Asian economies have been major host countries because<sup>of their low wages,highly</sup> skilled labor, good physical infrastructure and fewer<sup>restrictionson exports relativeto</sup> Japan. Prior to the early 1 990s, Japanese TNCs<sup>tended to import componentsfromJapan</sup> rather than obtaining them from local suppliers.'l I Finished<sup>productswould then be</sup> exported back to Japan or, in many cases, directly<sup>to third markets. This traditional</sup> pattern is beginning to change for higher level electronics,<sup>specificallycomputer</sup> products, as a result of not only tougher competition<sup>andthe increasing importanceof</sup> speed in getting products to market, but also because<sup>production capabilityis improving</sup> in local economies.' 2 While this bodes well for the future of regional production<sup>networks,it does not</sup> diminish the importance of the global element.<sup>In fact,this industry has come to be</sup> characterized by the emergence of a "new<sup>patternof regionalproductionsharing"that has</sup> given rise to "overlapping and competing international<sup>productionnetworks." This has</sup> both positive and negative implications for East Asian<sup>economiesin that it allows them to</sup> act as suppliers in a wide range of production networks,<sup>but it also gives buyersawider</sup> selection of suppliers to choose from.1<sup>13</sup> The automotive sector in East Asia is one where<sup>trade(through regionaltrade</sup> agreements) and FDI linkages, as well as the<sup>global/regional element, are particularly</sup> evident. Investment in this industry from Japan,<sup>the U.S. andthe EU has beendrawn to</sup> ASEAN countries by AFTA's lowering of intraregional<sup>trade barriersandraisingof</sup> import tariffs for non-members, which has benefited<sup>MalaysiaandIndonesiain</sup> particular. In fact, intraregional trade in motor<sup>vehiclesandtheir parts hasrisen</sup> significantly in the AFTA countries. Table<sup>4.11shows thegrowth ratein importsfrom</sup> member countries to be very high in the 1990-99<sup>period(18.6percentfor motor vehicles</sup> and 20.8 percent for parts). The negative growth<sup>for imports from non-members,is</sup> primarily because of the Asian crisis, but also<sup>becauseof efforts by some countriesto</sup> develop national industries.''<sup>4</sup> Table 4.1 1 <!-- Start of picture text --> Intrareglonal Imports of the Auto obile Industry<br>Growth rate in<br>Share In total Imports Growth rate extrareglonal Imports<br>$ million (Percent)<br>Region 1999 1990 1995 1999 1980-1989 | 1990-1999 1980-1989 1990-1999<br>AFTA Motor vehides 175 _ 1.1 1.a 5.4 9.4 18.6 1.5 -0.7<br>Parts of molor vehicles 195 1.1 2.9 9.5 17.3 20.8 14.2 -5.6<br>Motor vehides 365.672 1 10.7 6.6<br>Parts of motor vehicles 138.406 1 _ 10.2 6.41<br>Note: Data in this tab rebtes to SiTC 781,782. and 783 (motr vehicles), end to SITC 784 (parts f motr vehicles).<br>Source: Crnplled from UNCTAD, Tradeaand DeveloPment Report, 2002: Table 3A5, 108.<br><!-- End of picture text -->

After the mid-i 980s, rapid economic growth in the<sup>region, plus the yen's</sup> appreciation and the formulation of RTAs, helped<sup>the automobile industrytodevelop</sup> 39