IDEAS home Printed from
   My bibliography  Save this article

Are Exports of China, Japan and Korea Diverted in the Major Regional Trading Blocs?


  • Hyun-Hoon Lee
  • Chung Mo Koo
  • Euijeong Park


In recent years China, Japan and Korea, the three major economies in East Asia, have been gearing up their efforts to sign free trade agreements with many different regions and countries. One of the main reasons for this is that they fear that with a regionalism movement rising in every corner of the world, their exports are discriminated against and diverted in the trading blocs of other nations. The main purpose of this paper is to investigate whether this is a real fear. We utilise the gravity equation augmented with dummy variables for regional trading blocs in three different specifications. One is the static, standard gravity model to examine the effect of regional blocs on the 'level' of exports from these three countries in 2003; the second is the fixed effects and random effects panel models for the period 1993-2003; and the third is the dynamic, partial-adjustment model to examine the effect of blocs on the 'changes' in exports between 1993 and 2003. The results show that trade diversion is observed only for China's exports in EU, EFTA and EAEC, but no diversion effect is observed for Japan's and Korea's exports in any of the major trading blocs. On the other hand, trade creation is observed for exports from China in ASEAN, for exports from Japan in ASEAN, CACM, CARICOM, EAEC, EU and NAFTA, and for exports from Korea in ASEAN, CACM, EAEC and MERCOSUR. Thus, Japan's and Korea's fear of discrimination and trade diversion is ungrounded, while China's fear is grounded only to a limited extent. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Hyun-Hoon Lee & Chung Mo Koo & Euijeong Park, 2008. "Are Exports of China, Japan and Korea Diverted in the Major Regional Trading Blocs?," The World Economy, Wiley Blackwell, vol. 31(7), pages 841-860, July.
  • Handle: RePEc:bla:worlde:v:31:y:2008:i:7:p:841-860

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Alsem, K.J., 2003. "Insurability of export credit risks," Research Report 03F07, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. Paul Rienstra-Munnicha & Calum G. Turvey, 2002. "The Relationship between Exports, Credit Risk and Credit Guarantees," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 50(3), pages 281-296, November.
    3. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    4. repec:dgr:rugsom:03f07 is not listed on IDEAS
    5. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    6. Filip Abraham & Gerda Dewit, 2000. "Export Promotion Via Official Export Insurance," Open Economies Review, Springer, vol. 11(1), pages 5-26, January.
    7. Peter Egger & Thomas Url, 2006. "Public Export Credit Guarantees and Foreign Trade Structure: Evidence from Austria," The World Economy, Wiley Blackwell, vol. 29(4), pages 399-418, April.
    8. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    9. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    10. Dewit, Gerda, 2001. "Intervention in risky export markets: insurance, strategic action or aid?," European Journal of Political Economy, Elsevier, vol. 17(3), pages 575-592, September.
    11. Andrew Bernard & Joachim Wagner, 2001. "Export entry and exit by German firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
    12. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    13. Pierre-Guillaume Méon & Khalid Sekkat, 2004. "Does the Quality of Institutions Limit the MENA's Integration in the World Economy?," The World Economy, Wiley Blackwell, vol. 27(9), pages 1475-1498, September.
    14. Andrew K. Rose, 2007. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," The World Economy, Wiley Blackwell, vol. 30(1), pages 22-38, January.
    15. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    16. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, July.
    17. Salvador Gil & Rafael Llorca & José A. Martínez Serrano, 2008. "Measuring the impact of regional export promotion: The Spanish case," Papers in Regional Science, Wiley Blackwell, vol. 87(1), pages 139-146, March.
    18. Peter Egger & Michael Pfaffermayr, 2005. "Estimating Long and Short Run Effects in Static Panel Models," Econometric Reviews, Taylor & Francis Journals, vol. 23(3), pages 199-214.
    19. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    20. Funatsu, Hideki, 1986. "Export Credit Insurance and Moral Hazard," 商学討究 (Shogaku Tokyu), Otaru University of Commerce, vol. 36(3), pages 217-235.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:wsi:serxxx:v:62:y:2017:i:05:n:s0217590815501039 is not listed on IDEAS
    2. Richard Pomfret, 2009. "Regionalism in the Asia-Pacific Region: How Wide, How Deep?," School of Economics Working Papers 2009-31, University of Adelaide, School of Economics.
    3. Lee, Hyun-Hoon & Park, Donghyun & Wang, Jing, 2013. "Different types of firms, different types of products, and their dynamics: An anatomy of China's imports," China Economic Review, Elsevier, vol. 25(C), pages 62-77.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:31:y:2008:i:7:p:841-860. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.