Korea s trade intensity wit Tailand also increased from 2.78 in 2003 to 3.61 in 2008 due to te increase in Korea s special country bias wit Tailand from 2.49 in 2003 to 3.39 in 2008, wic migt be partly due to te increase in Korea s FDI to Tailand from US$ 32.2 million in 2003 to US$ 91.3 million in Korea s trade complementarity wit Tailand, owever, decreased from 1.12 in 2003 to 1.06 in 2008, wic means tat Korea's export structure and a Tai import structure became less complementary wit eac oter for te last five years. Korea's trade intensity wit Indonesia in 2008 is te igest among er trade intensity wit te five major ASEAN countries. Tis is totally due to te fact tat Korea's special country bias wit Indonesia is te igest among er equivalent value wit te five major ASEAN countries, even if Korea's trade complementarity wit Indonesia is te second lowest next to er trade intensity wit Tailand. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and oter four ASEAN countries (i.e., Malaysia, Tailand, Singapore, and Pilippines) do reduce Korea's special country bias wit tese four countries and accordingly lessen er trade intensity wit tese four ASEAN countries, even if Korea's trade complementarity indices wit Malaysia, Pilippines, and Singapore are iger tan er equivalent value wit Indonesia. Korea's trade intensity wit Pilippines in 2008 is te second igest next to er trade intensity wit Indonesia. Tis is totally due to te fact tat Korea's special 69

8 country bias wit Pilippines is again te second igest next to er equivalent value wit Indonesia, along wit te fact tat Korea's trade complementarity wit Pilippines is te second igest in te order of its value among er equivalent values wit tese five ASEAN countries as sown in Table 3. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and oter tree ASEAN countries (i.e., Malaysia, Tailand, and Singapore) do reduce Korea's special country bias wit tese tree countries and accordingly lessen er trade intensity wit tese tree ASEAN countries. Korea's trade intensity wit Singapore in 2008 is te tird igest next to er trade intensity wit Indonesia and Pilippines. Tis is totally due to te fact tat Korea's special country bias wit Singapore is te tird igest next to er equivalent value wit Indonesia and Pilippines along wit te fact tat Korea's trade complementarity wit Singapore is te tird igest among er equivalent value wit tese five ASEAN countries listed in Table 3. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and Malaysia (Tailand) do reduce Korea's special country bias wit Malaysia (Tailand) and accordingly lessen er trade intensity wit Tailand (Malaysia). 4.2 Determinants of Korea s Trade Complementarity wit Major ASEAN Countries Determinants of Korea s Trade Complementarity wit Indonesia As sown in Table 4, Korea in bot 2003 and 2008 as comparative advantage in te production of (a) labor-intensive product, suc as textile yarn, fabrics and related products (SITC 65) and (b) capital/tecnology-intensive products, suc as telecommunications and sound recording apparatus (SITC 76), office macines and ADP equipment (SITC 75), electrical macinery, apparatus and appliances, n.e.s. (SITC 77), rubber manufactures, n.e.s.(sitc 62), and oter transport equipments (SITC 79) (refer to Table 2 for te classification of manufactured products by factor intensity and end uses. Also notice tat in order to save te space of tis paper only SITC code will be listed from now on. Please look at Table 1 for te name of eac SITC code listed). On top of tese products, Korea in 2003 used to ave comparative advantage in te production of labor-intensive product, suc as SITC 84. In 2008 Korea additionally gains comparative advantage in te production of capital/tecnology-intensive products, suc as SITC 67, SITC 73, and SITC 87. On te oter and, Indonesia as comparative disadvantage in te production of (a) labor-intensive products, suc as SITC 61, SITC 65, and SITC 69 and (b) capital/tecnology-intensive products, suc as SITC 73, SITC 56, SITC 72, SITC 53, SITC 67, SITC 59, SITC 57, SITC 68, SITC 74, SITC 71, SITC 76, SITC 77, SITC 52, SITC 51, and SITC 79 in In 2008, Indonesia continues to ave comparative disadvantage in te production of (a) labor-intensive products, suc as SITC 61 and (b) capital/tecnology-intensive products, suc as SITC 56, SITC 72, SITC 73, SITC 79, SITC 67, SITC 53, SITC 59, 70

9 SITC 74, SITC 68, SITC 71, SITC 77, SITC 62, SITC 57, SITC 51, SITC 52, and SITC 76. Consequently, Korea's promising and potential exportable products to Indonesia (i.e., te products wic ave a ig value of in Table 4) in 2003 turn out to be (a) labor-intensive product, suc as SITC 65 and (b) capital/tecnology-intensive products, suc as SITC 76, SITC 77, SITC 67, SITC 73, SITC 75, SITC 79, SITC 72, SITC 57, and SITC 62. In 2008, Korea's promising and potential exportable products to Indonesia cange to capital/tecnology-intensive products, suc as SITC 76, SITC 79, SITC 72, SITC 67, SITC 73, SITC 77, SITC 62, and SITC 56. Te standard deviation of increases from 0.81 in 2003 to 0.90 in 2008, wic means tat Korea's export specialization becomes more concentrated over te period. Te standard deviation of also increases from 0.81 in 2003 to 0.95 in 2008, wic means tat Indonesia s import specialization becomes more concentrated over te period. Since Korea's pattern of export specialization and Indonesia s pattern of import specialization were positively correlated in 2003 (i.e., COV (, R I ) = ), (i.e., Korea s trade complementarity wit Indonesia) reaced 1.05, wic means tat Korea's export structure and Indonesia s import structure were complementary wit eac oter in As tis positive covariance between Korea's pattern of export specialization and Indonesia s pattern of import specialization increased to in 2008 (i.e., COV (, R I ) = ), reaced 1.11, wic means tat Korea's export structure and Indonesia s import structure became more complementary wit eac oter in

10 SITC Standard Deviation Covariance & Correlation Coefficient Kim Table 4: Analysis of Korea's Trade Complementarity Wit Indonesia in Manufacturing Sector: 2003, R I RI S K 0.23 R I R I RI S K =1 = =1 =1.11 COV (, R I ) r KI COV (, R I ) r KI Accordingly, te correlation coefficient between Korea's export specialization structure and Indonesia s import specialization structure (i.e., ), wic is te measure of te degree of matc of te two patterns neutral from te degree of concentration or diversification, increased from in 2003 to in Tis implies tat Korea's export structure and Indonesia s import structure became more complementary wit eac oter for te period of , if te degree of concentration or diversification was deleted from Korea s pattern of export specialization and Indonesia s pattern of import specialization. R I 72

11 4.2.2 Determinants of Korea s Trade Complementarity wit Malaysia, Pilippines, Singapore, and Tailand Due to space limitation of tis paper, te analyses on (a) comparative disadvantage structure of oter 4 major Souteast Asian countries (i.e., Malaysia, Pilippines, Singapore, and Tailand), (b) Korea s promising and potential exportable products to tose countries, (c) standard deviation of import specialization of tose countries, and (d) covariance of Korea s export specialization and import specialization of tose countries will be skipped ere. Tey, owever, will be self-explanatory from Tables 5 to 8. SITC Standard Deviation Covariance & Correlation Coefficient Table 5: Analysis of Korea's Trade Complementarity Wit Malaysia in Manufacturing Sector: 2003, R M RM S K 0.91 R M R M RM S K =1 = =1 =1.38 COV (, R M ) r KM 0.41 COV (, R M ) r KM R M 73

12 Table 6: Analysis of Korea's Trade Complementarity Wit Pilippines in Manufacturing Sector: 2003, 2008 SITC Standard Deviation Covariance & Correlation Coefficient R P RP S K 1.00 R P R P RP S K =1 = =1 =1.35 COV (, R P ) r KP COV (, R P ) r KP 0.35 R P 74

13 Table 7: Analysis of Korea's Trade Complementarity Wit Singapore in Manufacturing Sector: 2003, 2008 SITC Standard Deviation Covariance & Correlation Coefficient R S RS S K R S R S RS S K =1 = =1 =1.22 COV (, R S ) r KS COV (, R S ) r KS 0.22 R S 75

14 SITC Standard Deviation Covariance & Correlation Coefficient Kim Table 8: Analysis of Korea's Trade Complementarity Wit Tailand in Manufacturing Sector: 2003, R T RT S K R T R T RT S K =1 = =1 =1.06 COV (, R T ) r KT Summary and Conclusions COV (, R T ) r KT From te above analysis on Korea s trade intensity wit major ASEAN countries, te following policy recommendation can be suggested. (1) It was found tat Korea s trade intensity wit Indonesia decreased from 6.99 in 2003 to 6.74 in 2008 due to (a) te decrease in Korea s special country bias wit Indonesia from 6.64 in 2003 to 6.06 in 2008 and (b) te increase in Korea s trade complementarity wit Indonesia from 1.05 in 2003 to 1.11 in Terefore Korea s special country bias wit Indonesia sould be enanced by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Indonesia. Te FTA between two countries migt elp to increase capital movements and reduce tariffs and import restrictions. R T 76

15 (2) It was also found tat Korea s trade intensity wit Malaysia increased from 3.85 in 2003 to 4.11 in 2008 due to increase in Korea s special country bias wit Malaysia from 2.56 in 2003 to 2.97 in 2008 even if Korea s trade complementarity wit Malaysia decreased from 1.51 in 2003 to 1.38 in Terefore Korea s special country bias wit Malaysia sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Malaysia. (3) It was found tat Korea s trade intensity wit Pilippines increased from 4.32 in 2003 to 5.99 in 2008 due to te increase in Korea s special country bias wit Pilippines from 2.72 in 2003 to 4.43 in 2008 even if Korea s trade complementarity wit Pilippines decreased from 1.59 in 2003 to 1.35 in Terefore Korea s special country bias wit Pilippines sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Pilippines. (4) It was also found tat Korea s trade intensity wit Singapore increased from 2.94 in 2003 to 4.79 in 2008 due to te increase in Korea s special country bias wit Singapore from 2.20 in 2003 to 3.94 in 2008 even if Korea s trade complementarity wit Singapore decreased from 1.33 in 2003 to 1.22 in Terefore Korea s special country bias wit Singapore sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Singapore. (5) It was found tat Korea s trade intensity wit Tailand increased from 2.78 in 2003 to 3.61 in 2008 due to te increase in Korea s special country bias wit Tailand from 2.49 in 2003 to 3.39 in 2008 even if Korea s trade complementarity wit Tailand decreased from 1.12 in 2003 to 1.06 in Terefore Korea s special country bias wit Tailand sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and Tailand. (6) Korea's trade intensity wit Indonesia in 2008 is te igest among er trade intensity wit te five major ASEAN countries due to te fact tat Korea's special country bias wit Indonesia is te igest among er equivalent value wit te five ASEAN countries, even if Korea's trade complementarity wit Indonesia is te second lowest next to er equivalent value wit Tailand. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and te oter four ASEAN countries (i.e., Malaysia, Tailand, Singapore, and Pilippines) do reduce Korea's special country bias wit tese four ASEAN countries and accordingly lessen er trade intensity wit tese four ASEAN countries, even if Korea's trade complementarity indices wit Malaysia, Pilippines, and Singapore are iger tan er equivalent value wit Indonesia. Terefore Korea s special country bias wit tese four countries sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and tese four ASEAN countries. (7) Korea's trade intensity wit Pilippines in 2008 is te second igest next to er trade intensity wit Indonesia. Tis is totally due to te fact tat Korea's special 77

16 country bias wit Pilippines is again te second igest next to er equivalent value wit Indonesia, along wit te fact tat Korea's trade complementarity wit Pilippines is te second igest in te order of its value among er equivalent values wit tese five ASEAN countries. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and oter tree ASEAN countries (i.e., Malaysia, Tailand, and Singapore) do reduce Korea's special country bias wit tese tree countries and accordingly lessen er trade intensity wit tese tree ASEAN countries. Terefore Korea s special country bias wit tese tree countries sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and tese tree ASEAN countries. (8) Korea's trade intensity wit Singapore in 2008 is te tird igest next to er trade intensity wit Indonesia and Pilippines. Tis is totally due to te fact tat Korea's special country bias wit Singapore is te tird igest next to er equivalent value wit Indonesia and Pilippines along wit te fact tat Korea's trade complementarity wit Singapore is te tird igest among er equivalent value wit tese five ASEAN countries. Tis means tat discriminatory tariffs and oter import restrictions, lower capital movements and economic cooperation wic are prevalent in te economic relations between Korea and Malaysia (Tailand) do reduce Korea's special country bias wit Malaysia (Tailand) and accordingly lessen er trade intensity wit Tailand (Malaysia). Terefore Korea s special country bias wit tese two countries (i.e., Malaysia and Tailand) sould be enanced furter by increasing capital movements and reducing discriminatory tariffs and oter import restrictions between Korea and tese two ASEAN countries. (9) Rapid wage ikes from te late 1980s in Korea forced er to lose international competitiveness in te export of labor intensive manufactured products and start to ave comparative advantage in te production of manufactured commodities wic are relatively capital/tecnology intensive suc as SITC 76, SITC 79, SITC 77, SITC 62, SITC 67, SITC 75, SITC 73, and SITC 87. In order to transform Korea's export patterns more capital/tecnology intensive in te near future, te accumulation of pysical/uman capital troug appropriate incentive scemes sould be pursued in Korea along wit te increases in R&D expenditures. (10) Korea's promising and potential exportable products to Indonesia in te manufacturing sector in 2008 are found to be capital/tecnology-intensive products, suc as SITC 76, SITC 79, SITC 72, SITC 67, SITC 73, SITC 77, SITC 62, and SITC 56. Terefore Korea sould try to export more of tese products to Indonesia from now on, wic is an original and timely policy suggestion of tis paper. (11) Te Korean export products in te manufacturing sector became more concentrated during te period of Since tis kind of ig concentration of Korean export products are not desirable for avoiding any potential economic loss associated wit unfavorable trade-environmental canges against tese export products, it sould be relieved gradually in te near future. (12) In 2008, Korea's promising and potential exportable products to Malaysia cange to capital/tecnology-intensive products, suc as SITC 77, SITC 76, SITC 79, 78

17 SITC 67, SITC 75, SITC 72, SITC 73, and SITC 87. Terefore Korea sould try to export more of tese products to Malaysia from now on, wic is an original and timely policy suggestion of tis paper. (13) Korea's promising and potential exportable products to Pilippines in 2008 are found to be capital/tecnology-intensive products, suc as SITC 77, SITC 76, SITC 79, SITC 75, SITC 87, SITC 72, SITC 67, and SITC 73. Terefore Korea sould try to export more of tese products to Pilippines from now on, wic is an original and timely policy suggestion of tis paper. (14) In 2008, Korea's promising and potential exportable products to Singapore cange to capital/tecnology-intensive products, suc as SITC 79, SITC 77, SITC 76, SITC 75, SITC 72, SITC 87, SITC 88, SITC 73, and SITC 67. Terefore Korea sould try to export more of tese products to Singapore from now on, wic is an original and timely policy suggestion of tis paper. (15) Korea's promising and potential exportable products to Tailand in 2008 are found to be (a) labor-intensive product, suc as SITC 65 and (b) capital/tecnologyintensive products, suc as SITC 77, SITC 73, SITC 67, SITC 76, SITC 72, SITC 79, SITC 75, and SITC 87. Terefore Korea sould try to export more of tese products to Tailand from now on, wic is an original and timely policy suggestion of tis paper. Endnotes i More detailed survey on te trade intensity model could be seen in pp in Kim (2004). ii Refer to footnote 8 in p. 125 in Kim (2004). iii Te data for is supposed to use te total trade volume of te world. In order to secure consistency of data set, we ave to use total OECD trade volume wic is smaller tan total world trade volume. Tis migt cause some bias to calculate te indices. Furtermore, we cannot utilize te trade data of Cina wo is not an OECD country but is one of te biggest countries in te trade volume. Tis also could cause a bias of te indexes. Tese biases tat cannot be corrected until wen te world trade volume is available migt be one of te flaws of our researc. iv More detailed explanation about te determinants of trade complementarity could be seen in pp in Kim (2004). References Balassa, B. 1965, Trade liberalization and revealed comparative advantages, Te Mancester Scool of Economic and Social Studies, vol. 33, no. 2, Mancester, England. Kim, SJ 2004, Pure Trade Teory, Yulgok Books Co., Seoul, Korea. Kim, SJ 2007, Korea s trade intensity wit er major trading countries in te manufacturing sector: Its canges over te last decade, International Area Review, vol. 10, no. 1, pp , Hankuk University Foreign Studies, Seoul, Korea. Ministry of International Trade and Industry, Government of Japan 1986, Wite Paper on International Trade, Tokyo, Japan. OECD 2011, International Trade by Commodity Statistics, vol. 5, Paris, France. Yamazawa, I. 1970, Intensity analysis of world trade flow, Hitotsubasi Journal of Economics, vol. 10, pp , Tokyo, Japan. 79