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“Global Value Chain” in East Asia

This study explores the issues of global value chains and vertical specialization in East Asia, highlighting the fragmented nature of production networks. It discusses the challenges of applying the concept of "country of origin" and emphasizes the importance of lowering trade barriers. The study argues for a new trade regime that includes wider regional coverage, elimination of trade barriers, and free movement of goods, services, capital, people, and technologies. It also emphasizes the role of the WTO in ensuring global business activities and the need for complementary regimes such as FTAs and bilateral or regional agreements.

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“Global Value Chain” in East Asia

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  1. “Global Value Chain” in East Asia MichitakaNakatomi President Japan External Trade Organization(JETRO)

  2. ImplicationsofWTO/IDEstudy • Issuesof"globalvaluechains"and"verticalspecialization"highlighted • Diversityandcomplementaritiesofproductionnetworkscause"fragmentedvaluechains" • The concept of "country of origin" isbecoming increasingly difficult to apply • Importanceofloweringtradebarriers • Anewtraderegimeis needed,asfirms go beyond national boundaries

  3. Theregimeshouldinclude: • Wider regionalcoverage • Universality • Eliminationoftradebarriers • Freermovementofgoods,services,capital,peopleandtechnologies • Contributiontoglobalbusinessactivities

  4. ImportanceofWTO • WTOasauniversalregime • WTOasaregimeforensuringcompanies'productionsandactivitiesglobally • SwiftconclusionofDohaRoundnecessary • Aregimethatprovidessolutionstobusinesschallengesisneeded • Notonlytariffs,butalsoanti-dumpingrules,tradefacilitation,tradeandinvestment,competitionpolicyandintellectualpropertyrights,etc.cf.ChapterIV of the study:necessitytodealwithNTMs • Speed : Business requires a regime which responds quickly to its needs.

  5. Complementaryregimes for WTO • FTAs • Bilateral • Regional • PlurilateralAgreements(suchasITA) • Otherbilateralorregionalcooperation ⇒ Consistency with WTO rules is required

  6. Japan'sactionandglobalvaluechainsinEastAsia • SupplychainsinEastAsia • Deepeningofintra-regionaltrade • Thewidespreadsystemofsupplychains • Japan'ssupportforWTOregime • Only17%ofJapan'stradeiswithFTApartners • A multilateral-basedtraderuleisthebestsolution

  7. Major Flow of Intermediate Goods and Finished Goods in Asia (Electrical/Electronic) 1.6times (23.3←14.4) US/ Europe 5.9times(124.4←21.1) 6.5times (25.1←4.6) South Korea 1.1times (27.4←24.2) 10.9times (29.4←2.7) 1.8times(8.2←4.7) Japan China/ Hong Kong 3.2times (36.7←11.6) 1.6times(8.7←5.4) 4.9times (21.9←4.5) 9.8times (43.8←4.5) Taiwan ASEAN 1.3times (19.1←15.1) Flow of finished goods Flow of intermediate goods 2.1times (35.1←16.8) 2008←1998 2008←1998 * Electric/electronic machinery export value (billion USD) Source: RIETI-TID(2009), White Paper on International Economy and Trade 2010 (METI)

  8. Intra-regional trade percentage in major regions of the world

  9. Japan’s supporttowards the multinationalization of business Vertical/horizontal integration across borders 1. Promotion of FDI inward /outward FDI See next page 2. Trade liberalization 3. Contribution to international trade rules (ITA, ACTA etc.)

  10. Japan’s Outward FDI by Country/Region (International Investment Position, End of 2009) Total: 740 billion USD Sources: Prepared by JETRO from Ministry of Finance and Bank of Japan balance of payment and cross-border investment statistics, and Bank of Japan foreign exchange rates.

  11. Master Plan on ASEAN Connectivity • To build the ASEAN Community by 2015, ASEAN designed a plan focused on Physical Connectivity (transportation, energy, ICT etc.), Institutional Connectivity (trade facilitation, MRAs etc.) and People-to-People Connectivity (tourism, education, culture etc.). • ERIA, ADB, UNESCAP and other International Organizations helped the ASEAN Secretariat in drafting the work. • The Master Plan was presented at the 17th ASEAN Summit in 2010. Source: ERIA

  12. Japan’s support fostering: 1. Connectivityin soft infrastructure 1) FTAs E.g. (Completedwith): Singapore, Malaysia, Thailand, Indonesia, Brunei, Philippines, Vietnam, ASEAN, India (Under negotiation with): Korea, Australia (Under study with): China and Korea, Mongolia,ASEAN+3, ASEAN+6 2) Trade facilitation 3) IPR protection, etc. 2. Connectivity in hard infrastructure Infrastructure development 3. People-to-people connectivity Human resource development (HRD) Creating connectivity in ASEAN and with the surrounding region

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