ABSTRACT
Foreign trade and foreign direct investment (FDI) have contributed to economic growth of East Asian countries in various ways. Foreign trade has enabled the countries to use their productive resources efficiently. Taking advantage of foreign markets, countries can export products in which they have a comparative advantage, while they can import products in which they do not have a comparative advantage. Typically, a developing country exports labour-intensive products such as textile products, while it imports physical-capital-intensive and human-capital-intensive products such as machinery. This is because a developing country is richly endowed with labour, while it is poorly endowed with physical and human capital. Many East Asian countries have upgraded their export structure from labourintensive to capital-intensive products, following their success in accumulating physical and human capital, and in assimilating technologies.2
