Northeast Asia s Division of Labor with a Focus of Korea, China, and Japan

This paper discusses the intra-industry trade and foreign direct investment in Northeast Asia in the context of Northeast Asia s division of labor. The volumes of trade and foreign direct investment in Northeast Asia is rapidly growing and thus it is important to discuss why and how the division of labor is explained by considering intra-industry products. In particular, this paper examines the behaviors of three countries, Korea, Japan and China, trades and FDIs. Several research results are found in this paper. First, this paper investigates the current trend of trade and foreign direct investments among the three countries and the intra-industry trades in computer products. It is found that electronics products are good candidates for international division of labor. Second, this paper provides analytical results about the relationship between the international division of labor and the types of industry in the three countries. It is found that each country has both competitive advantages and disadvantages even in a single industry and it is useful to decompose production activities in the international business value chain. The empirical results also support this intra-industry division of labor in the region. Finally, this paper recommends strategic directions on how all three countries need to synchronize their resources to accomplish highly sustainable competence in each industry. Even though limitations of this paper exist, one can find utility in understanding the changing nature of international competition as well as of applying the results presented here to certain industries.