East Asian trade integration in the era of global value chains: Prospects and challenges
This paper examines trade integration of East Asian countries through the lens of global value chains (GVCs). It first gauges the extent and involvement of trade in value-added (TiVA) for East Asian countries. The analysis confirms that reliance on backward GVC participation outside of the region still looms large in East Asia. This implies, in addition to deepening intraregional integration, linking with global trade and production networks remains important.
Sectoral comparisons reveal that Regional Value Chains (RVCs) among East-Asian economies have been increasing its role in East Asian’s exports of transport equipment sector while decreasing the role in its exports of textile and apparel sector. Such trend seems to suggest RVC opportunities are available to East Asian economies in sectors that require production to locate close to large and growing markets and suppliers’ ability to absorb new technology.
Moreover, the study finds enabling policy environment is an important factor to strengthen intraregional value chain linkages. For example, non-tariff measures (NTMs), have become an important part of trade-policy measures and have significantly affected trade flows in RVCs. It is found that NTMs are generally associated with reduced trade in value-added flows, except in the case that NTMs may help ensuring quality standards, such as technical NTMs in the food industry.