Publishing Institution: Economic Research Institute for ASEAN and East Asia (ERIA) / Political Geography: Asia / Topic: International Trade and Finance

1. New Dynamism in ASEAN and East Asia: The Role of the RCEP as a ‘Living’ Agreement

Author:: Shandre Mugan Thangavelu, Fukunari Kimura, and Dionisius Narjoko
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This policy brief highlights the importance of maintaining open regionalism and economic and regional integration for sustainable and inclusive regional and global growth in the Association of Southeast Asian Nations (ASEAN) and East Asia. With rising global uncertainties and global value chain (GVC) disruptions, the region requires a new economic and social agenda beyond trading arrangements, and the alignment of global, regional, and domestic policies and structural issues. The Regional Comprehensive Economic Partnership (RCEP) is expected to provide a new institutional framework under the built-in institutional feature (Chapter 18) of the agreement.
Topic:: International Trade and Finance, Regional Cooperation, Regionalism, and Global Value Chains
Political Geography:: Asia and ASEAN

2. The Indo-Pacific Partnership and Digital Trade Rule Setting: Policy Proposals

Author:: Lurong Cheh
Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The idea of the Indo-Pacific was borne from a global trend that has (re)oriented the centre of the world’s economic gravity to the East. Accelerating digital transformation to harness gains from technology are in countries’ common interests. The launch of the Indo-Pacific Economic Framework for Prosperity tends to supplement economic benefits to the Indo-Pacific. Becoming more deeply involved in the digital economy will require Indo-Pacific members to commit to new international norms on digital trade, of which trade liberalisation of electronic transmissions, free flow of data with trust, cybersecurity, and intellectual property rights protection must be prioritised.
Topic:: Development, International Trade and Finance, Regional Cooperation, and Digital Economy
Political Geography:: Asia and Indo-Pacific

3. Japan and the Regional Comprehensive Economic Partnership (RCEP)

Author:: Mie Oba
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper aims to clarify the role of Japan in the process leading up to the establishment of the Regional Comprehensive Economic Partnership (RCEP). While emphasising that respect for the centrality of the Association of Southeast Asian Nations (ASEAN) was a principle of RCEP, Japan played a leading role in the process of RCEP negotiations. For Japan, RCEP is one of the fruits of its strategy in East Asia/Asia-Pacific that began the mid-1990s to protect and increase the interests and advantages of Japanese business and retain Japan’s political leverage in the region. When substantial negotiations for RCEP began in 2013, its importance for Japan was secondary to other free trade agreements (FTAs) including the Trans-Pacific Partnership, China–Japan–Korea FTA, and Japan–European Union FTA. However, the Government of Japan and the business community had set a lot of economic and strategic goals in promoting RCEP. After the withdrawal of the United States (US) from the Trans-Pacific Partnership, RCEP was seen as an essential framework for establishing a rules-based regional order in the Indo-Pacific region. Although it was after India’s withdrawal from the RCEP negotiations, Japan further emphasised the importance of RCEP as the measure to sustain and foster the rule-based regional order and simultaneously pursued the conclusion of negotiations and the establishment of high-level rules, achieving some success. Ultimately, the havoc brought about by the coronavirus disease (COVID-19) pandemic and the sense of crisis in the traditional liberal international order caused by the intensifying strategic competition between the US and China, drove the conclusion of RCEP. RCEP will be increasingly important for economic order in Japan and Asia in the coming years. Ironically, as the strategic competition between the US and China escalates and leads to a surge in protectionism, the economic and strategic importance of RCEP – an FTA that incorporates China – is becoming more significant as a measure to counter unilateralism and protectionism. In addition, RCEP needs elements that address globalisation’s adverse effects and pitfalls, in areas such as the environment, labour rights, and a reduction in the disparity between the rich and poor.
Topic:: Development, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Japan and Asia

4. RCEP Services Liberalisation: Key Features and Implications

Author:: Ramonette B. Serafica and Intan Murnira Ramli
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The Trade in Services Chapter of the RCEP Agreement establishes the rules for the progressive liberalisation of trade in the region and sets out regulatory disciplines to mitigate barriers to competition. Considered the most significant feature of the RCEP agreement compared to other FTAs of ASEAN is the scheduling of market access commitments using the negative list approach. Thus, an immediate challenge for members that initially adopted the positive list is the transition to the negative list scheduling approach. Furthermore, members will need to implement competitive and robust regulations in liberalising services. Developing countries, especially LDCs, might also face capacity constraints to fully take advantage of the market access given by the RCEP partners.
Topic:: International Trade and Finance, Regional Cooperation, Liberalism, and Progressivism
Political Geography:: Asia and ASEAN

5. International Production Network in the Next Generation and the Role of RCEP

Author:: Mitsuyo Ando, Fukunari Kimura, and Kenta Yamanouchi
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper attempts to discuss the potential role of RCEP from the perspective of two kinds of international division of labor, i.e., machinery international production networks (IPNs) and digital-related services trade. To consider the possible contribution of RCEP to the widening and deepening of IPNs, we first provide an overview of machinery IPNs in ASEAN and East Asia by employing international trade data, a value-added based index for global value chain (GVC) activities using international input–output tables, and a gravity equation exercise. Then, we focus on trade in two global innovator services – information and communication technology (ICT) services and other business services exports – to foresee the future of the new international division of labour and highlights some policy issues. RCEP should be an evolving, living one. In terms of liberalisation and facilitation as well as international rule-making, which cover the whole region, RCEP is expected to revise and upgrade the contents to support the dynamic international division of labour in East Asia. At the same time, RCEP may play an important role in reducing policy risks due to ad hoc trade policies based on political intension and defending the rules-based trading regime for the regional economy.
Topic:: Economics, International Trade and Finance, Labor Issues, and Digital Economy
Political Geography:: Asia and ASEAN

6. Potential Impact of RCEP and Structural Transformation on Cambodia

Author:: Shandre Mugan Thangavelu and Vutha Hing
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the potential impact of the Regional Comprehensive Economic Partnership (RCEP) on the Cambodian economy in terms of trade, output growth, and employment. It also provides quantitative (structural gravity model estimation and simulation) and qualitative trade policy evaluation in terms of exports, output, and the structural transformation of the economy in global and regional value chains. The results highlight the importance of RCEP for the pandemic and post-pandemic recovery and the structural transformation of the Cambodian economy. The paper also provides key policy recommendations to fully maximise the benefits of RCEP for Cambodia for inclusive and sustainable growth.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Global Value Chains
Political Geography:: Asia and Cambodia

7. The Implications of the Regional Comprehensive Economic Partnership (RCEP) for Asian Regional Architecture

Author:: Shiro Armstrong and Peter Drysdale
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: East Asia’s Regional Comprehensive Economic Partnership (RCEP) came into force in 2022 as the world’s largest free trade agreement. RCEP was concluded, signed and brought into force in the face of major international uncertainty and is a significant boost to the global trading system. RCEP brings Australia, China, Japan, South Korea and New Zealand into the same agreement with the ten member ASEAN group at its centre. It keeps markets open and updates trade and investment rules in East Asia, a major centre of global economic activity, at a time of rising protectionism when the WTO itself is under threat. The agreement builds on ASEAN’s free trade agreements and strengthens ASEAN centrality. One of the pillars of RCEP is an economic cooperation agenda which has its antecedents in ASEAN’s approach to bringing along its least developed members and builds on the experience of capacity building in APEC and technical cooperation under the ASEAN Australia-New Zealand Free Trade Agreement. There is an opportunity to create a framework that facilitates deeper economic cooperation that involves experience-sharing, extending RCEP’s rules and membership at the same time as strengthening political cooperation. The paper suggests some areas that might be best suited to cooperation — that is confidence and trust building instead of or before negotiation — and discusses how non-members such as India may be engaged and the membership expanded. Options such as multilateralising provisions and becoming a platform for policy convergence and coordinating unilateral reforms are canvassed.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Architecture
Political Geography:: Asia and ASEAN

8. Restrictiveness of RCEP Rules of Origin: Implications for Global Value Chains in East Asia

Author:: Archanun Kohpaiboon and Juthatip Jongwanich
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This chapter aims to examine the restrictiveness of rules of origin (RoO) in the Regional Comprehensive Economic Partnership (RCEP) and other key multilateral free trade agreements (FTAs) in East Asia with a view to facilitating the operations of existing global value chains (GVCs). The analysis begins with dissecting PSRs in the RoO Chapter in these FTAs and quantifying them. The key finding is that product-specific rules in RCEP are the most flexible compared to the other multilateral FTAs and more facilitative to GVC operations. This is driven by RCEP-specific features, such as high intra-member trade and the member coverage. The main policy inference is that a full cumulation clause is needed in RCEP to allow a regional value content alternative to be in full effect. Harmonisation in RoO provision across these multilateral FTAs remains a challenge for ongoing negotiation. Monitoring the dynamics of RoO as well as the FTA utilisation is needed so that these multilateral FTAs could be a true stepping stone for trade liberalisation in the broader World Trade Organization multilateral trading system.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Global Value Chains
Political Geography:: Asia and ASEAN

9. Centrality and Community: ASEAN in the Regional Comprehensive Economic Partnership

Author:: Soo Yeon Kim
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the Association of Southeast Asian Nations’ (ASEAN) role in the formation of the Regional Comprehensive Economic Partnership (RCEP) agreement. The RCEP project proceeded as trade governance has shifted from the multilateral trade regime under the World Trade Organization to free trade agreements and where the geopolitics of Asia has cast a shadow on the progress of regional integration efforts. The analysis in this paper focuses on ASEAN centrality, both as a concept and practice, in influencing the launch and progress of RCEP. Conceptually, ASEAN centrality is about the capacity of the 10-member group to help launch negotiations for the RCEP agreement and to shape its provisions for governing trade. In practice, the RCEP agreement consolidates and significantly unravels the numerous overlapping trade agreements between ASEAN, 38 in all between individual ASEAN members and its five RCEP partners, Australia, China, Japan, the Republic of Korea, and New Zealand. The paper also examines the relationship between the ASEAN Economic Community (AEC) and RCEP. RCEP provides for further tariff liberalisation between ASEAN members and its five RCEP partners and thus expands the zone of preferential treatment for goods exported from ASEAN and other RCEP members. RCEP also consolidates rules of origin requirements under one agreement, providing for diagonal cumulation and common rules of cumulation for agreement partners. The RCEP provisions can greatly facilitate production and trade along regional supply chains, thus accelerating the progress of the AEC as a single market and production base. Moving forwards, RCEP and ASEAN’s place in it, is likely to be shaped by challenges and opportunities from the Comprehensive and Progressive Transpacific Partnership and the Biden administration’s Indo-Pacific Economic Framework (IPEF) initiative. The ASEAN members with overlapping membership in the IPEF and RCEP will be pivotal in determining areas of cooperation. Regional integration will thus continue to be shaped by ASEAN centrality, and its progress will shape the ASEAN community.
Topic:: Diplomacy, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Asia and ASEAN

10. Regional Comprehensive Economic Partnership: Economic Backgrounds of ASEAN and Its Dialogue Partners

Author:: Keita Oikawa, Fusanori Iwasaki, and Shujiro Urata
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: We overview the economic backgrounds of the countries participating in the Regional Comprehensive Economic Partnership (RCEP) negotiations and two Association of Southeast Asian Nations (ASEAN) Dialogue Partners – the United States (US) and the European Union (EU) – to understand their economic relationships before the signing of the RCEP and their economic interests in the RCEP. We discover that the 16 countries participating in RCEP negotiations vary in terms of economic size, income level, growth pattern, share of trade in the economy, and foreign direct investment (FDI) flows. Additionally, both lower- and higher-income ASEAN Member States (AMS) have received a large amount of FDI, in contrast to Japan and the Republic of Korea (henceforth, Korea), which have seen more FDI outflows from their countries than inflows. In terms of bilateral FDI inflows and outflows, as a centre for regional FDI, Singapore attracts FDI from developed countries (including the US and the EU) and reinvests it in India and other AMS. As an FDI hub, Singapore promotes liberalised regional markets to attract advanced country investors. By examining bilateral trade relationships, we find that as the centre of manufacturing in the world, ASEAN and China have participated in international production networks that also include Japan and Korea since 2000. Japan and Korea have maintained competitiveness in intermediate goods in the region’s production networks, while China notably exports final products to the US and the EU. Amongst the 16 countries participating in RCEP negotiations, India has not had a significant presence in the production networks. Indeed, India has expanded its bilateral trade deficit with China, which probably caused India to withdraw from RCEP negotiations to protect its manufacturing industry. Simulation results of the impacts of the RCEP, using a computable general equilibrium (CGE) model (Global Trade Analysis Project model), show that the countries participating in RCEP negotiations – particularly the less developed AMS – would gain greatly from lowering services trade costs and investment liberalisation. India would also gain significantly from the RCEP. In contrast, countries not participating in RCEP negotiations (the US and the EU) would experience small negative impacts of the RCEP through trade diversion effects.
Topic:: Diplomacy, Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: Asia and ASEAN

11. Trade Facilitation in RCEP Countries

Author:: Weixiang Wang and Shandre Mugan Thangavelu
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The trade facilitation under the Regional Comprehensive Economic Partnership (RCEP) is critical for regional trade and economic cooperation amongst the 15 member countries. This chapter examines the trade facilitation under RCEP using the available datasets on the trade facilitation index and compares the current trends in trade facilitation across RCEP countries in terms of four dimensions: the World Trade Organization’s Trade Facilitation Agreement, digital trade streamlining, ease of doing business, and trade logistics performance. The study finds that RCEP countries have improved significantly in trade facilitation measures, but they vary across the countries. For example, China should further enhance its performance in cross-border paperless trade, whilst the Association of Southeast Asian Nations countries should improve their performance in the documentary compliance of trade, the infrastructure of trade, and trade logistics performance.
Topic:: Economics, International Trade and Finance, Regional Cooperation, and Regionalism
Political Geography:: Asia and ASEAN

12. Comparison of the Regional Comprehensive Economic Partnership (RCEP) and Other Free Trade Agreements (FTAs)

Author:: Innwon Park
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study evaluates the desirability of RCEP by comparing it with other mega-lateral FTAs. Evaluating the member-specific scale effects of the FTAs, we find that RCEP will generate significantly larger gains compared with the CPTPP. Evaluation of the provision-specific depth effects of RCEP suggests the possibility of positive gains but these gains may not be significant compared with those derived from the CPTPP. The existing CGE model analyses reveal that RCEP will generate greater gains than the CPTPP. RCEP will be more desirable for China, Japan, and the Republic of Korea and the estimated gains for ASEAN will notably increase as the model explicitly specifies the diagonal ROO cumulation scheme. Considering the sequence of implementing FTAs, we find that the CPTPP will generate greater gains for dual members, but the marginal gains enjoyed by RCEP members will not be substantial.
Topic:: Diplomacy, International Trade and Finance, Regional Cooperation, Free Trade, and Economic Cooperation
Political Geography:: Asia and ASEAN

13. Australia’s Interests in East Asia’s Regional Comprehensive Economic Partnership

Author:: Shiro Armstrong
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The Regional Comprehensive Economic Partnership (RCEP) agreement was seen as important for Australia economically and politically from its inception. RCEP economies account for roughly two-thirds of Australia’s total trade and being part of an Association of Southeast Asian Nations (ASEAN)-led initiative that progressed broader East Asian economic integration was consistent with the structure of Australia’s trade interests and with Australia’s support for the multilateral trading system. Australia has a track record of pursuing regional cooperation that supports multilateral trade and for supporting regional integration that is outward oriented. RCEP became more important economically, politically, and strategically throughout its negotiations. It furthered East Asian economic integration that avoided fragmentation but also to entrench the ASEAN Economic Community project. Concluding RCEP took on greater importance and urgency as a ballast against the rising protectionism globally in the latter half of 2010. The ASEAN–Australia–New Zealand Free Trade Area (AANZFTA) included an economic cooperation agenda focused on capacity building that was seen as a success for its members and shaped Australia’s approach and support towards economic cooperation being a pillar of RCEP. Negotiations for RCEP were chaired and led by Indonesia and ASEAN. Australia played a proactive role in pushing for high standards – credible market access commitments and new rules – in negotiations. Australia was one of the RCEP member countries that was also negotiating the Trans-Pacific Partnership (TPP) in parallel. The interest in the TPP was to keep the United States productively engaged in the region and to further rule-making and liberalisation amongst the TPP members. Having overlapping membership between the TPP and RCEP would mean that there was less chance of significant divergence or inconsistencies between them, although the approach differed. The deterioration of Australia’s economic and political relationship with China makes the RCEP framework potentially more important for facilitating the rebuilding of trust and confidence.
Topic:: Diplomacy, International Trade and Finance, Regional Cooperation, and Economic Cooperation
Political Geography:: Asia, Australia, and ASEAN

14. Changes in Trade and Investment Policies in Thailand and the Implications for Medium-term Growth

Author:: Archanun Kohpaiboon and Juthatip Jongwanich
Publication Date:: 08-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: his paper addresses the noticeable changes in trade and investment policies in Thailand in the new millennium and assesses their impact. These changes began with trade policy changes from the World Trade Organization to free trade agreement (FTA)-induced liberalisation, followed by changes in investment policies, all of which are to boost firms’ productivity and medium-term growth. Our results suggest that the policy changes are yet to produce the output the government expects. The signed FTAs’ impact on trade has been limited so far and has occurred selectively on certain product lines, as did the FTA-induced direct investment. Similarly, changes in investment policies had the impact of enticing direct investment but this varied across investors’ nationalities. The impact on firm productivity is also limited and found only for investment promotion policies. Our analysis highlights the role of traditional tools, i.e. trade openness, research and development, and skills upgrading, in fostering firm productivity. Whilst FTAs and investment promotion could be used as a catalyst for firms to enhance productivity, other supporting factors are also needed.
Topic:: International Trade and Finance, Regional Cooperation, Investment, Free Trade, and Economic Cooperation
Political Geography:: Asia and ASEAN

15. What Determines Interfirm Trade Credit? Empirical Evidence from the ASEAN

Author:: Sasidaran Gopalan and Ketan Reddy
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper empirically examines the link between the heterogeneity of firms and their probability of obtaining interfirm trade credit in Asia, with a specific focus on the Association of Southeast Asian Nations (ASEAN) bloc of economies. In doing so, the paper investigates the following three issues: to what extent firm size plays a role in obtaining trade credit, to what degree a firm’s integration into global value chains affects its probability of obtaining trade credit, and the impact of agglomeration on firms’ likelihood of obtaining trade credit.
Topic:: International Trade and Finance, Trade, Global Value Chains, and Credit
Political Geography:: Asia and ASEAN

16. The COVID-19 Pandemic and the World Trade Network

Author:: Kozo Kiyota
Publication Date:: 03-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Global trade is expected to suffer a significant contraction as a result of the COVID-19 pandemic. Did the relative importance of countries in the world trade network change as a result of the pandemic? The answer to this question is particularly important for Association of Southeast Asian Nations (ASEAN) countries because of their strong trade linkages with China, where the COVID-19 virus originated. This paper examines how the world trade network has changed since the COVID-19 pandemic, with a particular focus on ASEAN countries. Tracking the changes in centrality from January 2000 to June 2020, we find no evidence that centrality changed significantly after the pandemic started for most ASEAN countries. Our results suggest that the relative importance of the ASEAN countries in the world trade network is unchanged and will remain unchanged even after the pandemic.
Topic:: Globalization, International Trade and Finance, Pandemic, and COVID-19
Political Geography:: Asia and Southeast Asia

17. The COVID-19 Pandemic, Air Transport Perturbation, and Sector Impacts in ASEAN Plus Five: A Multiregional Input–Output Inoperability Analysis

Author:: Tamat Sarmidi, Norlin Khalid, Sufian Jusoh, and Muhamad Rias K.V. Zainuddin
Publication Date:: 04-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study simulates the sector impacts of demand-side perturbations on air transport sectors due to the COVID-19 pandemic, focusing on ASEAN members plus Australia, China, Japan, the Republic of Korea, and New Zealand. This study involves (i) the generation of a multiregional input–output table from the latest Global Trade Analysis Project data, (ii) a network analysis to determine the importance of the air transport industry in each country, (iii) multiplier and linkages analyses, (iv) determinations of sector impacts from demand-side perturbations on air transport sectors due to the COVID-19 pandemic, and (v) simulation of the effect of fiscal and monetary measures to mitigate the pandemic’s impact. This study demonstrates that the aviation industry is a key sector in domestic and regional economic activities, and the reduction in air transport consumer demand due to the pandemic is estimated to cause gross domestic product (GDP) reductions from 0.4% to 2.1%. Government intervention, through fiscal and monetary policies, has, however, mitigated severe impact, moderating GDP and value-added losses. Thus, a viable policy prescription for the aviation industry is of utmost importance.
Topic:: Globalization, International Trade and Finance, Pandemic, COVID-19, and Travel
Political Geography:: Asia and Southeast Asia

18. Facilitating Trade in Pharmaceuticals: A Response to the COVID-19 Pandemic

Author:: Ben Shepherd
Publication Date:: 04-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper reviews trade in pharmaceutical products, focusing on ASEAN countries. Trade in this sector is of singular policy importance as a result of the COVID-19 pandemic. First, the paper shows that pharmaceuticals are traded within Global Value Chains, which in turn means that international linkages are complex. Second, the paper shows that policy reforms can help boost trade in the sector, which has important human development implications during the pandemic period.
Topic:: Globalization, International Trade and Finance, Pandemic, Global Value Chains, COVID-19, and Pharmaceuticals
Political Geography:: Asia and Southeast Asia

19. East Asian Production Networks Amidst the COVID-19 Shock

Author:: Ayako Obashi
Publication Date:: 06-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: In the East Asian context, previous studies showed that trade occurring through production networks remained relatively steady amidst an economic shock and recovered faster and stronger once the shock was over. Using finely disaggregated product-level monthly bilateral trade data, we examine whether network trade in the East Asian region has been robust and resilient in face of the COVID-19 crisis, as well as in normal times, by conducting a series of survival analyses. We find a new set of empirical evidence suggesting the robustness of East Asian network trade in normal times and its resilience even amidst the COVID-19 shock.
Topic:: International Trade and Finance, Public Health, Pandemic, COVID-19, and Production
Political Geography:: East Asia, Asia, and Southeast Asia

20. The Effect of Non-Tariff Measures on Global Value Chain Participation

Author:: Upalat Korwatanasakul
Publication Date:: 06-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study examines the impact of non-tariff measures (NTMs) on global value chain (GVC) participation and the underlying mechanisms. Our study employs a novel approach using an additional compliance requirement indicator as a relative proxy for NTMs to measure their impact on GVC participation. We conduct a cross-sectional analysis at the industry level, spanning 19 industrial sectors in 30 countries in 2015. We combine our additional compliance requirement indicator dataset calculated from NTM data in the Trade Analysis Information System, with our dataset on trade in value added estimated from the Organisation for Economic Co-operation and Development Inter-Country Input–Output Table. Our analysis finds that, while NTMs and tariffs both negatively impact backward GVC participation, the impact of NTMs is greater than that of tariff measures. Moreover, the estimated results show that inward foreign direct investment is positively associated with backward GVC participation. Therefore, policies that reduce trade costs from policy barriers, especially NTMs, and attract more foreign direct investment can help promote GVC participation.
Topic:: Globalization, International Trade and Finance, Industry, Global Value Chains, and Non-Tariff Measures
Political Geography:: Asia and Southeast Asia

21. The Effects of SPSs and TBTs on Innovation: Evidence from Exporting Firms in Viet Nam

Author:: Duc Anh Dang and Vuong Anh Dang
Publication Date:: 06-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBTs) in destination markets may affect firms’ performance. In this paper, we examine how meeting foreign standards affects exporting firms’ innovation, reflected in the product quality, production processes, skills, and technological acquisition. The analysis relies on official regulations on non-tariff measures released by the United Nations Conference on Trade and Development (UNCTAD) and panel data for manufacturing firms in Viet Nam during 2013–2015. To correct for the potential endogeneity of SPS measures and TBTs and measurement errors, we use the number of SPS measures and TBTs imposed on other Association of Southeast Asian Nations (ASEAN) Member States as an instrument variable. Our results indicate that a higher number of SPS measures and TBTs applied by destination countries increases the probability of Vietnamese exporting firms’ skill acquisition. SPS measures also have higher positive impacts on product quality improvement and skill acquisition in the food processing sector. The SPS measures and TBTs have larger impacts on small firms than large firms. Foreign firms tend to acquire more technology and skills than domestic firms when facing SPS measures and TBTs by importing countries. Higher SPS measures and TBTs have more effects on the probability of acquiring skills by state-owned firms. However, the propensity of product quality and technological acquisition of non-state firms is much higher than that of state-owned firms when facing a greater level of SPS measures and TBTs.
Topic:: International Trade and Finance, Science and Technology, Governance, Innovation, and Trade
Political Geography:: Asia and Southeast Asia

22. Potential for India’s Entry into Factory Asia: Some Casual Findings from International Trade Data

Author:: Mitsuyo Ando, Kenta Yamanouchi, and Fukunari Kimura
Publication Date:: 06-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Despite its impressive economic growth in the past few decades, India is slow in adopting a task-by-task international division of labour or international production networks (IPNs). Using international trade data for international comparison from multiple angles, this paper visualises the position of India – particularly in machinery IPNs and information and communication technology (ICT) services. Although machinery industries are at the centre of IPNs in East Asia, the paper clearly visualises that India has not yet participated in Factory Asia. Rather, trade data indicate that India is still engaged in import-substituting industrialisation. The paper also argues that ICT services are a strength for the Indian economy, and its competitiveness could be utilised effectively by combining new technologies with traditional industries such as manufacturing. India still has huge potential for utilising the mechanics of a new international division of labour to accelerate economic growth, innovation, and poverty alleviation.
Topic:: Globalization, International Trade and Finance, Labor Issues, Manufacturing, Industry, and Global Value Chains
Political Geography:: India and Asia

23. Is the COVID-19 Pandemic Recasting Global Value Chains in East Asia?

Author:: Nobuaki Yamashita and K. Fukasaku
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper assesses how the current COVID-19 pandemic is shaping global value chains in East Asia after the formidable disruptions inflicted by the health crisis. Some have expressed the view that global value chains would readjust and production processes would move home, i.e. reshoring, facilitated by the recent movement of protectionism measures in the post-pandemic world. We evaluate such concerns and examine the role of policy with a focus on non-tariff measures in East Asia.
Topic:: Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:: East Asia and Asia

24. East Asian Integration and Its Main Challenge: NTMs in Australia, China, India, Japan, Republic of Korea, and New Zealand

Author:: Yan Lili Ing and Grace Hadiwidjaja
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: While East Asia has been moving forward with its regional integration agenda, one main challenge remains and is growing – non-tariff measures (NTMs). Animal, vegetable, and food products tend to be more regulated than other products, largely due to quality and safety standards. NTMs affect 66%–98% of total trade in those sectors. Our paper presents the frequency index, coverage ratio, and prevalence score to measure NTMs in the region. They are highest amongst food, vegetable, and animal products; and vary amongst other products, depending on the economy. We find that the high frequency index of NTMs does not necessarily translate to a high value of coverage ratio for trade. One explanation could be that countries tend to regulate imported goods which compete with the domestic products more than imported goods which they need.
Topic:: Globalization, International Trade and Finance, Regional Cooperation, Tariffs, Non-Tariff Measures, and Economic Integration
Political Geography:: Japan, China, India, Asia, South Korea, Australia, Southeast Asia, and New Zealand

25. Feeling the Pulse of Global Value Chains: Air Cargo and COVID-19

Author:: Christopher Findlay, Hein Roelfsema, and Niall Van De Wouw
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper focuses on air cargo market development, with special attention to the connections between countries in Asia, the European Union, and the United States. Before the coronavirus disease (COVID-19) crisis, we show that participation in global value chains played a crucial role in how countries in Asia increased their exposure to the European Union market, which was hit hardest by the COVID-19 crisis. Analysing the effects of the crisis in 2020- using a fuzzy set complexity approach and recent high-frequency data on air cargo transport - we show that such demand effects, together with domestic contraction conditions, explain a large share of variation in air cargo dynamics across countries in Asia. However, we also show that implementing best practices in pandemic control positively impacts air cargo recovery for countries that cannot rely on export market rebounds. After reviewing the convergence in air cargo business models since 2010, the paper continues to assess recovery options. The main conclusion is that business models will converge on long haul point-to-point models that combine passengers and cargo, moving away from the current hub and spoke system.
Topic:: Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:: Asia and Southeast Asia

26. Exploring Digital Economic Agreements to Promote Digital Connectivity in ASEAN

Author:: Sarah Y. Tong, Yao Li, and Tuan Yuen Kong
Publication Date:: 07-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper explores modules and articles on cooperation concerning the digital economy that are applicable for Association of Southeast Asian Nations (ASEAN) countries under certain circumstances. It investigates the progress of and obstacles to ASEAN’s digital connectivity, as well as features of existing Digital Economic Agreements and digital economy-related articles in other agreements. We propose the use of a differentiated strategy and steps to promote integration for ASEAN countries covered in this research.
Topic:: Economics, Globalization, International Trade and Finance, Digital Economy, and Digitalization
Political Geography:: Asia and Southeast Asia

27. Technical Barriers to Trade and the Performance of Indian Exporters

Author:: Pavel Chakraborthy and Rahul Singh
Publication Date:: 08-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: We study the effects of technical barriers to trade (TBTs) imposed by destination markets on prices, marginal costs, and markups of Indian manufacturing exporters. Using detailed firm-product-level data on prices and production from PROWESS, we first identify the underlying component of prices (i.e. marginal costs and markups), and use those as our outcomes of interest in the second stage. We find that (i) introduction of TBTs by importing countries increases marginal costs by 5% and prices by 4%, (ii) there is considerable heterogeneity based on exporters’ initial productivity, (iii) productive exporters (those belonging to the lower deciles) experienced an increase in marginal costs and decrease in markups compared to low productivity exporters, and (iv) overall effects are driven by private firms (both domestic and foreign) belonging to intermediate input industries.
Topic:: Globalization, International Cooperation, International Trade and Finance, and Exports
Political Geography:: India and Asia

28. Effective Rates of Protection in a World With Non-Tariff Measures and Supply Chains: Evidence from ASEAN

Author:: Ben Shepherd
Publication Date:: 08-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The concept of effective rate of protection expresses protection on a sector’s final output relative to protection affecting its inputs. As such, it is well adapted to analysing the effects of trade policy from a supply chain standpoint. This paper makes two contributions to the literature on effective rates of protection. First, it draws on the literature on trade in value added to highlight an alternative to the traditional measure that better accounts for supply chain trade by considering both direct and indirect input use. Second, it includes data on ad valorem equivalents of non-tariff measures, which are increasingly important as trade policy instruments. In an analysis covering 17 aggregate goods sectors, I find that average tariff only effective rates of protection in ASEAN averaged 6.9% and ranged from zero to 23.4% in 2018. By contrast, effective rates including non-tariff measures averaged 14.0% and ranged from –6.2% to 44.0%. While patterns of escalation and even effective taxation differ substantially across sectors, most countries practice a tariff and NTM trade policy that is broadly neutral between input and output sectors, but which causes low to moderate isolation from world markets. Given the complexity of tariffs and NTMs from a supply chain perspective, there would likely be reductions in economic waste accompanying substantial simplification.
Topic:: Economics, Globalization, International Cooperation, International Trade and Finance, Protectionism, Non-Tariff Measures, and Supply Chains
Political Geography:: Asia and Southeast Asia

29. Reconciling Tax and Trade Rules in the Digitalised Economy: Challenges for ASEAN and East Asia

Author:: Jane Kelsey
Publication Date:: 08-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: As the digital economy expands in scale, scope, and form it poses major challenges for public revenue and tax policy and administration in Asia and other parts of the global South. When attempts led by developed countries at the OECD-led Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to agree on new norms for taxing digital giants like Facebook, Google, and Amazon stalled, individual countries, including a number of developing countries in Asia, began developing their own responses, notably the adoption of digital services taxes. High-level compromises have recently been announced at the OECD, but the details are yet to come and are not expected to address the needs of developing countries to effectively tax the activities of digital giants operating from offshore. As countries seek effective and workable means to tax the digitalised economy, existing and proposed international rules on digital trade in free trade agreements, and plurilateral moves to develop electronic commerce rules in the World Trade Organization, may fetter their ability to do so. To date, very little attention has been paid in trade negotiations to the consequences of these developments for countries’ tax regimes. Nor have the adequacy, effectiveness, and workability of the tax exceptions in trade and investment agreements been properly re-assessed. Many governments are only becoming aware that trade rules may constrains their ability to regulate the (poorly understood and fast moving) digital domain after they have signed up to them. A series of investigations by the US government under Section 301 of the US Trade Act 1974 into digital services taxes, including those adopted by India and proposed by Indonesia, provides a real-world basis on which to assess how binding and enforceable digital trade rules might be used to challenge digital tax measures at the unilateral, bilateral, and multilateral levels. In highlighting these risks, the paper aims to provide a framework for the tax and trade divisions of governments in ASEAN and East Asia to reflect together on the potential for proposed digital trade rules to impact negatively on their public revenue.
Topic:: International Cooperation, International Trade and Finance, Digital Economy, Tax Systems, Commerce, and Digitalization
Political Geography:: Asia and Southeast Asia

30. The EU–China Comprehensive Agreement on Investment: Lessons Learnt for Indonesia

Author:: Yan Lili Ing and Junianto James Losarili
Publication Date:: 08-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The European Union (EU) and China have recently reached an agreement: the EU–China Comprehensive Agreement on Investment (CAI). As one of the most recent investment agreements concluded by the EU, the paper aims to assess specific concessions made in the agreement, and provides lessons learnt for Indonesia on the ongoing negotiations of the Indonesia–EU free trade agreement, the Comprehensive Economic Partnership Agreement (IEU CEPA). The paper will present an overview of the main areas covered under the CAI, assess the potential impacts of the CAI on EU investment into Indonesia, and set out lessons that can be learnt from the CAI.
Topic:: Economics, International Cooperation, International Trade and Finance, European Union, and Investment
Political Geography:: China, Europe, Indonesia, and Asia

31. COVID-19, Air Transportation, and International Trade in the ASEAN+5 Region

Author:: Anming Zhang, Xiaoqian Sun, Sebastian Wandelt, Yahua Zhang, Shiteng Su, and Ronghua Shen
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper provides an in-depth description of the coronavirus disease (COVID-19) pandemic and its interactions with air transportation in the Association of Southeast Asian Nations (ASEAN)+5 region, and then links the changes in air connectivity to trade using a gravity regression model. We find that almost all the countries probably reacted too late in their decision to reduce flights in the early stage of the pandemic. As the pandemic evolved, most countries have significantly cut the number of flight connections, especially international flights. The reduced connectivity is found to have a significantly negative impact on trade for time-sensitive merchandise that is essential to consumers and businesses. This points to the importance of the region seeking alternative arrangements to restore air connectivity. We offer a way to construct optimal travel bubbles by using risk indexes introduced here. Other policy issues such as uniform standards and regulations, and regional ‘open skies’, are also discussed.
Topic:: International Trade and Finance, Pandemic, COVID-19, and Travel
Political Geography:: Asia and Southeast Asia

32. The Trade Restrictiveness Index and Its Impact on Trade Performance in Selected East Asian Countries

Author:: Norlin Khalid, Muhamad Rias K.V. Zainuddin, Tamat Sarmidi, Sufian Jusoh, Faliq Razak, and Mohd Helmi Ali
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper aims to investigate the effect of non-tariff measures (NTMs) on trade in selected East Asian countries. In doing so, we first estimate the ad valorem equivalent (AVE) of NTMs and construct an augmented trade restrictiveness index (ATRI) by measuring the overall external regulations imposed by importing countries. Second, we analyse the effect of the AVE and trade restrictiveness index (TRI) of importing nations on the exports of various sub-sector products for each country in selected East Asian countries. Based on a standard gravity model framework, we perform a Poisson pseudo maximum likelihood (PPML) regression at the sectoral level (Harmonized System 2-digit) for total exports and major sub-sectors (agri-food, health, logistics, and manufacturing). The findings show that the ATRI has a negative and significant relationship towards bilateral exports for total exports, manufacturing, and logistics sub-sectors. The negative impacts of the ATRI also highlight that trade barriers play a significant role in bilateral exports. NTM restrictions (proxied by the calculated AVE of NTMs) imposed by importing countries have mixed results for technical and non-technical measures. Where technical measures have negative and significant impacts on bilateral exports for total exports, manufacturing, and health sub-sectors. This implies that implementation of technical NTMs such as sanitary and phytosanitary (SPS) and technical barrier to trade (TBT) measures in importing nations adversely affect bilateral exports for these sub-sectors. This is in line with our hypothesis, as exporters may face difficulties in meeting the current NTM specifications, leading to lower bilateral exports. In addition, the results show that most trade agreements have a positive and significant relationship with ASEAN and East Asia countries’ bilateral exports, suggesting that free trade agreements enhance trade between countries.
Topic:: Economics, Globalization, International Trade and Finance, and Non-Tariff Measures
Political Geography:: East Asia and Asia

33. Regulatory Distance, Margins of Trade, and Regional Integration: The Case of the ASEAN+5

Author:: Chandran Govindaraju, Neil Foster-McGregor, and Evelyn Shyamala Devadason
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper measures regulatory distance in non-tariff measures (NTMs) to examine the regulatory distance patterns and how the margins of trade respond to regulatory distance for the ASEAN+5 economies (the 10 Association of Southeast Asian Nations Member States plus Australia, China, India, Japan and New Zealand). It decomposes the margins of trade and regulatory distance by sector (agriculture and manufacturing) and NTM type (technical, non-technical, sanitary and phytosanitary (SPS), technical barriers to trade (TBTs), and pre-shipment inspections and other measures) for the 15 countries. At the country level, the results indicate a varying regulatory distance amongst the ASEAN+5 countries. Regulatory implementation also varies by sector and by the type of measure. Within sectors, SPS regulatory distance is higher in the agriculture sector, while for manufacturing, the regulatory distance in TBTs is higher. Notably, few countries recorded a higher regulatory distance for non-technical measures and pre-shipment inspections. Interestingly, for the ASEAN region, there seems to be no evidence supporting a reduction in regulatory distance from 2015 to 2018, despite efforts to harmonise NTMs since 2015. The results indicate that regulatory distance largely has a trade-reducing effect along the trade margins within ASEAN+5 bilateral trade. Technical measures have a greater trade-reducing effect than other measures along extensive and intensive trade margins – specifically SPS in the agriculture sector and TBTs in the manufacturing sector. Notably, there is also evidence of non-technical measures and pre-shipments and other formalities impacting trade along extensive margins, despite efforts to establish trade facilitation. The paper also describes some policy implications.
Topic:: Economics, International Cooperation, International Trade and Finance, Regulation, and Regional Integration
Political Geography:: Asia and Southeast Asia

34. Robustness and Resilience of Supply Chains During the COVID-19 Pandemic: Findings from a Questionnaire Survey on the Supply Chain Links of Firms in ASEAN and India

Author:: Yasuyuki Todo, Keita Oikawa, Masahito Ambashi, Fukunari Kimura, and Shujiro Urata
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Using a unique firm-level data set from the Association of Southeast Asian Nations (ASEAN) and India collected from November 2020 to February 2021, this paper examines how the robustness and resilience of supply chain links – i.e. maintaining links and substituting another for a disrupted partner, respectively – were determined when firms faced economic shocks due to the spread of the coronavirus disease (COVID-19). Focusing on the role of the characteristics of firms’ supply chains, we find that homophily, i.e. the tendency to form a group with similar agents, was often associated with the robustness of supply chain links, most likely because of the strength of homophilous ties. In particular, when a foreign-owned firm had a supply chain link with a firm located in the same country as its home country, the link was quite robust. We also find that the geographic diversity of customers and suppliers creates resilience of supply chains. When the demand or supply from a partner of a firm was disrupted because of COVID-19, the firm likely mitigated the damage from the disruption through substitution of partners if its supply chains were well diversified across countries. In addition, larger or younger firms tended to be resilient and robust. The robustness and resilience of supply chains are found to have led to higher performance.
Topic:: Globalization, International Trade and Finance, Pandemic, Resilience, COVID-19, and Supply Chains
Political Geography:: India, Asia, and Southeast Asia

35. China's Ties with Southeast Asia : From Green Shoots to Sustained Recovery

Author:: Kensuke Tanaka
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: China's rebound happened relatively quickly owing to a large extent to timely macroeconomic policy responses to the crisis. Lagging somewhat behind China, most Southeast Asian countries have now entered the transition from recession to recovery. Some export-dependent Southeast Asian countries shifted their export destination to China to benefit from its early recovery. This switch of export destination to China illustrates China's important role in leading the recovery of the region. Enhancing regional macroeconomic co-operation would help reduce vulnerability of the region and ensure a sustained recovery. Regional macroeconomic co-operation remains at an early stage in Southeast Asia, but possibilities for further co-operation should be explored.
Topic:: Development, Economics, International Cooperation, International Trade and Finance, and Economic Recovery
Political Geography:: China, Asia, and Southeast Asia

36. Input Allocation Behaviour on Tariff Changes: The Case of Indonesia’s Manufacturing Industries

Author:: Samuel Nursamsu, Dionisius Narjoko, and Titik Anas
Publication Date:: 02-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Can firms reallocate their imported inputs to domestic sources when faced with import tariffs? To answer this question, we analyse the input allocation behaviour of Indonesian medium and large-sized manufacturing firms in responding to the movement of import tariffs from 2000 to 2013 by utilising plant-level input data of Indonesian manufacturing. We find that an increase in tariffs only creates a weak substitution effect. Our findings indicate that firms reallocate their inputs towards domestic sources, although this is accompanied by a decrease in the firms’ value added. This implies that domestic inputs are worse substitutes for imported inputs and that firms’ capacity to switch over to domestic products is limited, suggesting that firms will immediately switch back to importing when the tariff is removed. We find no evidence that firms make any adjustment towards more domestic-oriented input composition over time; and heterogeneity exists within the result, as industries with a strong basis in the domestic market are more capable of adjusting.
Topic:: Industrial Policy, International Trade and Finance, Tariffs, and Manufacturing
Political Geography:: Indonesia and Asia

37. Learning-to-Export Effect as a Response to Export Opportunities: Micro-Evidence from Korean Manufacturing

Author:: Chin Hee Hahn and Yong-Seok Choi
Publication Date:: 02-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper aims to investigate whether empirical evidence supports the learning-to-export hypothesis, which has received little attention in the previous literature. By taking full advantage of plant–product level data from the Republic of Korea during 1990–1998, we find some evidence for the learning-to-export effect, especially for innovated product varieties with delayed exporters: their productivity, together with research and development and investment activity, was superior to their matched sample. On the other hand, this learning-to-export effect was not significantly pronounced for the industries protected by import tariffs. Thus, our empirical findings suggest that it would be desirable to implement some policy tools to promote the learning-to-export effect, while tariff protection cannot be justifiable for that purpose.
Topic:: Industrial Policy, International Trade and Finance, Tariffs, Manufacturing, and Productivity
Political Geography:: Asia and South Korea

38. Labour Market Impacts of Import Penetration from China and Regional Trade Agreement Partners: The Case of Japan

Author:: Kazunobu Hayakawa, Tadashi Ito, and Shujiro Urata
Publication Date:: 04-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The impacts of imports on the domestic labour market have been hotly debated recently. The purpose of this paper is to empirically examine the effects of not only imports from China but also those under regional trade agreements (RTAs) on employment in Japan. As in previous studies in the literature, we found that the rise in import penetration from China significantly decreases employment in Japan. However, import penetration under RTA regimes is found to have insignificant effects on employment. The finding suggests that the increase in imports under RTA regimes might not be harmful to the domestic labour market. In addition, we did not find significant effects of import penetration via input–output linkages. This insignificant result may be because imports by Japanese manufacturing firms are mostly conducted in the form of intra-firm trade, enabling them to avoid negative impacts on employment.
Topic:: International Trade and Finance, Regional Cooperation, Labor Issues, Employment, and Manufacturing
Political Geography:: Japan, China, and Asia

39. Trade Reform and the Evolution of Agglomeration in Vietnamese Manufacturing

Author:: Đoàn Thi Thanh Ha and Hông Quỳnh Nguyen
Publication Date:: 04-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: It is well-documented that agglomeration contributes to productivity growth. However, concentrations of workers could also lead to increasing regional income disparities. Therefore, understanding the evolution of agglomeration is relevant for the formulation of industrial policy and inclusive growth. This study documents the extent, pattern, and determinants of agglomeration in Vietnamese manufacturing during 2002–2016, a period when substantial economic reform took place. Our major findings are three-fold. First, agglomeration, as measured by the Ellison–Glaeser index, has declined since the mid-2000s. Second, there exists significant sectoral heterogeneity in the level and trend of agglomeration. Third, we do not find a significant impact of trade and foreign direct investment on agglomeration per se. However, foreign direct investment in port districts does contribute to disagglomeration.
Topic:: International Trade and Finance, Reform, Manufacturing, and Productivity
Political Geography:: Asia and Vietnam

40. The Economic Impact of Globalisation in Indonesia

Author:: Kiki Verico and Mari Pangestu
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper analyses the economic impact of globalisation in Indonesia from the end of the 1960s to date. The analysis found that globalisation generated a positive impact on Indonesia’s economic growth through the trade and investment channel; reduced wage inequality and child labour participation; and increased labour absorption, including women's participation in the labour market. Through the trade channel, globalisation also contributed to Indonesia’s productivity and structural economic transformation, benefited small and medium-sized enterprises (SMEs), contributed to poverty alleviation and reduced inequality, and increased trade in services such as tourism. Through the investment channel, there is evidence of the spillover effect of technology transfer, technology progress, improvement of the role of SMEs, and contribution to poverty alleviation. The waves of open and more restrictive trade and investment policies, which Indonesia has gone through in the last few decades, reflect the political economy reality – that is, the impact of globalisation is dynamic and only felt in the medium term, whereas the cost and potential negative impact is often felt more immediately throughout trade creation. The trade creation increases imports from countries with which free trade agreements have been negotiated, decreasing the domestic producer surplus. Since globalisation will create net benefits in the long run, Indonesia should continue its process of globalisation and integration with the world economy to ensure the net benefits and to move forward in its structural transformation, while managing the costs of globalisation and its transition process.
Topic:: Globalization, International Cooperation, International Trade and Finance, and Economic Growth
Political Geography:: Indonesia, Asia, and Indo-Pacific

41. Processing Trade, Trade Liberalisation, and Opening Up China's Miracle of International Trade

Author:: Miaojie Yu and Huihuang Zhu
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Understanding the role of international trade is the key to understanding China’s miraculous economic growth. This paper reviews the literature on international trade in the context of China, with a focus on processing trade, trade liberalisation, and firmperformance to provide a better understanding of China’s experience of opening up over the past four decades.
Topic:: International Trade and Finance, Economic Growth, and Trade Liberalization
Political Geography:: China and Asia

42. Globalisation and Economic Development: Malaysia's Experience

Author:: Cassey Lee
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The economic development of Malaysia has been strongly driven and shaped by globalisation, from the pre-colonial to the post-independence period. The country has harnessed trade, foreign capital, and foreign labour to grow and has transformed its economy from one that was highly dependent on primary commodities (tin and rubber) into one driven by manufactured exports. The impact of globalisation on the Malaysian economy has changed through the various phases of its development experience. The early phases of the country’s engagement with globalisation reduced poverty and inequality. In later stages, excessive dependence on low-skilled foreign labour, although beneficial initially, may have compromised the competitiveness of the economy. Malaysia’s multi-ethnic society has also posed considerable challenges in the balancing of domestic needs and benefits with greater engagement with globalisation. The openness of the Malaysian economy has also made it vulnerable to global economic shocks.
Topic:: Globalization, International Trade and Finance, Inequality, and Economic Development
Political Geography:: Malaysia and Asia

43. Economic Consequences of Globalisation: Case Study of Thailand

Author:: Archanun Kohpaiboon
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The paper reviews empirical works examining the effect of globalisation in Thailand, beginning with a discussion of its integration into the economy. Three drivers of economic globalisation are emphasised: international trade, foreign direct investment, and cross-border labour mobility. The findings point to globalisation’s potential to create a favourable economic impact. Opening up to international trade could promote productivity and drive economic growth. Large foreign direct investment inflows enticed by export-oriented industrialisation are likely to generate horizontal technological spillovers within a given industry; vertical spillovers through the linkages were not a robust result. There is no evidence that employing foreign workers retards firm productivity; rather, the opposite is the case. Well-performing firms are in a position to attract foreign workers and maintain production capacity. Global production sharing (GPS) does not necessarily mean the participating countries are trapped at the low end of the quality ladder. The Thai experience supports the case for further globalising its economy. Any possible side effects of globalisation can be mitigated by other policies such as strengthening the social safety net.
Topic:: Globalization, International Trade and Finance, Labor Issues, and Economic Growth
Political Geography:: Asia and Thailand

44. ASEAN in the Global Economy- An Enhanced Economic and Political Role

Author:: Anita Prakash and Ikumo Isono
Publication Date:: 01-2012
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Established in 1967, ASEAN has travelled a long way from a group of five nations to a thriving and leading group of ten countries. Based on the progress in the implementation of the blueprints for building the ASEAN community by 2015, there is an enhanced role for the ASEAN in dealing with regional and global challenges. It is emerging as a services hub in the region and is the chosen destination for investments. At the end of Indonesia's chairmanship of ASEAN, which had set the theme 'ASEAN in a global community of nations', it is imperative to take a stock of the readiness of the region if it is well on its way to step into a truly global role in the near future, especially by its goal of becoming one community by 2015. With its strategic location, abundant natural resources, quality human resources and growing economies, ASEAN has engaged economically, by way of trade and investments, with all the large economies of the world. It has also gained strategic weight and drawn the attention of global players, both economically and politically. Its global engagement is best exemplified by the fact that 55 countries across the globe have appointed their envoys to the regional grouping and this number is growing. Sitting in the midst of giant economies like Japan, China and India, and with active economic relations with USA and the EU, ASEAN is now seeking its due share in the global economy and politics. This Policy Brief looks into the current global profile of ASEAN and brings out policy recommendations that would help ASEAN in finding its appropriate role in the global politics and economy.
Topic:: Diplomacy, International Cooperation, International Trade and Finance, Hegemony, and Economy
Political Geography:: Asia and Southeast Asia

45. Liberalization of Trade in Services: Toward a Harmonized ASEAN++ FTA

Author:: Hikari Ishido and Yoshifumi Fukunaga
Publication Date:: 03-2012
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The East Asian countries are seriously discussing the consolidation of ASEAN+1 FTAs to develop so-called ASEAN++ FTA or RCEP. The detailed analysis of services chapters in the existing ASEAN+1 FTAs gives insights to services trade liberalization in this new trade agreement. In order for ASEAN and its FTA partners to gain substantial new commitments that are genuinely "plus" to the existing trade pacts, both WTO GATS and ASEAN+1 FTAs, ASEAN++ countries should aim at an ambitious level of liberalization much higher than the AFAS package 5. Also, the detailed analysis suggests a policy option of narrowing the types of services trade limitations, i.e., focusing on three types of limitations and hence improving transparency. Furthermore, we advocate for the needs of prioritizing production-related services sectors in the negotiation. Beyond ASEAN++ FTA, we briefly explain the critical roles of domestic regulatory reform.
Topic:: International Trade and Finance, Reform, Regulation, Services, and Private Sector
Political Geography:: Asia and Southeast Asia

46. Toward a Consolidated Preferential Tariff Structure in East Asia: Going beyond ASEAN+1 FTAs

Author:: Sio Yue Chia
Publication Date:: 05-2012
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: ASEAN countries are discussing a possible template for trade in goods chapter of so-called ASEAN++ FTA (also known as RCEP). Analyses of tariff structures under the current ASEAN+1 FTAs give insights on possible approaches as well as challenges in this discussion. To meet 90% or 95% tariff elimination thresholds, both ASEAN countries and their FTA partners should make further efforts. When a "common concession" approach, which we advocate in this paper, is applied, the challenge becomes even larger as member countries should focus their policy discretion on a more limited number of sensitive products. These challenges, on the other hand, mean room for additional gains for potential users of the new agreement despite the existence of ASEAN+1 FTAs.
Topic:: Diplomacy, International Cooperation, International Trade and Finance, and Tariffs
Political Geography:: Asia and Southeast Asia

47. Trade Facilitation: The Way Forward for ASEAN and Its FTA Partners

Author:: Marie Isabelle Pellan Marn-Heong
Publication Date:: 07-2012
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: ASEAN is working towards establishing a Regional Comprehensive Economic Partnership with its FTA partners. All five existing ASEAN+1 FTAs contain provisions on trade facilitation. Although varying in their scope, specificity and depth of commitments, they tend to cover several core areas and affirm the application of international agreements, standards and instruments. A review of trade facilitation performance shows that there are great disparities among ASEAN countries and their FTA partners. Reform efforts in the area of trade facilitation could be tracked regularly through a set of specially-compiled indicators. The following policy recommendations could inform discussions on trade facilitation coverage in the context of a wider agreement between ASEAN and its FTA partners: (i) define a consistent set of trade facilitation principles; (ii) adopt specific trade facilitation measures; (iii) monitor performance in core trade facilitation areas and set targets; (iv) share best practices and implement capacity-building measures in priority areas; and (v) keep abreast of developments in the multilateral process.
Topic:: Diplomacy, International Cooperation, International Trade and Finance, and Economic Cooperation
Political Geography:: Asia and Southeast Asia

48. Fragmentation and Changes in the Asian Trade Network

Author:: Norihiko Yamano, Bo Meng, and Kiichiro Fukasaku
Publication Date:: 01-2011
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The Asian trade network is increasingly fragmented, resulting in higher dependence on supplies of goods and services from neighbouring countries. The update OECD Input-Output and Bilateral Trade Databases allow us to examine the recent evolution of international trade networks involving ASEAN and East Asian countries at the 2-digit industry level. Using several globalization indicators, this Policy Brief highlights major changes in the pattern of Asia's trade in intermediate goods and services since the mid-1990s. It concludes by discussing implications for Asia's regional integration.
Topic:: International Trade and Finance, Regional Cooperation, Regional Integration, Economic Cooperation, and Industry
Political Geography:: Asia and Southeast Asia

49. The Economic Consequences of Shifting Away From Nuclear Energy

Author:: Ken Itakura
Publication Date:: 12-2011
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: In the aftermath of the devastating nuclear fallout in Japan, there has been a harsh debate surrounding the role of nuclear energy in electricity generation. A changing role will have economic consequences on production, consumption, and international trade. To quantity these effects, we implemented simulations with a global CGE model and database. The simulation results show that reductions in the use of nuclear for electric power generation may have profound negative impacts on the Japanese economy. A nuclear accident at the Fukushima power plant changed the future direction of Japanese energy policy as well as Asian energy policy. These policies are integrated via technological, financial, and nuclear energy knowledge sharing activities within the region. The main objective of this policy brief is to shed some light on the following question: what would be the economic consequences of altering the source of power generation from nuclear to fossil fuels? This Japanese case study offers policy implications for both Japan and the region as a whole.
Topic:: Economics, Energy Policy, International Trade and Finance, Economy, and Nuclear Energy
Political Geography:: Japan and Asia

50. Deepening East Asian Economic Integration in Services

Author:: Phillippa Dee
Publication Date:: 10-2010
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: In services markets, there may be legitimate reasons to regulate. Integration efforts should target regulatory restrictions that explicitly limit competition, and those that are intended to meet legitimate objectives, but are clearly more burdensome than need to be. In health and maritime, ASEAN is already relatively liberal by international standards, although there is still scope to promote cross-border trade and ease costly cabotage restrictions. In telecommunications, the residual foreign equity limits are hard to understand, given that past reforms and current technologies have ensured that most markets are already relatively competitive. In finance, there is substantially more to do, despite progress made during the Asian financial crisis. And in air transport, despite commitments to open skies, there is a need to further align the content of bilateral air services agreements with regional integration objectives.
Topic:: International Cooperation, International Trade and Finance, Markets, Bilateral Relations, and Services
Political Geography:: Asia and Southeast Asia

51. Comprehensive Asia Development Plan and Beyond -Growth Strategies for More Prosperous and Equitable East Asia

Author:: Takeshi Fujimoto, Shochiro Hara, and Fukunari Kimura
Publication Date:: 10-2010
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Let's dream of our bright and prosperous future. In the year of 2020, sixteen East Asia Summit (EAS) member countries can reach doubled per capita income compared with their income level in 2008 with proper policy guidance; eight countries may join developed countries with per capita income exceeding US$10,000, five countries could enjoy the status of newly industrialized countries with per capita income between US$3,000 and US$10,000, and three countries would have per capita income above US$1,000. The Comprehensive Asia Development Plan (CADP) provides immediate policy guidance for industrialization through the development of logistics and other economic infrastructure. Beyond CADP, EAS member countries will face novel policy challenges that developing countries in the world have not broken through yet. This policy brief claims that establishing four virtuous cycles will be the key and we must have the courage to meet a number of policy challenges.
Topic:: Development, International Trade and Finance, Regional Cooperation, and Economic Growth
Political Geography:: East Asia and Asia

52. Why Is the East Asia Industrial Corridor Needed?

Author:: Fukunari Kimura and Izuru Kobayashi
Publication Date:: 01-2009
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: The East Asia Industrial Corridor Project, in particular the Southern Corridor and its extension, can be a path-breaking effort for attaining both deepening economic integration and narrowing development gaps. New economic thoughts claim the necessity of comprehensive approach in which various policy modes and a number of stake holders are effectively coordinated.
Topic:: Development, International Cooperation, International Trade and Finance, and Economic Integration
Political Geography:: East Asia and Asia

53. Food Issues and Regional Cooperation in Dynamic East Asia

Author:: Fukunari Kimura, Daisuke Hiratsuka, and Kazunari Tsukada
Publication Date:: 02-2009
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: How can Asia avoid another panic in international markets of our staple crops, particularly rice?Lessons from the last food crisis in 2006-2008.
Topic:: Security, International Trade and Finance, Markets, Regional Cooperation, and Food
Political Geography:: Asia

54. Trade Facilitation in the ASEAN Economic Community

Author:: Christopher Findlay
Publication Date:: 11-2009
Content Type:: Policy Brief
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Trade facilitation refers to the reduction of costs in the trading system. Significant cost reductions are possible, but policy reform and international cooperation are required to capture those gains. ASEAN has a key role to play in that work. Suggestions for the ASEAN scorecard are to reinforce or add commitments to, and then monitor the implementation of (a) National Single Windows as a prerequisite to the ASEAN Single Window, (b) a web-based databank of trade regulations that is regularly updated, (c) streamlined and harmonized procedures, starting with the Customs declaration (or 'SAD') form, and (d) mutually recognized technical standards. In terms of performance measures it is recommended to (1) have ASEAN customs authorities report regularly and in a comparable manner on clearance time through customs, (2) maintain and report updates of a logistics restrictiveness index for all countries in each year which has been developed in this project, and (3) recalculate adjusted cif/fob ratios as measures of trade costs, using the methodology developed in this project.
Topic:: Economics, International Cooperation, International Trade and Finance, World Trade Organization, World Bank, and Tariffs
Political Geography:: Asia and Southeast Asia

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COLUMBIA UNIVERSITY PRESS