Publication in Economics, Politics and Public Policy in East Asia and the Pacific

How global value chains will evolve in the post-COVID-19 economy

Workers are busy at assembling a vehicle along the production line at a workshop of Shandong branch of Chinese state-owned automobile and commercial vehicle manufacturer JAC Motors, Qingzhou county-level city, Weifang city, east China's Shandong province, 31 May 2020 (Reuters).

Author: Satoshi Inomata, IDE-JETRO

According to traditional trade theory, the direction and magnitude of product flows are principally determined by the comparative advantages of trading countries. These comparative advantages depend on endowments of production factors: labour, capital (including human capital) and land (or natural resources). Forces integrating the different factor endowments of various countries — especially capital and technologies from advanced economies and cheap labour from developing countries — drive the development of global value chains (GVCs). Read more…

Securing supply chains and global production after COVID-19

Staff of a local factory owned by Honda Motor Company, a Japanese public multinational conglomerate corporation primarily known as a manufacturer of automobiles, work to produce cars after a long Spring Festival vacation, Wuhan city, central China's Hubei province, 23 March 2020. (Photo: fachaoshi via Reuters).

Author: Editorial Board, ANU

The lockdowns that started in China’s Hubei province on 23 January were a major disruption to the international supply of manufactured goods. Its capital Wuhan, the epicentre of the COVID-19 pandemic, is an industrial powerhouse that produces nearly 10 per cent of all motor vehicles made in China and, for example, is home to more than 100 parts suppliers for Honda alone.

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Economic distancing from China and the world would carry heavy costs

Workers are busy extracting copper at a local factory which resumes production, Hengfeng county, Shangrao city, east China's Jiangxi province, 13 April 2020. (Photo: Reuters via fachaoshi).

Author: Shiro Armstrong, ANU

The health and economic crises from the coronavirus are unlike anything the world has experienced since the Great Depression and Second World War. The global community is at risk of repeating the mistakes of the 1930s and undoing the foundations of lasting peace and prosperity that were forged in the ashes of that war. Read more…

COVID-19 doesn’t spell the end of supply chains

Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China, 7 January 2020. (Photo: REUTERS/Aly Song).

Author: Ken Heydon, LSE

Well before the COVID-19 pandemic, global value chains (GVCs) were losing their impetus as drivers of world growth. Between 2012 and 2015, GVCs were already playing a lesser role in stimulating trade than they had in earlier cycles. Concerns about the environmental footprint of globally-fragmented production were one thing. But rising protectionism was the principal reason. Read more…

Remaking the global system after COVID-19

Shipping containers sit on train tracks downtown as the spread of the coronavirus disease (COVID-19) continues in Los Angeles, California, 7 April 2020. (Photo: REUTERS/Lucy Nicholson).

Authors: Peter Gourevitch, UC San Diego and Deborah Seligsohn, Villanova University

The international trading system was under attack even before the COVID-19 crisis. The pandemic has intensified the combat by challenging confidence in the global system. It has made the world acutely aware of the inequality and inefficiency that exists not just in economics, but also in disease management and treatment.

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COVID-19’s medical, economic and financial triple shock

A worker wearing a protective suit takes body temperature measurement of a man inside the Shanghai Stock Exchange building, as the country is hit by a new coronavirus outbreak, at the Pudong financial district in Shanghai, China 28 February 2020 (Reuters/Aly Song).

Author: Edwin M Truman, Peterson Institution for International Economics

The COVID-19 pandemic combines three shocks: medical, economic and financial. Policymakers around the world must respond to these shocks not only to limit the extent of the immediate economic, health and social damage but also to demonstrate support for the institutions of international economic and financial cooperation in the future. Read more…

US-China trade warring and decoupling during COVID-19

U.S. President Donald Trump applauds greets Chinese Vice Premier Liu He prior to signing "phase one" of the U.S.-China trade agreement with Liu in the East Room of the White House in Washington, U.S., 15 January 2020 (Reuters/Kevin Lamarque).

Author: C H Kwan, Nomura Institute of Capital Markets Research

Phase one of the US–China Economic and Trade Agreement was signed on 15 January 2020 in an step to end the trade war that began in March 2018. China promised to greatly increase its imports from the United States in exchange for no further hikes in US additional tariffs on imports from China. A ceasefire is now in place, but many challenges remain. Read more…

Organising the post-COVID-19 world and technology

U.N. Secretary General, Antonio Guterres speaks while sitting next to Director General of the World Health Organization (WHO), Tedros Adhanom Ghebreyesus during an update on the situation regarding the COVID-19 (previously named novel coronavirus) at the World Health Organization (WHO) headquarters in Geneva, Switzerland, 24 February 2020. (Salvatore Di Nolfi/Pool via Reuters).

Authors: Heather Smith, Canberra and Allan Gyngell, ANU

In 1941, even before the Japanese attack on Pearl Harbour, Paul Hasluck, then a public servant and later an Australian Liberal Party foreign minister, recommended the establishment in the Australian Department of External Affairs of a Post-Hostilities Section. Read more…

DEPA lacks added value

Customers try out smartphones at a mobile phone store (Photo: Reuters).

Author: Jane Kelsey, University of Auckland

Negotiations on the Digital Economy Partnership Agreement (DEPA) between Chile, New Zealand and Singapore were concluded on 21 January 2020. The Joint Ministerial Statement issued in May 2019 promised a ‘first-of-its-kind’ and ‘forward-looking’ agreement that would be a pathfinder for the WTO and APEC — offering new approaches to digital trade issues and exploring new frontiers in the digital economy. But significant new rules and obligations were never likely.

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Palm oil politics still threaten EU–Malaysia ties

A truck carrying oil palm fruits passes through Felda Sahabat plantation in Lahad Datu in Malaysia's state of Sabah on Borneo island, 20 February 2013 (Photo: REUTERS/Bazuki Muhammad).

Author: Helena Varkkey, University of Malaya

Malaysia and the European Union share a long history and strong trade ties. The European Union is Malaysia’s third-largest trading partner and is its largest source of foreign direct investment, and Malaysia is a major exporter of raw materials to the European Union. But politics over palm oil threaten their relationship.

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Can we stop the protectionist wave?

A worker cycles past containers outside a logistics center near Tianjin Port, in northern China (Photo: REUTERS/Jason Lee).

Author: Gary Clyde Hufbauer and Euijin Jung, PIIE

Globalisation was under threat even before the pandemic. US President Donald Trump set the tone by declaring himself ‘tariff man’, imposing bogus ‘national security’ tariffs on steel and aluminium imports from allies while launching a trade war with China and eviscerating the WTO Appellate Body. But Trump was not alone in attacking the global trading system.

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Escaping spiralling global uncertainty

An electronic stock board displays the Tokyo Stock Exchange in Tokyo, Japan (Photo: Reuters/Yohei Osada/AFLO).

Author: Editorial Board, ANU

The new year and new decade are off to a bad start. The spread of the novel coronavirus out of Wuhan and the bushfires in Australia are global events that remind us how interconnected the world now is.

More than ever we face challenges on a global scale that require global action. But the world is moving in the opposite direction away from collective action.

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Smaller countries lose in the US–China trade deal

A truck carrying containers are seen near a Chinese flag at the Yangshan Deep Water Port in Shanghai, China, 6 August 2019 (Photo: REUTERS/Aly Song).

Author: Edward Alden, CFR

Since the phase one trade deal between China and the United States was inked on 15 January, much of the commentary has focussed on the overly ambitious targets for Chinese purchases of US goods. Critics charge that the deal amounts to ‘managed trade’ or ‘central planning’ that substitutes government diktats for market forces.

The real danger of the new agreement, however, is that it replaces a trading system based largely on agreed rules with one based purely on negotiating muscle. Read more…

India navigates a new global order

A crow flies past a container ship docked at a port in Vallarpadam in the southern Indian city of Kochi, 11 December 2013 (Photo: Reuters/Sivaram V).

Author: Suman Bery, Wilson Center

With Indian economic growth slowing, commentary is focused on Finance Minister Nirmala Sitharaman’s 2020–21 Union Budget.

Less public attention is being paid to India’s external challenges.  The world economy matters to India today and India has itself become a global player. The rules-based multilateral economic order which supported global integration for a generation is under widespread challenge.  Read more…

America’s strategic China blunder

United States Trade Representative Robert Lighthizer with Chinese Vice Premier Liu He with Treasury Secretary Steven Mnuchin at the Xijiao Conference Center in Shanghai, China, 31 July 2019 (Photo: Reuters/Ng Han Guan/Pool).

Author: Stephen Roach, Yale University

From tariffs and the blacklisting of Huawei to democracy and human rights concerns over Hong Kong and Xinjiang Province, the United States raised the heat on China to a boil. A so-called Phase I trade deal lowers the immediate threat of tariffs but doesn’t end a deep-rooted structural conflict. Washington is caught in the grips of a ‘China deceit’ narrative, convinced that China has broken a solemn pledge made at the time of its WTO accession in late 2001 to mould itself in the image of the West.

Read more…