Distance on FDI and Trade: The Roles of China and Mexico in the Pacific Basin

Yushi Yoshida and Hiro Ito

No 24, Discussion Papers from Kyushu Sangyo University, Faculty of Economics

Abstract: In this study, we investigate the dynamics of the trilateral trade relationship among the U.S., Japan and an emerging economy in the Pacific Basin. Our particular attention is paid to two emerging countries; China and Mexico. In what we call the “triangular trade approach,” we explore how Japanese trade with and foreign direct investment to an emerging economy affect its exports to the US market. We apply the trilateral trade approach to eight Southeast Asian countries, four American continent countries and four European countries. Our empirical results suggest that the exports of China and Mexico are directly competing with those of Japan in US markets while the exports of China and Mexico to the US also appears to be promoted partly by Japanese exports to these countries. However, after controlling for Japan’s FDI to these countries, the trade enhancing effect of Japanese exports disappears for China, leading us to conclude that Japanese exports to China are positively correlated with Chinese exports to the US through an increase in vertical trade between Japanese multinationals and their affiliates in China. Our results indicate important distinction about two distances: proximity to home country and proximity to market.

Keywords: China, Distance; Foreign Direct Investment; FTA; Japan; Trade; Mexico; Triangular Trade Approach (search for similar items in EconPapers)
JEL-codes: F14 F23 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ip.kyusan-u.ac.jp/keizai-kiyo/dp24.pdf First version, 2005Mar (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kyu:dpaper:24

Access Statistics for this paper

More papers in Discussion Papers from Kyushu Sangyo University, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Yoshitsugu Kitazawa ().