FTA use in export-platform FDI

Evidence from exports to China by Japanese affiliates in ASEAN

Kazunobu Hayakawa, Toshiyuki Matsuura

Research output: Contribution to journalArticle

Abstract

Multinational enterprises (MNEs) actively use overseas affiliates to trade with third countries (i.e., neither the home country nor host country). In this paper, we empirically identify significant firm characteristics that influence the use of FTAs in export-platform Foreign Direct Investment (FDI). Specifically, we investigate the correlation of FTA use with: the share of "originating inputs"; intensity of exports to the third country; and experience using FTAs in exporting to other third countries. Then, we further investigate the difference in such characteristics according to the size of the parent company in order to clarify why the use of FTAs from platform countries is different between overseas affiliates owned by large firms versus small- and medium-sized enterprises (SMEs). To this end, we employ a unique dataset collected by the Japan External Trade Organization for 2012 and 2013. We found that Japanese affiliates owned by large parent firms are more likely to use FTA schemes in exporting than those owned by SMEs. In terms of Rules of Origin (ROO) compliance however, most affiliates owned by either SMEs or large parent companies have no difficulty because they already have a sufficiently high share of originating inputs. Therefore, we find that the major obstacle to FTA utilization concerns how to obtain certificates of origins (COOs) rather than complying with ROOs.

Original languageEnglish
Pages (from-to)266-282
Number of pages17
JournalJournal of Southeast Asian Economies
Volume34
Issue number2
DOIs
Publication statusPublished - 2017 Aug 1

Fingerprint

third countries
small and medium-sized enterprise
ASEAN
direct investment
foreign investment
parents
firm
overseas
China
evidence
certification
utilization
Japan
organization
Foreign direct investment
Small and medium-sized enterprises
experience
Parent company
Exporting

Keywords

  • Export-platform FDI
  • Exports
  • MNEs
  • Regional trade agreements

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Political Science and International Relations

Cite this

FTA use in export-platform FDI : Evidence from exports to China by Japanese affiliates in ASEAN. / Hayakawa, Kazunobu; Matsuura, Toshiyuki.

In: Journal of Southeast Asian Economies, Vol. 34, No. 2, 01.08.2017, p. 266-282.

Research output: Contribution to journalArticle

@article{d35a1ead838843d6b515f4ea99f8be5d,
title = "FTA use in export-platform FDI: Evidence from exports to China by Japanese affiliates in ASEAN",
abstract = "Multinational enterprises (MNEs) actively use overseas affiliates to trade with third countries (i.e., neither the home country nor host country). In this paper, we empirically identify significant firm characteristics that influence the use of FTAs in export-platform Foreign Direct Investment (FDI). Specifically, we investigate the correlation of FTA use with: the share of {"}originating inputs{"}; intensity of exports to the third country; and experience using FTAs in exporting to other third countries. Then, we further investigate the difference in such characteristics according to the size of the parent company in order to clarify why the use of FTAs from platform countries is different between overseas affiliates owned by large firms versus small- and medium-sized enterprises (SMEs). To this end, we employ a unique dataset collected by the Japan External Trade Organization for 2012 and 2013. We found that Japanese affiliates owned by large parent firms are more likely to use FTA schemes in exporting than those owned by SMEs. In terms of Rules of Origin (ROO) compliance however, most affiliates owned by either SMEs or large parent companies have no difficulty because they already have a sufficiently high share of originating inputs. Therefore, we find that the major obstacle to FTA utilization concerns how to obtain certificates of origins (COOs) rather than complying with ROOs.",
keywords = "Export-platform FDI, Exports, MNEs, Regional trade agreements",
author = "Kazunobu Hayakawa and Toshiyuki Matsuura",
year = "2017",
month = "8",
day = "1",
doi = "10.1355/ae34-2b",
language = "English",
volume = "34",
pages = "266--282",
journal = "Journal of Southeast Asian Economies",
issn = "2339-5095",
publisher = "ISEAS - Yusof Ishak Institute",
number = "2",

}

TY - JOUR

T1 - FTA use in export-platform FDI

T2 - Evidence from exports to China by Japanese affiliates in ASEAN

AU - Hayakawa, Kazunobu

AU - Matsuura, Toshiyuki

PY - 2017/8/1

Y1 - 2017/8/1

N2 - Multinational enterprises (MNEs) actively use overseas affiliates to trade with third countries (i.e., neither the home country nor host country). In this paper, we empirically identify significant firm characteristics that influence the use of FTAs in export-platform Foreign Direct Investment (FDI). Specifically, we investigate the correlation of FTA use with: the share of "originating inputs"; intensity of exports to the third country; and experience using FTAs in exporting to other third countries. Then, we further investigate the difference in such characteristics according to the size of the parent company in order to clarify why the use of FTAs from platform countries is different between overseas affiliates owned by large firms versus small- and medium-sized enterprises (SMEs). To this end, we employ a unique dataset collected by the Japan External Trade Organization for 2012 and 2013. We found that Japanese affiliates owned by large parent firms are more likely to use FTA schemes in exporting than those owned by SMEs. In terms of Rules of Origin (ROO) compliance however, most affiliates owned by either SMEs or large parent companies have no difficulty because they already have a sufficiently high share of originating inputs. Therefore, we find that the major obstacle to FTA utilization concerns how to obtain certificates of origins (COOs) rather than complying with ROOs.

AB - Multinational enterprises (MNEs) actively use overseas affiliates to trade with third countries (i.e., neither the home country nor host country). In this paper, we empirically identify significant firm characteristics that influence the use of FTAs in export-platform Foreign Direct Investment (FDI). Specifically, we investigate the correlation of FTA use with: the share of "originating inputs"; intensity of exports to the third country; and experience using FTAs in exporting to other third countries. Then, we further investigate the difference in such characteristics according to the size of the parent company in order to clarify why the use of FTAs from platform countries is different between overseas affiliates owned by large firms versus small- and medium-sized enterprises (SMEs). To this end, we employ a unique dataset collected by the Japan External Trade Organization for 2012 and 2013. We found that Japanese affiliates owned by large parent firms are more likely to use FTA schemes in exporting than those owned by SMEs. In terms of Rules of Origin (ROO) compliance however, most affiliates owned by either SMEs or large parent companies have no difficulty because they already have a sufficiently high share of originating inputs. Therefore, we find that the major obstacle to FTA utilization concerns how to obtain certificates of origins (COOs) rather than complying with ROOs.

KW - Export-platform FDI

KW - Exports

KW - MNEs

KW - Regional trade agreements

UR - http://www.scopus.com/inward/record.url?scp=85040192665&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85040192665&partnerID=8YFLogxK

U2 - 10.1355/ae34-2b

DO - 10.1355/ae34-2b

M3 - Article

VL - 34

SP - 266

EP - 282

JO - Journal of Southeast Asian Economies

JF - Journal of Southeast Asian Economies

SN - 2339-5095

IS - 2

ER -