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IR Working Paper 1992/3
Mitchell Bernard and John Ravenhill, ‘New Hierarchies in East Asia: The Post Plaza Division of Labour’, IR Working Paper 1992-3, Canberra: Department of International Relations, Research School of Pacific Studies, Australian National University, June 1992.
A remarkable transformation has occurred in the location of production in East Asia in the relatively brief period since the negotiation of the Plaza Agreement. The Agreement was significant not only for its direct impact on the relative value of currencies but for what it symbolised, namely, the increased contentiousness of international economic relations in the Pacific region. The combination of currency appreciation, rising input costs, and the growth of protectionism in the US market stimulated a substantial surge in foreign investment from Japan, Korea and Taiwan. An increasing regionalisation of production has occurred which has incorporated southern China, Malaysia and Thailand into chains of production for global markets. New trade imbalances resulted – both within East Asia and with the United States which continues to absorb a large share of the new manufactured exports. This paper surveys the strategies pursued by firms in adapting to the new competitive conditions, the differences in response between Korea and Taiwan, the effects on the economies of the recipients of the new investment, and the way regionalised networks of production challenge conventional thinking on development and regional trade tensions.