The Economics of East Asian Integration
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The Economics of East Asian Integration

A Comprehensive Introduction to Regional Issues

Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai

This study is intended to be the most comprehensive textbook on economic integration in East Asia. It introduces the reader to various issues related to the topic such as institutional building of FTAs; production networks and the location choice of MNEs; R & D and innovation; infrastructure development and transport costs; international migration and service trade; monetary integration; regional disparity and poverty. It also deals with critical energy, environmental and agricultural concerns. Each chapter contains ample data and rigorous analyses, complemented by illustrative box articles.
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Chapter 1: A History of De Facto Economic Integration in East Asia

Ikuo Kuroiwa and Satoru Kumagai


Ikuo Kuroiwa and Satoru Kumagai 1.1 INTRODUCTION This chapter overviews the progress of de facto economic integration, or in other words, the evolving structure of production and trade in East Asia.1 Firstly, a brief history of industrial development in East Asia is provided with a focus on industrial policy. Secondly, key statistics are furnished to give readers basic information, through an overview of the economies in the region. Thirdly, the trade structure of East Asia is examined with a focus on production networks in the electronics and automobile industries. Fourthly, drivers of economic integration are examined with reference to trade policy and tariff rates as well as freight costs. It is of great interest to explore how production networks have evolved in East Asia and why East Asia was able to become the manufacturing factory of the world; however, in the face of the current global economic crisis, a need has arisen to transform the East Asian economy, and this is discussed in the conclusion of the chapter. 1.2 INDUSTRIAL DEVELOPMENT IN EAST ASIA Only half a century ago, East Asia was generally seen as a region of ‘poverty’ and ‘stagnation’. Now, East Asia has transformed itself into the ‘growth center’ of the world, recording a high economic growth rate well above the world average for decades. Some people regard this as a ‘miracle’, and it was a favorite theme of argument for economists in the 1990s and thereafter (World Bank 1993, Krugman 1994, Stiglitz and Yusuf 2001). Economic development...

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