Trade in value added in the West Pacific: An input-output analysis

The evolution of trade between the four regions in the West Pacific in both gross and value added terms is analyzed using international input-output tables. It is found that value added exports of computers and electronic equipment of the Asian economies are very limited in comparison with their gross exports, and that the largest shares of value added exports were accounted for by the services sectors in every region, particularly so in Japan and the US. Surpluses and deficits in bilateral trade balance in value added terms are generally lower than those in gross terms, and that Japan's manufacturing sector played a central role in the production chains in the West Pacific, and the US contributed to the region by providing services in value added terms. The inter-temporal factor decomposition of trade shows that deepening input-output linkages between the four regions played an important role in promoting trade in value added in the West Pacific. This process was partly interrupted by the economic turmoil during the 1995 - 2000 period, but intensified toward 2005. The service sectors seem to have played an increasingly important role in enhancing trade in value added in the West Pacific.