PACIFIC RIM TRADE : Asia : Fewer Barriers Make for Good Neighbors : Intra-Asian commerce is on the rise. Last year, Japan’s trade surplus with its regional partners exceeded its surplus with the U.S.

Lost in the debate about the United States’ trade deficit with Japan is a new cause for anxiety on this side of the Pacific: Japan is dominating the booming trade with Asian nations as well.

For the first time, in the year that ended March 31, Asian nations ran up a bigger trade deficit with Tokyo ($55.95 billion) than did the United States ($51.14 billion).

“In 1985 . . . Japan exported a third more to the United States than it did to Asia,” noted a study by Deutsche Bank Capital Markets. “It now exports a third more to Asia than it does to America.”

One of the factors behind the Asian nations’ greater trade deficit was Japan’s recession, which drastically cut imports from Asian states. But the strengthening yen also played a role.

Japanese multinationals accelerated their efforts to move their factories from the Japanese mainland to foreign countries, mainly to Southeast Asia and China, because the high yen makes Japanese-made products too expensive to compete.

When a Japanese company sets up a factory overseas, it usually imports the machine tools and other capital goods needed from Japan, helping to turn the trade balance in Japan’s favor.

Meanwhile, with the rest of Asia growing more prosperous, imports of cars and other Japanese products are on the rise, further worsening the trade imbalance.

So great are the trade disparities that some Asian nations have raised special barriers to Japanese goods.

South Korea, which ran an $8.5-billion trade deficit with Japan last year, now bans the import of 230 items from Japan, including cars, video players, cameras and chemicals.

Most of the Southeast Asian nations are hoping that as Japan pulls out of its recession, more and more consumer goods manufactured in the region will find their way back to the Japanese market.

The trade frictions between Japan and the rest of Asia point up another phenomenon that is frequently lost in the debate about transpacific trade: Trade within Asia is growing increasingly important.

In 1991, Asian nations reached a watershed by trading more with themselves than with the United States.

“We see more and more of our exports going to Asia,” Singapore’s founding father, Lee Kuan Yew, noted recently.

In 1992, Singapore sent nearly half its exports to Asian countries. Not only are six of its eight top markets in Asia, but Singapore is the biggest trading partner of Vietnam, Cambodia and Myanmar.

Pearl Iboshi, an economist at the East-West Center in Honolulu, said that trade patterns in Asia have closely followed investments.

“Investments have fueled trade, especially in intermediate goods,” she said.

For example, Iboshi said, Taiwan and South Korea have been major investors in Southeast Asian nations such as Thailand and Indonesia in industries where labor costs are a key factor: textiles, shoes, electronics. Taiwan and South Korea are doing exactly what the Japanese did before them, exporting those industries where they are no longer competitive using plants on their own soil because of high domestic wages.

*

Iboshi said that while intra-Asian trade has advanced significantly in recent years, her studies suggest that most of the final products are still going to the United States. A computer disk drive manufactured in Penang, Malaysia, for example, might be exported to Taiwan, to be installed in a laptop computer that is destined ultimately for the U.S. market. But the drive and other components would be counted as intra-Asian trade.

Meanwhile, investors are taking note of the rapidly developing prosperity of the Southeast Asian market, which, with Vietnam included, now totals nearly 500 million people.

Thailand has become the world’s second-largest market for Toyota cars, and Japanese auto makers are increasingly shifting their production to Thailand to serve not only the domestic market but as a production hub for Southeast Asia. Hitachi and Mitsubishi Electric have also announced major expansion plans for their home appliance production facilities in Thailand.

Honda Motors recently announced plans to build a $40-million car-parts factory on the outskirts of Bangkok to serve Thailand and the entire Southeast Asian region.

“This will be in line with our plan whereby the Philippines, Malaysia, Indonesia and Thailand are able to exchange parts as each country makes different parts,” said Koji Nagata, managing director of Honda Motor Co. Ltd.

Most Southeast Asian nations, which were among the world’s fastest growing in the 1980s, suffered a sharp falloff in investment last year as big companies diverted their resources to China.

Asian investment in China surged 501% last year, to $52 billion, and dropped 12% in Indonesia, 19% in Malaysia and a sharp 51% in Thailand.

Members of the Assn. of Southeast Asian Nations--Thailand, Malaysia, Singapore, Indonesia, Brunei and the Philippines--are hoping to stimulate regional trade by adopting what they call the ASEAN Free Trade Area, which is supposed to lower tariffs on imports in the region to zero in 15 years.

The plan got under way in January, but few countries cut their duties significantly at the outset because of domestic pressures to protect home-grown industry. Nevertheless, officials are hopeful for the future.

“I think eventually the ASEAN Free Trade Area will accelerate the trend toward intra-ASEAN trade,” said Washington SyCip, a Manila business consultant.

One indirect sign of a trend came in last month’s complaint by the Australian subsidiary of cereal maker Kellogg that it will suffer in competition against Swiss food giant Nestle because Nestle has set up joint ventures in ASEAN countries and will enjoy lower tariffs.

Another factor affecting regional trade is the sudden growth of cross-border development plans, such as the Singapore-Johor-Riau Growth Triangle. These plans take advantage of lower-cost labor in one country and use the financial resources of others to produce a product that may end up crossing three borders before the product is ready for final export.

The granddaddy of growth triangles is the China-Hong Kong-Taiwanese model, but other zones have formed among Indonesia, Malaysia and Thailand and among Thailand, Myanmar, Laos and southern China.