Complementarity in Northeast Asian Trade

This paper reviews the degree of competition and complementarity among three Northeast Asian countries ? China, Japan and Korea. An attempt is made to identify sectors or commodities that are expected to potentially increase trade between Korea and China or Japan. For the analysis, bilateral, as well as total trade at a somewhat disaggregated commodity level, are considered. We try to analyze the extent of the structural similarities (between one's exports and the other's imports and vice versa, therefore, comlementarity) in international trade between the Northeast Asian countries with the index of trade conformity (ITC). The ITC analysis yielded the following implications. Korea's imports from Japan are much more likely to increase than those from China, in a potential sense. Potentially speaking, Korea's exports to the two other countries will increase relatively, somewhat more for Korea's exports to Japan than to China. Looking at it another way, in terms of potential, Korea's exports to China are much more likely to increase than are China's exports to Korea. The overall aggregate trade structures (between one's exports and the other's imports and vice versa) of Japan and Korea are quite similar, therefore complementary, and Japan's exports to Korea are potentially a little more likely to increase than are Korea's exports to Japan. We also try to identify some commodities which are expected to increase bilateral trade between Korea and China or Japan. For example, Korea's exports to Japan have the potential to increase in apparel, bags, and textile articles; fish and meat; arts for office machines; miscellaneous manufactured goods; aluminum, copper; miscellaneous chemical products; and watches and clocks. It was possible to identify even more complementary relationships between the countries as the product classification was disaggregated further.