[Working Papers Vol.2004-40]

*The International Centre for the Study of East Asian Development (ICSEAD)


ABSTRACT
World trade relationships are changing rapidly. Regional trade arrangements proliferate
even with considerable progress in multilateral trade liberalization. Without any
institutional framework on regional integration, however, the three Northeast Asian
countries, i.e., China, Japan and Korea, have been experiencing significant changes and
progress in their economic relationships in trade, especially during the last two decades
or so. The purpose of this paper is to examine the trade structure of the three Northeast
Asian countries, especially, in terms of complementarity through the index of trade
conformity (ITC) and to estimate trade potential with the gravity model of trade
considering the directions of trade between them. The three Northeast Asian countries
are analyzed as having relatively high complementarity in their trade structure,
especially in trade flows from Korea to both China and Japan followed by those from
Japan to China. Potential trades between them are also estimated significantly larger
than their actual trade performances. Based on the results, some measures to attain the
potential trades are suggested, for example, implementing trade facilitation measures,
utilizing complementarity in trade between them, and introducing institutional
integrations such as a regional trade arrangement.
Key Words: , , Northeast Asia, ,