Are Exports of China, Japan and Korea Diverted in the Major Regional Trading Blocs?
Author InfoHyun-Hoon Lee Chung Mo Koo Euijeong Park Abstract 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
