EASTASIAFORUM ECONOMICS, POLITICS AND PUBLIC POLICY IN EAST ASIA AND THE PACIFIC Vol.13 No.2 April–June 2021 $9.50 Quarterly

Reinventing global trade

Inu Manak Agenda to save the WTO

David Dollar Asia’s new foreign investment landscape

Homi Kharas and Meagan Dooley The digital transformation

Deborah Elms Managing digital trade ... and more ASIAN REVIEW: Angie Baecker and Yucong Hao on boys’ love fan labour CONTENTS EASTASIAFORUM 3 INU MANAK Quarterly Agenda to save the WTO 6 BILAHARI KAUSIKAN ISSN 1837-5081 (print) ISSN 1837-509X (online) Can Asia reinvent global trade? From the Editor’s desk 8 MELY CABALLERO-ANTHONY Towards a multipolar order For long, trade hovered confidently over the Asia Pacific region as its vital post-pandemic growth engine. As average tariffs fell from 17 per cent in 1989 to 5.3 per cent 10 CARLOS KURIYAMA in 2018, regional trade multiplied—faster than the rest of the world—along The international economics with jobs and incomes. Increasing integration even helped the region to of self-harm bounce back from shocks as severe as the 2008–09 global financial crisis. 12 DAVID DOLLAR Escalation of geopolitical tensions seems to have unsettled trade from Clear skies over Asia’s new foreign its perch. As rivalries heightened and criticism of globalisation grew in investment landscape recent years, the multilateral trading system on which Asia’s prosperity and 14 HOMI KHARAS, MEAGAN DOOLEY security had been based was challenged and the WTO’s relevance called The digital transformation of East Asian into question. trade It took a global pandemic to shift the narrative. As the articles in 17 ANGIE BAECKER, YUCONG HAO this issue of East Asia Forum Quarterly illustrate, many of the region’s ASIAN REVIEW: Fan labour and the economies have emerged from the COVID-19 crisis bruised but not rise of boys’ love TV drama in China defeated. Supply chains have proven surprisingly resilient, partly because 21 PENCHAN PHOBORISUT of their greater interconnectivity within Asia. Lockdowns have accelerated ASIAN REVIEW: Thai Youth’s struggle digital transformation to the benefit of small businesses; some countries for democracy may fizzle but political such as Singapore, New Zealand, and Chile have finalised partnerships contention continues aimed at expanding the digital economy. Even long-brewing mega trade 25 DEBORAH ELMS agreements like RCEP came to fruition in the middle of the COVID crisis, Managing digital trade in Asia highlighting the leadership of regional groupings such as ASEAN. 27 KA ZENG To be clear, Asia’s economic bruise from COVID-19 is real. Many Chinese supply chains prove resilient to countries are still struggling under fiscal pressures exacerbated by the global shocks and pressure pandemic. But speculation about China losing ascendancy is so far 29 FUKUNARI KIMURA unproven. Even as investors pursue China Plus One policies, foreign direct COVID-19 won’t rattle East Asian supply investment in China remains robust. China is also increasing investments chains across Southeast Asia, while ASEAN helps to shape the region’s new trade 31 SUMAN BERY architecture. India’s search for self-reliance There are many more months in 2021, however. This edition of EAFQ 33 SONG HONG reminds us that, in anticipation of the WTO’s 12th Ministerial Conference Globalisation isn’t losing steam in China this year, Asia’s eyes are on two key players whose roles are not yet clear: India and the United States. Even if the former continues to forge its own Acknowledgement way, that will impact on the region’s direction. Similarly, actions taken EAF gratefully acknowledges the Hinrich by the latter, particularly in response to the new WTO leadership and its Foundation’s support for this issue of East Asia neighbours across the Pacific, may reconfigure Asia’s balance of power— Forum Quarterly. The Hinrich Foundation again. is an Asia-based philanthropic organisation In our Asian Review section we explore the symbiosis between the that works to advance mutually beneficial and tenacious popularity of boys love TV drama and its fandom in China and sustainable global trade through research and the power of digital media in the contest for influence that continues to educational programs. EAF wishes to thank surround the Thai monarchy. Andrew Staples (formerly of Hinrich) and Dini Djalal for assistance editing this issue and the Rebecca Sta Maria and Dini Djalal Hinrich Foundation for its financial assistance.

2 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 STARK CHOICES PICTURE: FABRICE COFFRINI / POOL VIA REUTERS

WTO Director-General Ngozi Okonjo-Iweala attends a session of the WTO General Council, Geneva, March 2021. Agenda to save the WTO

INU MANAK monitoring function. I address each in Katherine Tai takes over, there will turn. be a reassessment of the previous HE fate of the World Trade Rules are only as good as they are administration’s policies. While US T Organization (WTO) hangs in enforceable. WTO rules have taken President Joe Biden has not yet acted the balance after four years of assault a hit with the continued blocking on lifting the impasse at the Appellate by the Trump Administration and in of appointments to its Appellate Body, there is hope that a solution can the face of COVID-19. But things are Body by the United States. Since the be found. The core of any compromise, not as dismal as they appear. Turning Appellate Body became defunct in late however, requires a rethink of the the corner in 2021, the WTO has an 2019, appeals to panel decisions have Appellate Body. opportunity to usher in a new era of remained unresolved. As of March Simon Lester has suggested that a trade cooperation. The WTO’s new 2021, a total of 18 disputes have fallen possible compromise could involve Director-General, Dr Ngozi Okonjo- into this crevasse. The United States limiting the scope of appellate Iweala, has vowed to ‘do things argued that the Appellate Body has review, increasing deference on ‘trade differently’ and set a clear agenda of overreached in its interpretations remedies’ and giving members more deliverables by year end. To ensure of particular disputes. But despite power to object to reasoning they the WTO remains fit for purpose, years of discussion on Appellate Body disagree with in reports. Jennifer members should pursue changes reform, it is still not clear what reforms Hillman has put forward a number in three areas: dispute settlement, would fully assuage the United States. of strong suggestions such as an negotiations and the WTO’s As US Trade Representative oversight committee, an amended set

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 3 of the Walker Principles, and limiting South Korea and Japan. Together EASTASIAFORUM the length of service of the Appellate they make up 58 per cent of all global Quarterly Body Secretariat’s staff. The last point fisheries subsidies. And while nine is particularly important because out of fifteen of the largest marine EDITORIAL STAFF the Secretariat came under fire for capture fish producers are developing Issue Editors contributing to a culture of deference members, many continue to request Dr Rebecca Fatima Sta Maria, Executive to previous decisions by establishing special and differential treatment Director of the Asia-Pacific Economic de facto stare decisis. (SDT). Cooperation (APEC) Secretariat based This idea should be taken further by The fisheries talks are important in Singapore. limiting service to the Secretariat to because the subject best illustrates Dini Sari Djalal, Associate Director– five years, after which individuals must modern challenges to trade. This Editorial, the Hinrich Foundation. leave the WTO entirely. While this is not just about subsidies, but Series Editors may sound like a radical proposition, environmental sustainability and Peter Drysdale, Editor in Chief, East it solves the problem of Secretariat development as well. How we navigate Asia Forum and Head, East Asian staff being shuffled to the Legal Affairs the intersection of these issues will Bureau of Economic Research, Crawford School of Public Policy, ANU. or Rules Divisions where they then test the WTO’s ability to adapt to new assist panellists with the drafting of circumstances. SDT will undoubtedly Shiro Armstrong, Director, Australia– Japan Research Centre, and Editor, East panel reports, and also would breathe be a crucial part of the final Asia Forum, Crawford School of Public new life into the organisation every compromise, though we should not Policy, ANU. few years with a new cadre of young expect broader issues of SDT reform Editorial Staff lawyers. Providing Appellate Body to be settled in a single negotiation. Coordination: Arius Derr members with their own law clerks Members should try to experiment Editing: Marie Armstrong, Nicol Brodie, could also be a supplement to this with a new approach, building on the David Chieng, Alison Darby, Benjamin change, as it would further shift power innovation of the TFA to tie certain Clarke, Serena Ford, Oliver Friedmann, from the Secretariat to Appellate obligations to capacity building. Annie Gao, Jade Lin, Dorothy Mason, James Naylor-Pratt, Maya Salama, Lily Body members. If the culture of the Finally, one of the greatest Shen, David Wu, ANU. Appellate Body is a problem, and the achievements of the WTO is one of Editorial Advisers: Max Suich, Peter United States wants to deemphasise its least talked about functions—to Fuller. its role, reform will require a bold monitor whether members uphold Production: Niki van den Heuvel institutional change. their obligations and to engage in Email [email protected] The next crucial area for reform is discussions to resolve trade frictions [email protected] in the WTO’s negotiating function. before they become disputes. This The WTO has not concluded any monitoring largely takes the form COVER: Shipping containers at Tanjung Priok major negotiating ‘rounds’ since its of peer-to-peer exchanges, but also port in Jakarta. Ajeng Dinar Ulfiana / REUTERS founding, though it has completed includes thematic discussions on other important negotiations such certain issues to avoid the emergence Views expressed are those of individual as the Trade Facilitation Agreement of trade barriers in the first place. A authors and do not represent the views of the (TFA). These stalled negotiations stem, standout in this regard is the Technical Crawford School, ANU, EABER, EAF, or the in part, from disagreements over the Barriers to Trade (TBT) committee, institutions to which the authors are attached. level of commitments that developing where members can raise ‘specific countries should undertake. trade concerns’ (STCs) against another Recent negotiations to eliminate member’s measure that is thought to subsidies that contribute to illegal, be in violation of the TBT agreement. unreported and unregulated fishing, The committee provides a forum as well as subsidies that lead to for discussion of regulatory outliers Published by ANU Press overcapacity and overfishing, are a and gives members the opportunity to The Australian National University case in point. China leads the top five express why certain actions may have a Canberra ACT 2601, Australia Email: [email protected] providers of subsidies, followed by the negative impact on trade. Even during Web: http://press.anu.edu.au European Union, the United States, the pandemic, the TBT committee

4 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 PICTURE: EDGAR SU / REUTERS

Operations at the PSA International port terminal in Singapore. Connected to more than 600 ports in some 120 countries, Singapore is one of the world’s busiest shipping hubs and is often called the gateway to Asia. continued to function and even had led some members to file ‘counter- solutions, even setting up an interim a record number of STCs submitted notifications’ where they notify on dispute resolution mechanism to through a newly established written another member’s behalf. However, preserve some degree of predictability. procedure. Its success should be counter-notifications are a time and They have also continued to engage studied and, if possible, replicated in capacity intensive process, leaving less virtually in the last year to make other committee work throughout the developed members at a disadvantage. headway on negotiations and to organisation. The only solution is to improve the maintain transparency amid rampant One persistent issue that has notification process across the board. economic nationalism. plagued the monitoring function, In 2017, the United States pushed The WTO is a vital part of the however, is the submission of for penalties on members for failure international trading system. The notifications. Members are obliged to to notify, with suggestions to improve problems it is currently facing may notify measures that could potentially the notifications process. While the seem insurmountable, but that would impact trade and these notifications United States gets a number of things be the case even if we were to try serve as the basis for many of the right in this proposal, members must to create a new organisation from discussions in committees. While this be cautious about how to approach scratch. The options are clear—a has received acute focus during the penalties and build consensus on return to beggar-thy-neighbour COVID-19 pandemic, as members defining what ‘an early appropriate policies and a growing spaghetti bowl called for greater transparency in stage’ is for notifications. This must of rules, or a multilateral approach that trade actions, the notification problem also be matched by capacity building makes the benefits of trade accessible touches a number of other areas. For efforts to ensure that less developed to all. The choice is up to the WTO’s instance, notifications on subsidies are countries are not unfairly targeted. members. EAFQ a key issue for the largest members, The WTO has had its fair share especially given the growing concern of challenges in the last few years. Inu Manak is Research Fellow in the over industrial subsidies. Frustration Instead of abandoning the institution, Herbert A. Stiefel Center for Trade Policy with the lack of notifications has members have endeavoured to find Studies, Cato Institute, Washington DC.

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 5 TRADE FANTASIES Can Asia reinvent global trade?

BILAHARI KAUSIKAN respond primarily to their own have been economic failures but imperatives and according to their political successes. Against all ET’S not believe our own own dynamics. Neither are likely to predictions, Modi won the 2019 L propaganda. Asia reinventing evolve teleologically, forever up and on elections by a landslide. But what global trade is a superficially attractive towards ever-freer trade. choice do Indian businesses, big or but problematic proposition. It The hope and promise of Narendra small, have? The Congress Party is in assumes that there once was a free Modi’s election as prime minister shambles. And it is not as if Congress international economy open to in 2014 were based on a faulty is committed to free trade either. reinvention, and that’s a stretch. extrapolation from the business- It assumes that there is an ‘Asia’ friendly environment he was said to NDIA is nevertheless open in more than the trite geographic have nurtured in Gujarat. But being I compared to China. The most sense and that what defines ‘Asia’ is business friendly is not the same as salient fact about Chinese economic a common attitude towards trade, being trade friendly. India’s withdrawal (or any other) policy is so obvious somehow superior to the attitudes from RCEP is proof positive that it’s almost invisible: China carries of other regions. It also assumes that whatever else is on Modi’s economic the baggage of communism. Of this mythical ‘Asia’ can rescue the agenda, trade liberalisation is not a course, no longer in its ideology, international trade regime from the priority. We must all piously hope that which today is based on an assertive pressures it has been subjected to, or India will one day return to RCEP. But ethnonationalism rather than class- at least mitigate those pressures. None don’t hold your breath. struggle, but certainly in its political of these assumptions is valid. What matters most to Modi and the structure. China’s origins were as True, Asia is home to the Regional Bharatiya Janata Party (BJP) is power. a Leninist state led by a Leninist- Comprehensive Economic Partnership The ultimate source of power is money style vanguard party, the Chinese (RCEP) and the Comprehensive and which is the sine qua non of electoral Communist Party (CCP). Progressive Agreement for Trans- success in India. To get the donations A Leninist party’s primary Pacific Partnership trade pacts, and needed to lubricate the system, Modi value—the core interest to which all most Asian countries generally have needs to please Indian, not foreign, other interests are subordinate—is more open attitudes towards trade than business. Indian businesses are not control. The CCP claims absolute some of the attitudes that have emerged instinctively free traders, particularly control over all dimensions—internal in the United States and Europe. This the small businesses that are the and external—of state and society. is unsurprising since most of Asia backbone of the BJP’s base. Many of President Xi Jinping has enforced consists of trading states. But ‘most’ is these small businessmen are happy this claim more thoroughly than any not all, and trading states are not always with India’s licence raj system because of his immediate predecessors. The free trade states. The most important their skill at navigating that labyrinth CCP’s overriding interests, coupled exceptions are India and China. These gives them an advantage over foreign with assertive ethnonationalism which giants represent huge deviations competitors. That China seems to seems to enjoy wide popular support, which far outweigh middle-power free have become equally skilled at this are the root cause of many of China’s traders such as Japan, South Korea and game—witness India’s trade deficit economic and geopolitical behaviours Australia, let alone small economies with China—is a political complication that have aroused concerns across the like Singapore or Taiwan. for the BJP. region, indeed globally. Indian and Chinese attitudes Modi has not even always found The purpose of economic reform towards free trade are ambivalent it necessary to pursue economic in China is always to preserve if not downright mercantilist. rationality, let alone free trade that system. This was the primary These attitudes are inherent to orthodoxy, to hold on to power and reason for ‘reform and opening up’ their respective political systems. secure Indian business support. Many under Deng Xiaoping. It remains India and China are not static but of his policies such as demonetisation the primary reason under all his

6 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 PICTURE: TYRONE SIU / REUTERS successors, including whoever will Souvenir plates with eventually succeed Xi Jinping. China images of Chairman Mao is undoubtedly one of the chief Zedong and President beneficiaries of the open trading Xi Jinping on display in system, but China will uphold the a Beijing shop window, values and practices of free trade only 2017. if they reinforce the Leninist system and the CCP’s interests. Insofar as China achieves greater self-sufficiency under the new approach of ‘dual circulation’, the mercantilist element in Chinese trade policy will be enhanced because Beijing will have even less reason to abide by international norms unless it suits the CCP’s interests. There is no practical alternative to CCP rule. Other alternatives will pose even greater challenges. Imagine, for instance, a multi-party China whose political dynamic is driven by assertive ethnonationalism. Any analysis of trade in ‘Asia’ therefore confronts a central and permanent paradox: China is one of the main locomotives of the region’s growth, but China is also at particularly well. It is difficult to strategic mistake. Once revealed, the heart of most of the instabilities imagine the global trading system ambitions are not easily forgotten and and imbalances that threaten to derail being ‘reinvented’ unless the United inevitably provoke counter-reactions, the region’s growth. China will always States and the major European as we are already witnessing. be simultaneously the problem and economies change their attitudes. Not all problems have solutions; part of the solution. Western democratic politics are not everything desirable is achievable. Nor can the rest of Asia claim dysfunctional by design to prevent Bereft of leadership from either East superior virtue, except in relative an over-concentration of power. But or West, the international trade regime terms. Complaints about Japanese and of late, politics in the United States will stumble along sub-optimally South Korean unfair trade practices and Europe have perhaps become for the foreseeable future. But it is are legion and have been for a long more dysfunctional. Meaningful unlikely to entirely collapse, provided time. Even Australia and Singapore, political reform in the West is highly ad hoc and flexible coalitions of the who like to think of themselves as improbable. like-minded—from which China devout upholders of a free trade, can China is better placed to decide should not be a priori excluded— do so only by ignoring the beams in on and pursue long-term goals. But pragmatically calculate risk and their own eyes. authoritarian systems have their own opportunity and manage particular Domestic politics are the primary shortcomings. They have an advantage issues, rather than chase the chimaera source of pressure on the international only if decisions are correct in the first of definitively ‘reinventing’ global trade. trading system. The dynamics differ place. Deng’s decision to reform was EAFQ from country to country but none is correct; Mao Zedong’s ‘Great Leap Bilahari Kausikan is Chairman of the particularly susceptible to external Forward’ and Cultural Revolution were Middle East Institute, an autonomous influence or example. We must each disasters. Xi’s decision to abandon institute of the National University of manage our own politics the best we Deng’s sage approach of ‘hiding Singapore. can, and no one is handling them capabilities and biding time’ was a

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 7 MULTILATERAL ACTION Towards a multipolar order post-pandemic PICTURE: UESLEI MARCELINO / REUTERS

Presidents of Brazil, Jair Bolsonaro, Russia, Vladimir Putin, China, Xi Jinping, South Africa, Cyril Ramaphosa and India’s Prime Minister Narendra Modi pose for the cameras as they arrive for the BRICS summit in Brasilia, November 2019.

MELY CABALLERO-ANTHONY Political leaders in Asia have joined interests, a reinvigorated multilateral the global community in stressing the system remains the only way for OT since the end of the importance of collective action against the international community to N Cold War has the concept of this shared threat, but evidence of respond to transnational threats such multipolarity been more salient as the greater multilateral cooperation has as climate change and pandemics. global community continues to grapple not met expectations. The absence Reviving multilateralism by focusing with COVID-19. The pandemic has of global leadership amid major- on common problems, reinforcing become a threat multiplier, cascading power rivalry has resulted in doubling inclusive and non-discriminatory from a health and socio-economic down on self-interest rather than practices and underpinning shared crisis to a political and security crisis collaboration. Meanwhile, the rigidity norms and values is critical not only as countries turn inward and adopt of the world’s multilateral institutions for mustering political will, but also for more populist and nationalistic makes them no longer fit for purpose generating and building the resources policies. Since the outbreak of the in dealing with 21st century economic needed to address today’s global pandemic a year ago, the call for global and security challenges. problems. solidarity and deeper multilateral Despite an imperfect global system Much has changed in the multipolar efforts to combat it has gained of contested hegemony, power order that has defined international momentum across the globe. asymmetry and competing national political and economic relations

8 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 since the end of the Cold War. over RCEP, not to mention through The growing influence of big tech While international politics is still its lead in creating multilateral companies like Google and Facebook influenced by superpower rivalry— financial institutions like the Asian that have the capacity to change this time between the United States Infrastructure Investment Bank and the rules of the game—especially and China—expanded ‘poles’ of Belt and Road Initiative. These new given their dominance in the global power and influence have appeared arrangements and organisations are markets and lack of regulatory as the European Union and emerging seen as less ‘Western centric’ and frameworks—cannot be ignored. economies like Brazil, Russia, India, impose fewer conditions while being Private foundations like the Bill and China and South Africa (the BRICS) more sensitive to the ideological Melinda Gates Foundation have also hold increased economic clout. diversity of recipients and members. contributed significantly to the fight The extent to which these poles against communicable diseases like have the power to influence the HE problems of coherence and tuberculosis, malaria and HIV/AIDS international economic order depends T divided interests can be mitigated while spearheading research into on how coherent their interests are if competing multilateral institutions COVID-19 vaccines and therapeutics. in effecting change in the global channel efforts into common goals, Similarly, civil society organisations economic agenda. Developing particularly in addressing threats are working both regionally and countries for example, have pushed to global public goods like health, locally to help communities cope with to reform institutions like the IMF to environmental and food security. natural disasters, which are increasing gain more voting rights and seek more For instance, in tackling the in frequency as a result of climate equity but so far with only limited COVID-19 pandemic, global and change and disproportionately affect success. regional institutions are both vulnerable groups. The expansion of the G7 to the important actors, providing assistance, The complexity of the transnational G20 is another indication of the resources and expertise to countries issues confronting the world realignment of interests among the struggling to contain the virus. In Asia, today underscores the growing diverse set of actors that intends to the ASEAN+3 framework (ASEAN interdependence of states and shape the contours of a new economic together with China, Japan and South societies. These challenges are architecture. These changes have led to Korea) has established a recovery reshaping a multipolar order that is the notion of a ‘G-Zero’ world where fund aimed at improving aid capacity more diverse yet more connected, no single country or bloc of countries for regional health emergencies, with a growing number of actors has all the political and economic addressing shortages of medical with claims to influence the nature of power to drive the international supplies and funding research into global governance. In such a world, agenda. vaccines and therapeutic drugs. regional institutions like ASEAN are Regions now play an increasingly As the largest economy in Asia, important in fostering cooperation important role due to the ‘spaghetti China has filled the supply gaps caused and promoting multilateralism. Civil bowl’ of regional free trade by vaccine nationalism by distributing society organisations and private agreements, including the Asian vaccines to developing countries, actors also play a valuable role— mega-FTAs like the Comprehensive which are acutely disadvantaged together offering more pathways for and Progressive Agreement for Trans- by export restrictions and limited development, peace and security. EAFQ Pacific Partnership (CPTPP) and the vaccine supply. Thus, the capacity of Regional Comprehensive Economic multilateral institutions and networks, Mely Caballero-Anthony is Professor Partnership (RCEP). Though Japan and particularly those in Asia, presents a of International Relations and Head of ASEAN countries are taking the lead potential reservoir of resources that the Centre for Non-Traditional Security in the CPTPP and RCEP respectively, can be deployed to tackle a range of Studies (NTS Centre), S. Rajaratnam the diverse interests of member states regional and global challenges. School of International Studies (RSIS), mean that the goals of each trade bloc The dynamics of a multipolar Nanyang Technological University, are correspondingly diverse. order are not limited to coalitions Singapore. It’s still unclear how a big power of the willing and the proliferation like China might wield influence of plurilateral trade arrangements.

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 9 COERCION PICTURE: HENNING GLOYSTEIN / REUTERS

Vessels anchored in the Singapore Strait wait for access to one of the world’s busiest ports, April 2019. The international economics of self-harm

CARLOS KURIYAMA and export prohibitions or restrictions to regional and global stability. It affecting specific goods from a weakens diplomacy and overrides the MPLEMENTING or threatening particular source or origin. Other multilateral mechanisms available I another territory with economic methods include cutting foreign aid, to initiate consultations and resolve sanctions in order to achieve a nation’s freezing financial assets, removing disputes. political end is an age-old tactic. In banks from the SWIFT (Society Yet, in today’s highly ancient and medieval Europe, trade for Worldwide Interbank Financial interdependent global economy, most blockades were put in place to obtain Telecommunication) clearance system, of these coercive actions have proven commercial privileges or to compel rejecting regulatory approvals and the ineffective. For example, in negotiating opponents to surrender. Today, with boycott of particular products. the US–China Phase One trade deal, globalisation, territories are more The world has become more the Trump administration failed to connected and interdependent, antagonistic in recent years. compel China to increase purchases and the mechanisms of economic Governments are implementing, or of select manufacturing, agricultural, coercion are evolving in these new threatening to implement, unilateral energy products and services from circumstances. actions against others to achieve their the United States as initially agreed. Common coercive tools in trade own objectives. This weaponisation of A 2021 study by Chad P. Bown include import tariffs, trade remedies economic policy tools is a challenge shows that US exports to China of

10 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 goods included in that deal totalled could be used for military purposes Australian businesses have been able US$94 billion by the end of 2020, an if on-sold to hostile third parties. In to find alternative markets, Chinese increase of 13 per cent over 2019 and South Korea these measures were tariffs and other trade restrictions representing only 59 per cent of the considered as a retaliation against have affected Australian firms by commitment. a Supreme Court decision that diverting purchases to other suppliers. ordered particular Japanese firms to China’s imposition of anti-dumping CONOMIC coercion also compensate Koreans who were used measures and countervailing duties on E impacts those who aim to as forced labour during the Second Australian barley reduced Australia’s coerce. US firms and consumers have World War. Japan’s export controls barley exports to China—its main paid for the tariff hikes on Chinese prompted immediate consumer foreign market—from US$410 million products through the increased price boycotts in Korea against Japanese to US$330 million between 2019 and of imported consumer goods and products, resulting in the withdrawal 2020. Meanwhile, China bought more the higher cost of components and of automaker Nissan from the Korean barley from other sources. China’s equipment imported from China to market. South Korea retaliated with purchases of barley from Canada produce goods and provide services Japan’s removal from a ‘white list’ of increased from US$370 million to in the United States. Before the preferred trade partners. US$439 million. COVID-19 pandemic, US exports The Japan–South Korea export of goods to China decreased by 11.2 controls have affected IT product consequence of these trade- per cent in 2019, due to retaliatory supply chains, as firms in South Korea A related actions is the rapid tariffs imposed by China after the were largely importing those chemicals deterioration of China’s reputation Trump administration increased tariffs from Japan. It is unsurprising that in Australia and around the world. against a range of Chinese products. South Korean chaebols have been A 2020 Pew Research Center survey This retaliation affected workers in looking for strategies to partially shows that 81 per cent of Australian American firms that suddenly faced decouple from Japan, such as respondents had negative views of unfavourable terms on which to identifying other import sources and China, up from 32 per cent in 2017. compete in the Chinese market. investing in the domestic production This survey suggests that China’s The Phase One deal also impacted of these chemicals that are critical to actions are counterproductive in third parties negatively, as China semiconductor production. influencing Australian groups to lobby began importing more from the None of the measures implemented for policy changes that meet China’s United States at the expense of others. during the Japan–South Korea trade political interests. In 2019, for example, China increased row have been effective at forcing the Economic coercion affects both its imports of US soybeans by 77 per other party to change its stance. On the target and the coercer. The use cent (from US$7.9 billion to US$14.2 the contrary, the pressure to decouple of economic coercion in the Asia billion) but reduced soybean imports frustrated established synergies Pacific region has costs beyond missed from Argentina by 38 per cent (from based on comparative advantages economic opportunities and lost US$3 billion to US$1.8 billion). and imposed higher costs of doing economic wellbeing in the countries Economic coercion complicates the business. affected. A survey conducted by restoration of relationships based on Similarly, recent Chinese actions the APEC Secretariat in December mutual trust. It intensifies nationalism against Australian exports have not 2020 reveals an overwhelming public and generates antipathy towards the been effective at forcing Australia perception in Asia Pacific economies coercing state among vast segments to reverse its decisions to block that multilateralism is a means for of the population in the state that is Chinese foreign investment deals in achieving future economic success. targeted. strategic sectors—including the ban The erosion of trust that comes with In 2019, Japan implemented on Huawei to provide equipment for economic coercion undermines efforts tighter export controls on hydrogen an Australian 5G network and calls to reach common understanding fluoride, fluorinated polyimide and for an independent World Health and strengthen regional economic photoresists—three key chemicals for Organization inquiry about the origin cooperation. semiconductor production—to South of COVID-19. Economic coercion is a threat to Korea, claiming that those chemicals While some of the targeted regional stability because it amplifies

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 11 VALUE CHAINS nationalism and populism. The immediate challenge in the region is Clear skies over to deflate the current tensions. The signing of the Regional Comprehensive Economic Partnership in November Asia’s new foreign 2020 provides one opportunity to do so through cooperation in areas of mutual interest. investment Though economic coercion rarely brings about the desired changes in the target party, it is a popular tool landscape because it can be deployed to obtain political support from domestic stakeholders at the expense of DAVID DOLLAR on industrial policies aimed at external parties. It is sometimes used generating domestic innovation and as diversionary policy tactic to steer HE global pandemic and limiting technology imports. The public attention away from domestic T recession, compounded by the pandemic has also led to temporary problems. pre-existing US–China trade war, have global shortages for medical Working together is vital in the era caused speculation about the future equipment and raised concerns of globalisation, as interdependence of foreign investment and global value about dependence on imports for is high and the costs of economic chains (GVCs). The two are closely key products and calls for increased coercion are two-way and have related because it is multinational domestic production of these items. complex effects on third parties. enterprises (MNEs) from advanced Despite these disruptions, some Building long-term trust-based economies that largely organise and aspects of international trade and relationships among governments is manage the complex supply chains investment held up strikingly well in an important step toward reducing that cut across countries to create 2020. US imports were down only 1 the use of economic coercion and an efficient division of labour and per cent despite its GDP dropping 3.4 resolving disputes in an amicable make quality products at the lowest per cent, probably as a result of the manner. For example, strengthening possible cost. There is likely to be some special economic stimulus measures regional economic integration in permanent change in GVCs as a result aimed at maintaining incomes in the Europe after the Second World of the pandemic and trade war, but face of massive unemployment. US War significantly reduced tensions probably not as much as politicians trade data shows only a small decline and dispelled the confrontational and some in the policy community in imports from China (3.6 per cent), atmosphere that pervaded the expect. despite the 25 per cent tariffs and a interwar period. Similarly in Southeast The United States has become sharp recession. Americans clearly still Asia, the expansion and consolidation alarmed at China’s technological want electronic products from China of ASEAN has been extremely useful advance and instituted a range of that make work and leisure at home to promote a constructive engagement restrictions on Chinese investment more comfortable (not to mention in this region and avoid tensions in the United States and on sales medical equipment and protective among its members. EAFQ of hi-tech products to China. It is gear). also taxing about half of US imports One flow that has been disrupted Carlos Kuriyama is a Senior Analyst at from China at a rate of 25 per cent. is China’s outward investment into the APEC Secretariat’s Policy Support These measures were introduced advanced economies. China had been Unit. by the Trump administration and using high-tech acquisitions in the will be reviewed by the new Biden United States and European Union to The views expressed in this piece are administration, but most of them enhance the technical capabilities of personal and do not represent the views will likely remain in place, reflecting its own firms. But both jurisdictions of APEC member economies. growing bipartisan distrust of China. have tightened security screening and China, in turn, has doubled down investment restrictions, reducing the

12 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 PICTURE: JAMES MATSUMOTO / SOPA IMAGES / SIPA USA A man wearing a face mask as a preventive measure against the spread of COVID-19 walks past an electronic board showing currency exchange rates at a securities firm in Tokyo, March 2021.

inflow of Chinese direct investment by has urged US firms to leave China and estimate, 84 per cent of the value of 50 per cent between 2016 and 2019. ‘reshore’ to the homeland, but there the large firms in the S&P 500 index Meanwhile, Chinese direct investment is no evidence that this is happening. consists of IP. Operating globally into the four largest ASEAN AmCham China’s survey of 346 enables these firms to use their assets economies increased by nearly 50 per American firms in 2020 found that in the largest market possible. cent over the same period, and is now the vast majority are expanding there. For developing countries, on par with Chinese investment into Only 4 per cent plan to reshore any participating in GVCs speeds the United States and European Union. production to the United States, as up the development process. It Some Chinese firms are circumventing leaving would mean foregoing business increases labour productivity and US tariffs by investing in ASEAN and profits from China’s lucrative living standards and upgrades the companies, often for final assembly. domestic market. While they are not capabilities of domestic firms. They export parts and machinery to moving back to the United States, Naturally, each side grumbles about an ASEAN partner which then sends about one-seventh are considering the bargain. Advanced economies final goods to the United States, a moving some production to other worry that they are losing factory jobs, natural evolution of GVCs in response countries in Asia with lower wages. while developing countries bristle to rising wages in China and to the The reason why GVCs have at being dependent on imported US tariffs. Despite the recession, US proved resilient is that they are a very technology. In each case, there are imports from ASEAN were up 13 per efficient form of organisation. The domestic policies that could address cent in 2020. ASEAN has become main contribution of MNEs to the the concerns. China’s largest trade partner. value chain consists of different types While there are some worrying Interestingly, investment into China of intellectual property (IP): patents, policy trends, especially US has not decreased. In fact, 2020 saw brands, trade secrets, managerial technology restrictions and Chinese record inflows. The US government know-how and sales networks. By one techno-nationalism, there are also

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 13 INCLUSIVE GROWTH positive developments. The Regional Comprehensive Economic Partnership The digital among ASEAN, China, Japan, South Korea, Australia and New Zealand, is a significant trade liberalisation transformation of agreement that should cement Asia’s place at the heart of many value chains and encourage direct investment in East Asian trade different directions. China has also signed a bilateral investment treaty with the European Union that, if HOMI KHARAS people in the middle class in 2021, or ratified, would open new sectors and MEAGAN DOOLEY 25 per cent of the world’s population, provide confidence in policy stability. using forecasts prepared by the IMF China will likely emerge this decade AST Asian economies are famous and the methodology described in as the world’s largest economy; it is E for delivering growth with equity Kharas (2010). Since the Chinese already the largest trading nation, and for their export orientation, as middle class took off around 2006, and was the largest recipient of reflected today in their participation in China has been adding an average of direct foreign investment in 2020. global and regional value chains. In a 60 million people to its middle class Given Asia’s dynamism and the world with COVID-19 these traits will every year. Elsewhere in the region, new agreements, it is likely that likely be accentuated. Indonesia, Japan, the Philippines, both interregional and intraregional East Asian trade will rise in Thailand and South Korea all rank investment will expand rapidly. importance because the scale of among the 20 countries with the Developing countries that can provide the region’s economic recovery is largest middle classes. complementary infrastructure, larger and faster than anywhere else. The global middle-class market is institutions and human capital will be Asia was already the second most massive—over $43 trillion in 2021, the winners in attracting investment integrated regional trade network measured in 2011 PPP terms. East and benefiting from this expansion. after the European Union in 2019, Asia is already the largest regional One cloud on the horizon is the with regional trade at 58 per cent of middle-class market, accounting for absence of the United States from total trade. East Asia’s trading system 35 per cent of the global total. It is any Asia Pacific agreements, and the is likely to become more inclusive estimated that expenditures made by risk of growing US protectionism. and sustainable as it shifts to using East Asian middle-class households The United States remains the largest digital platforms. Although there is will grow by almost 6 per cent per year global economy, and joining the still a digital divide in the region, with over the coming decade. By 2030, the Asia Pacific trade and investment less access for women, minorities and East Asian middle-class market could liberalisation would benefit both it rural residents, new digital platforms exceed that of Europe, North America and its partners. Furthermore, while are encouraging the participation and Latin America together. China’s Asian partners are happy of small farmers and small firms in Increasing competition to serve this to share the economic benefits international trade, including those new consumer market is now driving of its rise, they are also nervous owned by women, and opening East Asian innovation. Companies are about China’s military advance and opportunities for many near-poor quickly adopting new digital tools that increasingly confrontational foreign people. expand consumer choice and shrink policy. A United States that remains East Asia now accounts for 40 the distance between the producer and economically engaged in the Asia per cent of the global middle class, consumer. Pacific would be good for both the measured as those living on $11 to East Asia is leading the global region’s prosperity and security. EAFQ $110 per person per day in 2011 e-commerce revolution, with Chinese purchasing power parity (PPP) terms. tech giants like Alibaba and Tencent David Dollar is a Senior Fellow in the Despite the setbacks caused by the driving growth. Although estimates John L. Thornton China Center at the COVID-19 induced global recession, vary widely, an Asian Development Brookings Institution. China alone could have 1 billion Bank study looking specifically at

14 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 PICTURE: ALY SONG / REUTERS

A customer shops at an Alibaba rural service centre in Jinjia Village, Zhejiang province, China, 2015.

digital platforms found that business US$404 billion in sales in 2018, up as only 56 per cent of the region has to consumer (B2C) digital platforms 7 per cent from the year before. access to the internet. But the region (including e-commerce, online travel, Business to business (B2B) sales has seen dramatic growth since 2010 advertising technology, transportation, account for 80 per cent of cross-border in this area, with notable progress in e-services and digital media) generated e-commerce, but B2C represents the Thailand (up 44 percentage points), US$3.8 trillion in revenue in 2019, fastest growing segment. China is the Brunei Darussalam (up 42 percentage with US$1.8 trillion of it in Asia. global leader here, with ownership points), Cambodia (up 39 percentage E-commerce alone accounted for of most of the largest online retail points) and Vietnam (up 38 percentage US$1.9 trillion in revenue globally and auction sites. Cross-border points). ASEAN countries are now the and US$1.1 trillion in the region. transactions now account for 10 per fastest growing internet market in the China has become a leader in this cent of all e-commerce sales in China. world, with 125,000 new users added area, now accounting for 45 per cent COVID-19 has likely driven these every day. 94 per cent of the region of e-commerce transactions. Online figures even higher, as consumers is covered by a 4G network, ranging sales already represent 12 per cent of have increasingly turned to online from 89 per cent coverage in rural total retail sales in Asia, compared purchases with in-person retailers areas to nearly 100 per cent in the with 8 per cent in Europe and North closed. cities. Thus, access is a bigger barrier America. The digital economy is Despite these seemingly large to expanded digital readiness than expected to add US$1 trillion to Asia’s numbers, there is considerable room coverage. GDP in the next 10 years. for growth. E-shopper penetration, Digital consumers represent a The e-commerce movement started measured as the share of the online new market. According to McKinsey, with domestic sales but is rapidly population that make purchases 40 per cent of internet spending in evolving to include cross-border online, is below 50 per cent in Asia, China and 30 per cent in Indonesia transactions. Cross-border B2C much lower than other regions. The represents new consumption, e-commerce generated an estimated digital divide still hampers progress, rather than substitutes for in-

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 15 person purchases. Thus, these new players are using real time transaction e-commerce platforms are tapping into East Asian growth, and social media data to improve previously unmet consumer needs. risk assessments and to offer loans to Digital platforms are fostering powered by digital MSMEs. The most famous example inclusion in two complementary may be Ant Financial’s ‘3-1-0’ ways. For consumers, they are driving platforms, will be strong program. Ant’s online lending model down prices, adding variety of choice, is designed to take three minutes to and reducing the transaction costs of and inclusive if countries apply, one second for the money to be making purchases. At the same time, disbursed into the merchant’s account, digital platforms are vastly expanding in the region invest in with zero manual operations. Ant’s the reach and marketing prospects for SME-dedicated service, MYbank, micro, small and medium enterprises digital infrastructure and had reached 25 million enterprises (MSMEs). While these benefits were by the time of its fifth anniversary in previously restricted to people and human capital June 2020. Mybank has a particular firms in large metropolises, digital focus on filling the financing gap for platforms are opening up similar product on the platform. As payment women-owned MSMEs, adding to its opportunities for those living in lower modalities become integrated, markets contribution to inclusion. tier cities and rural areas. This is where too can become integrated. Consider Third, digital platforms provide the majority of East Asians still live, so the example of AliPay. AliPay is MSMEs with a range of technical there is a strong likelihood that digital acquiring local mobile-money startups assistance and market information growth will translate into inclusive across the region, expanding into services that increase productivity and growth in the region. India, Thailand, South Korea, the export revenue. There is already a trend of Philippines, Hong Kong, Malaysia, East Asian growth, powered by e-commerce platforms connecting Indonesia, Pakistan and Bangladesh digital platforms, will be strong and younger and peri-urban consumers through its regional partners. inclusive if countries in the region with international brands. Tmall, one In addition to reducing the invest in digital infrastructure and of Alibaba’s cross-border e-commerce transaction costs for small cross- human capital. Governments in the platforms, is providing preferential border purchases, this expansion of region will also need to coordinate on rates to international companies and FinTech is dramatically expanding a number of oversight and regulatory allowing firms to sell on their platform financial inclusion. More individuals mechanisms to ensure that these new without a license to operate in China. have access to a range of financial platforms are accessible and inclusive It reports that 29,000 brands came services without the need for and not exploitative. ASEAN countries onto the platform in 2020, 80 per cent an account at a formal financial have formed an e-payments coalition of which were entering the Chinese institution. That, in turn, connects to support the development of a market for the first time. 45 per cent them more tightly to the regional regional digital payment framework. of Tmall users are from lower tier economy. E-payment and consumer protection cities in China, many of them younger, Inclusive economies tend to have policies seem adequate for now, tech savvier consumers. These digital many dynamic MSMEs. Digital but more will need to be done to platforms are connecting consumers platforms serve MSMEs in a number protect data privacy and strengthen outside of the major metropolitan of different ways. First, they reduce cybersecurity. EAFQ areas with the rest of the region, and financial costs. Credit card processing offering younger consumers, whose fees cost US small businesses an Homi Kharas is a Senior Fellow in the preferences are likely to dominate the average of 2 per cent of gross sales. Center for Sustainable Development market for years to come, choices from Alipay and WeChat Pay, on the other program at the Brookings Institution. countries throughout the region. hand, have no transaction fees on One feature that makes cross- purchases made within their digital Meagan Dooley is a Senior Research border purchases on digital platforms commerce platform, and a 0.1 per cent Analyst in the Center for Sustainable so easy is the presence of digital fee on outside transfers. Development program at the Brookings wallets that can be used for any Second, e-commerce and FinTech Institution.

16 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 ASIAN REVIEW: CONVERGENCE CULTURE Fan labour and the rise of boys’ love TV drama in China

PICTURE: / REUTERS

Wang Yibo, Chinese idol and star of the boys’ love drama The Untamed, poses infront of adoring fans in Shanghai, September 2020.

ANGIE BAECKER Taoist cultivation. But the narrative continue to dominate the top two YUCONG HAO at the heart of the show is the tender spots in celebrity popularity, influence romance that unfolds between the two and endorsement indexes. O YOU remember that summer? men. With over 1.56 million reviews, D Search this hashtag on Weibo By any metric, The Untamed was The Untamed is the most reviewed and you will find that for a substantial a smashing success, but especially by television series on the interest-based number of people in China, it was the those measuring the show’s ability to social media platform Douban. On the summer of 2019 and their memories drive data and engagement. During international, open-source fanfiction of it are dominated by nostalgia for its final month of broadcast, it racked repository, Archive of Our Own, the one experience: watching Tencent’s up 200 million views per day and show’s main characters are the most web drama The Untamed (Chenqing over 70 million yuan in viewing fees popular romantic pairing among the ling). on its streaming platform, Tencent. fandoms represented on the website. The Untamed is nominally a fantasy The show’s leads, Xiao Zhan and To the entertainment industry, The costume television series that follows Wang Yibo, catapulted from mid- Untamed’s success is irrefutable proof two young lords as they investigate tier celebrity to the zenith of the idol of concept for the viability of adapting dark happenings in the world of entertainment industry, where they intellectual property from boys’ love

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 17 ASIAN REVIEW: CONVERGENCE CULTURE web novels to the small screen. Boys’ iQiyi—will consider purchasing relationship between its leads so love, also called danmei or BL, is a the rights to adapt the story into a deeply that it is possible to watch all 40 subculture genre of fictional media platform exclusive television drama. episodes believing the main characters defined by the presence of romantic Boys’ love drama adaptations were simply close colleagues—the male–male relationships. Borrowed must navigate both the platform’s star-crossed sort, who find each other from the Japanese tanbi—an addiction commercial interests and the political repeatedly across the reaches of time to beauty, often used in reference to demands of the National Radio and and space. two handsome men in a romantic Television Administration’s (NRTA) Still, the production had its issues. relationship—danmei discourse in regulatory processes—a system that Financing problems caused filming to China first developed closely around media scholar Ruoyun Bai compares stop mid-production, and the show Japanese subculture from the 1990s. to the Chinese Communist Party’s remains notorious for its low-budget More recently it has bifurcated with rhetoric of ‘material civilisation special effects. Although the show drama adaptations of danmei literature and spiritual civilisation’. During managed to air in its entirety, it was acquiring unprecedented visibility and this process of adaptation and pulled from the streaming service even attracting mainstream audiences. negotiation, explicit sexual or Youku a month after the series Live-action adaptations of danmei romantic elements are modified or concluded and later uploaded with literature (dangaiju) usually begin eliminated, transforming depictions scenes either edited or deleted. as an original work of online fiction of homosexual desire into ‘bromantic’ It was a revelation, then, when The hosted on the online literature website homosociality. Untamed not only made it to air, but Jinjiang Literature City. Authors Attempts at adapting boys’ love was praised during its run by the state- of popular works are approached web novels into live action dramas owned newspaper People’s Daily. In a to sell adaptation licenses, with had mixed success until the 2016 review for the newspaper, broadcaster first adaptations usually released web series Addicted (Shangyin). The Hu Xin lauded the show’s ‘confident’ as radio dramas, mobile games or drama based on Chai Jidan’s web novel depiction of traditional Chinese donghua (animated comics). Based Are you addicted? (Ni ya shangyin culture. The review dwelt on the on the success of these multimedia le?), was the first to achieve broad chivalry and selflessness of the moral adaptations, one of China’s leading popularity. But it was pulled from air universe depicted in The Untamed, streaming platforms—the most with four episodes remaining when but without mentioning that the prominent are Tencent, Youku and the romantic and sexual relationship main characters express their sense of between the two male leads became justice and chivalry primarily through Boys’ love drama obvious. Addicted left frustrated fans their devotion to one another. and confused production studios in The dissonance involved in praising adaptations must its wake, with studios unsure if future the ‘traditional cultural values’ boys’ love content could pass the portrayed in The Untamed without navigate both the NRTA ’s review process. The NRTA mentioning the show’s central male– upholds a ban on content depicting male romance marks the conflict at the platform’s commercial ‘abnormal sexual relations or sexual heart of the danmei novel’s increasing behaviour’, or activities it defines as prominence in mainland China’s interests and the perversion. pop culture. There is a paradoxical Two years later, an adaptation of the acknowledgment of the power of the political demands Chinese web novelist Priest’s Guardian boys’ love genre and its derivative (Zhenhun) broke through. After products on the one hand, and the of the National successfully passing the censors and maintenance of plausible deniability obtaining its license, the series aired to about the genre’s non-heteronormative Radio and Television completion in the summer of 2018. But origins on the other. while Addicted contained scenes with Yet boys’ love narratives will Administration its male leads touching and discussing likely become more prominent over sexual contact in unambiguous terms, the next few years. In 2020, over 60 Guardian submerged the romantic danmei novels from Jinjiang Literature

18 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 ASIAN REVIEW: CONVERGENCE CULTURE

City were purchased for live action PICTURE: REUTERS adaptation. There are at least a dozen high profile boys’ love dramas in various stages of production, and one show, Word of Honor (Shanhe ling), based on Priest’s novella Faraway Wanderers (Tianyake), quietly went to air this February. Budgets and production values have increased commensurate to the growing visibility of boys’ love dramas, and shows are staffed with talented cast and crew. Before 2021 is over, there will likely be an abundance of boys’ love dramas on air. While some of these shows will encounter difficulties in production and in final review, it seems we are on the cusp of a popular subculture securing a position of mainstream hypervisibility. The boys’ love genre is an inherently contested space, where even conventional markers of genre are a shifting target. Boys’ love drama adaptations freely appropriate elements from other genres, including ahistorical time travel, supernatural phenomena, alternative universes and mythical fantasy, to create fictionalised time and space so to avoid direct references to the history or the contemporary society of China. Despite these preemptive strategies, The Untamed’s Xiao Zhan speaks at the 2019 Jinri Toutiao Fashion Gala in Beijing, January 2020. boys’ love and its adaptations are under constant risk of removal mainstream production studios in narratives on China’s leading social and even criminal prosecution, overlapping economies of labour. media platforms, especially Weibo. as the genre’s frequent allusion to Boys’ love drama adaptations might This fan labour is, in turn, built homosexuality puts it at odds with be best understood as a convergence into the production of value in the the central government’s conservative culture—to borrow Henry Jenkins’s economy of popular entertainment standards for film and television. term for when differing forms of media culture in China. Still, TV dramas adapted from merge and the consumer becomes a Indeed, communication studies the boys’ love genre should not be driving force in its development. Boys’ scholar, Yiyi Yin, argues that fans understood through the binary of love fans are not passive recipients of participate in highly organised political control and the desire for cultural products, but ‘prosumers’ who forms of data labour, driving traffic dissent. Rather, the creation and collapse the boundary between the toward their favourite fan-objects, dissemination of boys’ love drama consumer and the producer through in what she calls a new algorithmic adaptations is a complex process the datafication of their fandom. Boys’ culture. Fan labour can be organised that triangulates boys’ love fans, love fan communities manufacture through official and unofficial fan social networking platforms and extraordinary visibility of boys’ love communities and includes a diverse

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 19 ASIAN REVIEW: CONVERGENCE CULTURE range of behaviours, some of which and irrational applications of time and were never substantiated, and the involve financial transactions and financial resources. However, when show remains available in China. some of which do not. Examples fans are given the opportunity to speak Will The Untamed be taken offline include repeat viewings of a boys’ for themselves, they can possess a and censored, as Guardian was in love drama to boost the show’s total sophisticated understanding of how 2018? Will the NRTA enforce even view count; purchasing multiple to manipulate social media algorithms more restrictions around depiction of streaming platform subscription to increase the visibility of their male–male relationships in response accounts; participating in hashtagged favourite actors and dramas. They to the raft of boys’ love drama conversations on social media realise their capacity to participate in adaptation currently in production? platforms like Weibo to increase the economies of the entertainment In the absence of any transparency visibility of a drama, actor or couple; industry. Significantly, the affective around the NRTA’s review process, it creating derivative fan works, labour that female fans perform to is hard to say. such as fan art, fan videos, and promote their favourite shows makes Meanwhile, fans have been known fan fiction; and generating traffic the intellectual property visible and to spread negative rumours in by re-posting and liking content legible across linguistic and geographic anticipation of a new boys’ love drama from official cast or crew social boundaries, transforming the boys’ adaptation’s release as a pre-emptive media accounts. Production studios love fandom into a transnational attempt to prevent new shows from recognise the capacity of fan labour phenomenon. poaching supporters from existing in manufacturing the visibility of the fanbases. Whether the rumours are dramas, and intentionally mobilise RONICALLY or inevitably, the manufactured by calculating fans or the fan community in their marketing I process of censorship itself has insiders with dark tidings, we will have strategies. For instance, by providing emerged as another site of data to watch and wait to find out. EAFQ materials for fan consumption or labour, hypervisibility and contest. encouraging fan art, a two-way In January, rumours spread that the communication between industry and NRTA was on the verge of tightening Angie Baecker is a Lecturer in the fan communities is established. restrictions on boys’ love content and Department of Art History at the Like any other type of labour, that The Untamed would soon be University of Hong Kong. fan labour carries certain class and removed from streaming platforms. gender markers. Fans are often The Untamed once again became Yucong Hao is a PhD candidate in the assumed to be young urban women a trending topic on Weibo as fans Department of Asian Languages and (even adolescents) and their labour scrambled to warn one another and Cultures at the University of Michigan. is dismissed as mindless spamming download the show. But the rumours

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20 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 ASIAN REVIEW: POWER AND INFLUENCE

PICTURE: JORGE SILVA / REUTERS

A man pushes against police officers during an anti-government protest in Bangkok, October 2020. Thai youth’s struggle for democracy may fizzle but political contention continues

PENCHAN PHOBORISUT in 2020 and this year have been without conviction implied prolonged denied bail and visitation from their detention of students under arrest. HAI protests continued families. The prominent student Meanwhile, rumours circulated on T through to 2021, with student- activist, Parit ‘Penguin’ Chiwarak, social media about attempts on the led protesters trying to maintain who has been imprisoned without life of protest leader and founder of momentum despite the surging bail, announced a hunger strike over the We Volunteer network of protest number of arbitrary arrests. In March, court bail. Another student activist, guards, Piyarat ‘Toto’ Chongthep, protesters endured a harsh crackdown Panusaya ‘Rung’ Sithijirawattanakul, while in prison. He was later released as they faced water cannons, rubber also began a hunger strike while in on bail before being rearrested on a bullets and physical assault. A fresh detention. The court’s denial of bail royal defamation charge. round of force and the mass arrest illustrates state machinations that While the state’s stepped-up of 70 protestors in one day aimed to deny fundamental rights to protesters measures to detain political activists quash ongoing protests. while their cases are still being may have stymied protests, youth pro- Students and activists who have prosecuted. Scholar Prajak Kongkirati democracy networks—facilitated by been arrested for organising protests argued that the condition of no bail modern communication technology—

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 21 ASIAN REVIEW: POWER AND INFLUENCE continue to fight the state’s top-down With the politicisation eagerly embraced the trend to support suppression. Thanathorn and retweeted the Of particular interest here are of nationwide student hashtag to top Twitter’s Trending List. the decentralised, networked Elections that had formerly relied on communication tactics that activists’ networks, fandoms, local political canvassers shifted to have used to mobilise against the Thai online and offline social influencers. establishment and its adherence to YouTube and internet As Pitch Pongsawat explains, these hierarchical communication strategies public endorsements of Thanathorn of the past. idols, LGBTQI+ contributed to his immense popularity. The concerns of Thailand’s youth Similarly, the student-led protest movement exploded into communities, and movement’s network has been mass demonstrations in August mobilised and endorsed by various 2020—the largest since the country’s netizens on emerging influencers from diverse groups. It 2014 coup. The rallies unveiled started with students from different political grievances on the failure to social media platforms, schools and colleges voicing their return to democracy after the 2019 support for democracy by crafting general elections, a court verdict that the pro-democracy creative and funny hashtags with disbanded the Future Forward Party, the names of their campuses and the abduction of a political activist in movement has expanded identities. June and the diminishing popularity of Fandom—a group’s intense the monarchy. considerably engagement with fan objects Young activists demanded the like comics, television shows, or resignation of junta leader-turned- celebrities—has been a driving force Prime Minister, Prayut Chan-o-cha, for political activism. As fans in a new constitution, and monarchical argues that the economy today, unlike Thailand created online communities reform. They broke through the glass the industrial economy, no longer to share news and photos of their ceiling protecting the monarchy privileges hierarchical relations in pop idols, they also connected with from criticism—the lese majeste law production. The information society their members for a cause, including prohibiting criticism against the King, has forged new types of relationships supporting students’ rallies. At the the Queen and the Heir Apparent, in the market in which consumers height of the demonstrations in which is punishable with three to can become producers. Individuals October 2020, K-Pop fandoms publicly fifteen years imprisonment. Since last become engaged consumers, confident supported the student movement, year, the student protesters succeeded in their ability to effect change and claiming that, with better politics, they in unearthing the current reign’s accomplish their goals in the digitally might have more money to support irregularities, raising questions about networked environment. New ways their K-Pop idols. Fan Twitter feeds the King’s residence in Germany, the have emerged for individuals to see featuring daily news and photos violation of human rights in silencing themselves as productive human of their favourite K-Pop stars were exiled political activists, the Crown beings, forming new connections and punctuated by updates on rallies, Property Bureau’s huge assets and becoming politically engaged. safety and fundraising. the King’s personal regiment. The In Thailand, for example, the young The latest online influencer protesters’ public criticism of the invented their own unique ways to recruit to the student movement monarchy and the Thai establishment engage political candidates in the is the transgender YouTuber and revealed how people had become less 2019 Thai general election. Netizens Comedian, Mae Ying Lee, also known fearful and more disposed to speak crafted the hashtag FahRakPho (Fah as Mahathewi Chao Haeng Muang out. Loves Father), inspired by a Thai soap Thip, who rose to superstardom The audacity and political opera, to express support for the overnight. She is known for flashing determination of youth activists is former Future Forward Party leader a three-fingered salute in support of partly explained by changes in the Thanathorn Juangroongruangkit. the movement. With the politicisation information economy. Yochai Benkler Although puzzled at first, netizens of nationwide student networks,

22 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 ASIAN REVIEW: POWER AND INFLUENCE

PICTURE: ATHIT PERAWONGMETHA / REUTERS

A protester shows the three-finger salute while taking part in a protest against the government and to reform the Thai monarchy, Bangkok, October 2020. fandoms, YouTube and internet idols, severed to form new lines. The Cold War was the context in LGBTQI+ communities, and netizens MIDST the ongoing anti- which the international community on emerging social media platforms, A monarchy sentiments, the Palace engaged King Bhumibol in the the pro-democracy movement has has not issued any statements or fight against communism. The US expanded considerably. response to the demands of student government carefully crafted print With this decentralised structure, protesters. This is a stark departure and film media to portray the Thai the network enables the fluidity from practice in the reign of the late monarchy as being threatened by for individuals of influence to lead, King Bhumibol who was lauded for his communism. Now, with the Cold connect and amplify their political charisma and extraordinary capacity War era over, King Vajiralongkorn movements, and to reconfigure tactics for communicating with the public as is less well strategically positioned when traversing state suppression. The a mediator during political conflicts internationally and rarely gives public network has adapted to efforts at state in 1973, 1976 and 1992. He was a speeches or interviews about current control by changing protest locations figure who defused political tension events. This may explain his lifestyle or calling off rallies at short notice to and united the country. As Pavin choices and residence in Germany. avoid arrest. The loosely connected Chachavalpongpun has observed, As anti-monarchy sentiments network is organic—operating in the King Bhumibol was ‘very engaging and grow, the Palace has felt the need to manner of plant rhizomes that spring realised the importance of winning the stabilise the King’s position. Since up from the points where they are popular mandate in his own way’. October 2020, the King has remained

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 23 ASIAN REVIEW: POWER AND INFLUENCE in Thailand, postponing his return family members. to Germany, where he used to spend These strategies depict the Pro-government much of his time. He has attended monarchy’s sacrosanct position while royal functions and visited different reasserting the hierarchical structure social media accounts parts of the country, replicating Cold that demarcates the monarchy’s divine War royalist strategies to enhance the position from his earthly subjects. propagate content monarchy’s popularity. These are anachronistic in the modern The backdrop of yellow-clad world. generated by paid supporters sitting and waiting for the royals has been a staple at the King’s HE military-backed government bloggers, social media official functions, though it has been T has at the same time deployed argued that many are mobilised by top-down measures to censor political influencers and pro- the authorities themselves. The Palace dissenters’ expression and promote has also tried to tap into less formal pro-establishment content on social military media communication by replicating the media. Leaked documents from the distribution of hand-drawn new year military’s Information Operation cards that were used during King and its instructions to post and Bhumibol’s reign. But popularity and comment in favour of the government dehumanise student activists and charisma are not easily inherited. have surfaced over the years. The promote antagonism towards them The Palace has also tried to harness opposition party disclosed these and their cause. the power of social media. An attempt documents in the censure debate in With their use of arbitrary arrest to make a video go viral on social February 2020. Army-sanctioned and detention, the authorities aim to media shows the King complimenting operations and pro-establishment evoke fear. As many predicted, the a man in a yellow shirt (a colour groups threaten the government’s current pro-democracy movement identified with the King) who had critics, employing witch hunts, hate appears to be fizzling out. But the past earlier raised photos of late King speech and diatribes that deepen year has revealed Thailand’s youth as Bhumibol challenging protesters at a existing political divisions. In October outspoken, creative and determined student rally. The King is seen greeting 2020, Thailand made news headlines to resolve the country’s political his elated follower, remarking ‘Kla when Stanford University identified dysfunction. Their decentralised mak, kla mak, keng mak, Khopjai!’ 926 Twitter accounts linked to the Thai networks have so far withstood (Very brave, very brave, very good, Army which were later suspended. demolition efforts by the authoritarian thank you!). The clip indeed went The state also hires professionals to government. Individuals continue viral, perpetuating the myth of an propagate pro-government messages to step up to lead the movement, ‘auspicious encounter’ with the royals. on social media. One case is that ceaselessly reinventing their tactics to But when the King’s daughter, of Sarinee Achavanuntakul, a pro- fight for their political causes while Princess Sirivannavari, tweeted democracy blogger-turned-social evading arrest. While the young photos of her vacation in the islands media influencer, who was approached might temporarily abandon the street, of Southern Thailand in 2019, she by a public relations agency to create their discontent still simmers. With was trolled by netizens criticising pro-government content—an offer she the deterioration in Thai economic her privilege as security guards had refused. Pro-government social media conditions and a raft of other closed the island to ensure her safety. accounts propagate content generated government failures, Thai youth see Meanwhile, Facebook fan pages of by paid bloggers, social media little choice but to continue to push Queen Suthida and Princess Consort influencers and pro-military media, for change—even if it achieves only Sineenat ‘Koi’ Wongvajirapakdi including the recently founded outlet, a small crack that might eventually constantly contribute content to their Top News, which features hyper fracture the system. EAFQ audiences. The Queen’s Facebook fan royalist anchors formerly employed page features 300–500 posts per day, by Nation TV. Top News is dedicated Penchan Phoborisut is an Assistant mostly responding to photos of the to generating digital content to Professor at California State Queen with the King or other royal discredit the student-led movements, University, Fullerton.

24 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 TRADING SPACES

PICTURE: ALY SONG/ REUTERS

Digital payment technologies such as QR codes have enabled contactless trade during the COVID-19 pandemic, Shangai 2020. Managing digital trade in Asia

DEBORAH ELMS As the online world continues to recognise national borders. Indeed, grow rapidly, these approaches are one of the great promises of the OR years, digitally enabled trade becoming increasingly untenable. digital revolution was that firms could F has grown without significant Offline shops were concerned that become ‘multinational’ regardless regulatory oversight. Firms started they were losing competition to of their size. Anyone could launch a by delivering goods ordered online less regulated online firms, and that global business from their own home. and then figured out ways to provide consumers had limited protections. The global nature of digital trade a wide range of services over the Even firms that were benefiting from required officials to grapple with internet. Electronic payment methods the unregulated or lightly regulated appropriate regulatory oversight in and new logistics and shipping options environment could see the advantage a collective way. But officials were evolved to support growing digital of having rules in place to ensure that uncertain about the nature of the trade demands. Eventually, whole new trade lanes remained open. Commerce digital environment and the best ways categories of digital commerce sprang does not prosper if the environment is to manage a growing set of complex up, such as the sharing economy and risky or uncertain. challenges. Uneven distribution of the Internet of Things (IoT). While the digital world has many digital growth meant that not all Officials have either taken a hands- characteristics in common with governments were looking at the same off approach or struggled to fit offline physical commerce, one key difference set of issues at the same time. rules to the online environment. is that the internet does not readily The result has been a proliferation

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 25 of policies and a growing patchwork including new service activities not of regulations, laws and requirements yet imagined, applying taxes to cross- Digital trade is the in different markets. This explosion of border deliveries of digital goods regulatory interest is set to continue. and services, effectively tackling future of trade. It serves But policymakers are still struggling to concerns over cybersecurity and data find the right forum to discuss how to protection, and managing digital or as the connective tissue harness the best of digital trade while data sovereignty. Other considerations protecting consumers and avoiding include a renewed emphasis on running between and unfair market dominance and illicit competition and anti-trust policies, commercial activity. COVID-19 has managing cross-border payments, the across sectors of all accelerated the urgency of finding growth of new technologies, and how collective solutions, as firms have the spread of digital trade will affect kinds rapidly shifted online in order to the growth of the smallest firms. navigate lockdowns and severe Digital trade is the future of trade. disruptions to local markets. Digital It serves as the connective tissue as the Regional Comprehensive trade works best when the largest running between and across sectors of Economic Partnership, the ASEAN– number of governments have similar all kinds. It binds countries together. Australia–New Zealand Free Trade regulatory policies in place. Done well, it allows the smallest firm Agreement (AANZFTA), and the Despite the growing importance the opportunity to become a micro- Comprehensive and Progressive of digital trade, the ability of multinational with customers and Agreement for Trans-Pacific governments to effectively manage the suppliers around the globe. Done Partnership (CTPPP)—all include online environment still lags behind poorly, digital policies can trap firms digital trade provisions. ASEAN the pace of business innovation. and customers into substandard is working to implement its own Domestic-level regulatory and legal outcomes. Agreement on Electronic Commerce adjustments to better accommodate Asian governments have been at the in 2021. digital trade can be complicated. forefront of trying to address many of Some of the ‘digital only’ trade Negotiations between governments to these challenges. At the World Trade arrangements are attached to larger ensure greater consistency of policy Organization (WTO) 86 members are trade agreements, such as Australia frameworks are often time-consuming. engaged in negotiations on the Joint and Singapore’s Digital Economy By the time policy settings adjust, the Statement Initiative for e-commerce. Agreement, or are being added to commercial environment could appear Convened by Australia, Japan and ongoing upgrading exercises for quite different. Singapore, this initiative is working existing free trade agreements. This At the start of this decade, key across several cross-cutting issues includes the possible inclusion of issues for digital trade include to enable e-commerce openness, modules drawn from the Digital managing a sharp rise in the kinds trust, market access, updated Economy Partnership Agreement into and types of digital services available telecommunications and trade rules the upgrade for AANZFTA. to better fit today’s digital economy. Efforts to manage digital Some elements of this agreement may trade more effectively should be be ready by the next WTO ministerial welcomed. Getting cooperation and EASTASIAFORUM meeting in Geneva at the end of 2021. harmonisation across the broadest Quarterly Several Asian economies, including range of governments is critically Australia, Japan, New Zealand and important in allowing the smallest OUR NEXT ISSUE . . . Singapore, have also been designing firms, located anywhere, to engage and signing ‘digital only’ trade globally and to continue to become Reimagining agreements that include a range of ‘multinationals’. EAFQ rules and cooperation commitments. Japan, again These digital arrangements are likely Deborah Elms is Executive Director of to continue to multiply rapidly. the Asian Trade Centre, Singapore. Asian trade agreements—such

26 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 SWIFT RECOVERY Chinese supply chains prove resilient to global shocks PICTURE: MARTIN POLLARD / REUTERS

A cargo ship carries containers near the Yantian container terminal in Shenzhen, Guangdong province, May 2020.

KA ZENG tensions. These developments have the same period. This reflects a shift prompted a critical re-evaluation of in China’s trade patterns away from N the past couple of decades existing approaches to global sourcing processing trade and towards higher I multinational corporations have and manufacturing activities to value-added activities that enhance invested heavily in China in order to increase supply chain resilience and its ability to engage in industrial cut production costs and capitalise on reduce external risks. upgrading and climb the value chain. the rapidly growing Chinese domestic The extensive supply chain linkages It is not yet clear how the trade market. In the process, they have China has developed with partner war and pandemic have affected turned the country into the factory of countries can be seen in both its China-centred supply chains, but the world and a global supply chain backward and forward global value there is some preliminary evidence hub. chain (GVC) linkages: the former that the impact has not been uniform However, the ongoing trade war defined as the share of foreign value across industries. Instead, the coping between the United States and added in China’s gross exports and strategies of firms and industries may China and the COVID-19 pandemic the latter as the share of domestic be heavily dependent on their relative have highlighted the vulnerability value added in the gross exports of ease of adjusting to external changes. of complex global supply chains the foreign exporting country. China’s New research on the political to ongoing structural changes in backward GVC linkages with most activities of US corporations with the global economy resulting from regions experienced a gradual decline regard to US–China trade relations rising labour costs, automation, between 2005 and 2015, while its shows that US companies that have protectionism and geopolitical forward GVC linkages rose during verticalised their production by

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 27 moving operations to China are more To be sure, the pressures on supply Trade Area in 2001. Its aggressive likely to engage in China-related trade- chain adjustments, especially those pursuit of regional trade initiatives lobbying activities as they tend to have generated by the Fourth Industrial such as the Belt and Road Initiative unrecoverable assets dedicated to the Revolution, predate the trade war may have further increased its appeal Chinese market. In contrast, firms and the pandemic. The scale and as a trade and investment partner primarily engaged in input sourcing velocity of the recent global shocks for regional economies. Deepening tend to be less politically active have accelerated existing trends, regional supply chain integration may because they are more likely to be forcing firms to react more swiftly and therefore have cushioned the impact of involved in arms-length transactions efficiently to abrupt changes in the a major global crisis, even if it impedes that may increase the ease with which global political and economic climate allocative efficiency and limits the they can adjust to changing market in order to weather the storm. While ability of firms to adjust to shocks conditions. it is nearly impossible to identify the originating from a specific country or For similar reasons, the US–China most proximate source of change, region. trade war has resulted in more recent events provide opportunity to In view of the uncertainties significant declines in trade volumes observe firm behaviour under crisis generated by recent developments, for industries highly dependent on conditions. what can be done to ensure the sourcing from China, than for those smooth functioning of supply chains heavily integrated with the Chinese HINA’S response to the and increase their ability to withstand market through vertical foreign direct C pandemic also points to the the impact of future global crises? investment. importance of the regionalisation Indeed, companies have already The computer, electronics and of supply chains for its domestic started searching for strategies that textile industries provide good industry. Data on trade flows and will allow them to balance the priority illustrations of these dynamics. In the manufacturing output for the period of improving operational efficiency computer and electronics industry, the following the outbreak of COVID-19 against the need for contingency substantial capital costs of building suggests that disruptions to China- planning. In addition to accelerating and maintaining local plants coupled centred supply chains may have been the pace of new technology adoption, with the need for highly skilled transient. The Container Throughput many companies have more actively workers may have limited the ease Index published by the Leibniz sought to cultivate alternate sourcing, of relocating production outside of Institute for Economic Research and manufacturing, and transportation China. For example, between 2017 the Institute of Shipping Economics options and to prioritise the and 2019, Apple not only had more and Logistics, for example, shows that localisation and regionalisation of suppliers in China, but even increased the container throughput of Chinese supply chain relationships. Some have its presence in the East Asian supply ports generally recovered to pre- resorted to reshoring, near-shoring or chain. pandemic levels by March 2020 and the China Plus One strategy in order In contrast, more apparel suffered only a modest decline for the to diversify sourcing alternatives and manufacturing and sourcing activities year as a whole. mitigate the risks of supply chain have shifted from China to other An important factor for China’s disruptions. The China Plus One neighbouring countries in Southeast swift recovery from the pandemic is strategy, in particular, has emerged as Asia due to the existence of a larger its growing integration in value chains an attractive option for multinationals number of alternative suppliers, the in the Asia Pacific. Compared to other based in China as it allows them higher dependence on exports, and regions, the Asia Pacific has retained to maintain their existing business the less complicated nature of the its importance for China’s global supply ties with China while at the same supply chain. Other factors such chains, with China’s backward and time hedging against pressures to as the strategic importance of a forward GVC linkages with Asia-Pacific decouple from the centre of the world’s sector, government restrictions and Economic Cooperation countries manufacturing activities. regulatory policies may have further reaching over 11 per cent by 2015. But government policy also complicated the picture, accentuating China has also become more closely has an important role to play in the diversity of industry responses to integrated with ASEAN through the ensuring supply chain resilience. external shocks. signing of the ASEAN–China Free With global shocks and rising

28 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 GVC RESILIENCE protectionist pressures in major economies threatening to destabilise COVID-19 won’t global supply chains, it is important that governments are sensitive to diversified firm characteristics, rattle East Asian preferences and demands, and that they adopt complementary policies to harness market forces. supply chains It is thus more critical than ever PICTURE: ALY SONG/ REUTERS that national governments refrain from pursuing protectionist or mercantilist policies and instead strengthen regional economic cooperation to provide the institutional framework necessary for expanding global supply chain networks. The negotiation of new regional trade agreements such as the Comprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership are positive steps in this direction. Both agreements address Workers sew clothing at barriers to the movement of goods and a Vietnamese garment services. The CPTPP further sets high factory in Hung Yen, standards in areas such as intellectual December 2020. property rights, investment, and subsidies, which may help to increase FUKUNARI KIMURA due to an insufficient understanding the transparency and predictability of of the multiple shocks generated by doing business in member countries. N THE early stage of the COVID-19. Health policies—including While the rise of regional trade I COVID-19 pandemic, there was lockdowns and other social distancing agreements is partly a response to a series of overreactions about the measures —created three kinds of firms’ desire for a more stable business viability of global value chains (GVCs), shocks to GVCs: negative supply environment, it also risks creating with some mixed feeling about China. shocks, positive demand shocks and an unwieldy set of international Many claimed that the pandemic negative demand shocks. These shocks trade rules that undercut rather would mark the end of GVCs and have emerged in different places at than facilitate the ease of doing that there’d be a massive ‘reshoring’, different times and have confused business transnationally. Stepping up with production pulled back from observers. international coordination is therefore developing to developed countries. For countries other than China, needed to revitalise the rules-based Others claimed that GVCs needed the first impact of COVID-19 was multilateral trading system, reintegrate broadening to boost resilience and that negative supply shocks. In February and harmonise disparate national and companies should avoid concentrating 2020, imports from China—both regional standards and regulations, their operations in one location such parts and components, and final and prevent the balkanisation of as China. products—suddenly stopped. But as regional economies. EAFQ But GVCs have mostly remained China successfully contained the virus, intact over the past year, with more import supply was quickly restored Ka Zeng is Professor of Political Science intensive use of communications in a month. As COVID-19 spread to and Director of Asian Studies at the technology. other countries, lockdowns and other University of Arkansas. The initial reactions were partially measures caused negative supply

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 29 shocks, though the effects were minor initial negative supply shocks and sensitive materials such as rare metals, and temporary in East Asia. positive demand shocks, and anxiety as well as companies producing PPE. In many countries, there were about China. But private companies Some of these reshored and others initial positive demand shocks for remained calm. They had already moved part of their production personal protective equipment (PPE), optimised the balance between from China to other countries. and countries importing such goods efficiency and risk management before Japan’s Ministry of Economy, Trade experienced panic around sudden COVID-19. They knew that negative and Industry provided two subsidy spikes in demand. Some countries supply shocks would be temporary, programs in 2020–21 for supply introduced export restrictions on PPE positive demand shocks might create chains targeting these products. One and other ‘essential’ goods to prioritise business chances and negative demand was for reshoring and the other for domestic demand, without regard shocks needed to be watched carefully diversification, mainly to ASEAN to the credibility of the rules-based to gauge their depth and length. countries. Whether a policy tool such trade regime. But after the initial as a subsidy is optimal or not can shock, things calmed down and the HE world has not observed any be arguable, but the two programs market ensured stable supplies of most T massive reshoring or relocation were well accepted among Japanese goods—except vaccines. of production operations. Machinery companies. COVID-19 also generated positive international production networks— The US–China confrontation demand shocks for telework and characterised as a task-by-task has morphed from trade issues into stay-at-home related goods. Sales international division of labour— super-power competition. Countries of laptops, communication-related have been more robust and resilient such as Japan and South Korea heavily equipment, dishwashing machines and than other types of transactions depend on a national security system water purifiers boomed. East Asian as they proved to be in past crises underpinned by the United States exports to North America and Europe including the GFC and the East Japan and have an incentive to behave as recovered primarily due to these Earthquake. good allies. Careful assessment of the positive demand shocks. To what extent did US–China extent of decoupling in terms of the A third impact of COVID-19 was decoupling already under way affect types of technologies, products, and negative demand shocks. Lockdowns decision making for GVCs during firm nationalities will be crucial in the and social distancing, businesses COVID-19? coming years. closing and income losses reduced the For Japanese companies, to take Further extension and deepening demand for a wide range of goods and one example, China is attractive of international production networks services. The slump in GDP was felt all for production sites and markets. are desirable for enhancing resilience. over the world. But unlike the global But China is also prone to sudden India’s participation in these would financial crisis in 2008–09, many politically driven policy changes. So, have helped do that so its decision to countries implemented mitigation Japan’s China Plus One strategy to walk out of Regional Comprehensive policies on an unprecedented scale. extend its GVCs has been in place Economic Partnership negotiations So, there was no collapse of the since 2010 when disputes over the was unfortunate. By improving the financial sector and asset markets, and Senkaku (Diaoyu) Islands began to investment climate and enhancing consumer purchasing power held up. escalate. Labour-intensive operations connectivity, South Asia could also The trough of international trade started moving earlier in response to participate in tightly connected East was much shallower than that of labour cost pressures and some quiet Asian production networks and GDP, both of which largely bottomed reallocation of production occurred in thereby achieve more rapid economic out across the world in May 2020. response to the US–China tariff war. growth and poverty alleviation. EAFQ While particular sectors—such as COVID-19 aggravated the conflict and the garment industry, transportation, accelerated decoupling. That trend Fukunari Kimura is Professor, Faculty tourism and on-site services—have continued. However, most operations of Economics, Keio University and suffered serious damage, major in China remain as they were. Chief Economist, Economic Research reshuffling of GVCs seems unlikely. The limited exceptions are Institute for ASEAN and East Asia Initial concern about GVC viability companies with sensitive technologies (ERIA). was fuelled by over reaction to the that require semiconductors or

30 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 OLD WINE, NEW BOTTLES

PICTURE: EDGAR SU / REUTERS India’s search for self-reliance

A 2019 decision by Indian Prime Minister Narendra Modi (pictured in 2018) to withdraw from the Regional Comprehensive Partnership demonstrates India’s longstanding stance to preserve its strategic autonomy while restoring its standing as a major economic power.

SUMAN BERY environment. India seems engaged in the Cold War, reacting to US support such a reset at this time. What are the of Pakistan and China under President NDIA as a modern state has forces shaping India’s present external Nixon. The economic outcome was I pursued two interconnected posture, and what might they mean for dismal stagnation but ‘strategic objectives since independence from India as an Asian player? autonomy’ was preserved. Britain in 1947. These goals, still India is often regarded as innately India’s return to openness in 1991 relevant, are to restore the country’s protectionist, but as the economist also occurred on the watch of a standing as one of the world’s Pravin Krishna has observed, at Congress-led coalition government. major economies, and to preserve its independence India inherited Parliamentary elections in 1989 led to geopolitical freedom of action, or a relatively open trade regime and the rejection of the ruling Congress ‘strategic autonomy’. Economic in 1948 was one of the 23 original party led by Indira Gandhi’s son, Rajiv strength is both an end in itself (to ‘contracting parties’ to the GATT. Gandhi. The inexperienced coalition lift millions out of deep distress India’s turn inward was facilitated government that took office was not and poverty) and indispensable for a decade later when the GATT in a position to handle a fiscal and maintaining autonomy. permitted ‘special and differential balance of payments crisis. The crisis Over this long period, India’s treatment’ for its poorer members. was exacerbated by external events: engagement with the outside Policy was reinforced by geopolitics: the collapse of the Soviet Union, an world has periodically changed to Indira Gandhi of the Congress party important trade and defence partner, reflect domestic imperatives, global who became prime minister in 1966 and the first Gulf War. In the 1991 experience and changes in the external increasingly sided with the USSR in parliamentary election campaign

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 31 that followed, Rajiv Gandhi was Mexico with NAFTA, as well as its and domestic forces has prompted assassinated, as his mother had been support for China’s WTO accession, a revaluation of India’s external seven years earlier. together with the steady expansion of engagement. While there is no The electoral outcome was a the European Community undermined crisis and the government is strong Congress-led minority government India’s faith in the multilateral order in and popular, three contemporary headed by P. V. Narasimha Rao, the the 1990s and early 2000s. developments are particularly first Congress prime minister drawn significant. The economic, medical from outside the Nehru-Gandhi NDIA remains by instinct a and political dimensions of the family. Rao’s technocratic finance I multilateral trading power, COVID-19 scourge have exposed minister, Manmohan Singh, advised preferring to trade under the and reinforced weaknesses in India’s the prime minister to seek support GATT’s most favoured nation rules, development trajectory. China’s long- from the IMF. The program submitted and actively uses the protectionist term economic success and its current to the IMF included a comprehensive flexibility afforded by the distinction political assertiveness are now shaping set of reforms covering trade, public between applied and bound tariffs, both the regional and global economic finance, the exchange rate regime as well as the trade remedies (anti- order as well as its bilateral relations and the reform of capital markets. dumping, safeguards) that are with India. These developments While Prime Minister Rao provided available. In the first decade of the have occurred at a time of declining valuable political cover he was not new century it began to flirt with support for multilateral co-operation inclined to mount a frontal challenge relatively shallow bilateral preferential following the global financial crisis and to the party’s centre-left orthodoxy trade agreements with a range of on into the pandemic. Taken together, associated with the iconic Indira partners. It also agreed to participate these developments have prompted Gandhi. External integration remained in negotiations on the Regional India to reconsider its external a largely technocratic project: ‘reform Comprehensive Partnership (RCEP) in posture. Much remains obscure and by stealth’ as it came to be known. 2012 but in the end withdrew in 2019. seemingly inconsistent, but it does Though weak, this impetus to The patterns of comparative appear that India is reducing its bets liberalisation lasted till the global advantage that emerged under on integration with its East Asian financial crisis 20 years later. There liberalisation were different from neighbours and investing greater was substantial reduction in average those anticipated and desired. The energy in links with Europe and the applied industrial tariffs over this 20 years of liberalisation were by United States. period, though agriculture remained and large good for growth: by size of The deeper message is that in its very highly protected. Liberalisation economy India is now a consequential, post-COVID recovery, India’s pursuit was largely unilateral, driven by though still poor, middle-rank power. of strategic trade and industrial policy a desire to emulate the export- However, India did not succeed in means it prefers the flexibility offered led manufacturing success of the boosting the share of manufacturing by bilateral trade agreements over economies of East and Southeast Asia in domestic output; as agriculture more ambitious regional structures. and thereafter China. declined the services sector boomed. Its aim will be to make access to India was an active but This composition of output was also the Indian market most attractive unconvinced participant in the WTO’s reflected in India’s trade. While the for those willing to bring the latest Doha Development Round launched overall balance of payments in general technology, following the playbook of under the WTO in 2001. India remained comfortable, its structure China and before it, Japan and South argued—with some justification— was closer to that of an advanced Korea. It will also seek to consolidate that a new round was premature country, with a large deficit in industry market access for its export of services as there was unfinished business balanced by surpluses in agriculture in rich countries. EAFQ from the earlier Uruguay Round to and services. The concentration of the be dealt with, particularly where manufacturing deficit in India’s trade Suman Bery is a Global Fellow at the agricultural trade was concerned. with China has been a problem given Woodrow Wilson International Center Washington’s retreat from committed political and diplomatic tensions for Scholars, Washington DC. multilateralism toward preferential As in the 1960s and again in the agreements first with Canada and then 1990s, a combination of external

32 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 RECIPE FOR SUCCESS

PICTURE: ALY SONG/ REUTERS

Tesla Model 3 vehicles roll off the line at the company’s gigafactory in Shanghai, January 2020. Globalisation isn’t losing steam in China

SONG HONG the COVID-19 pandemic and through Agreement on Investment with the the US–China trade war. During the European Union. More free trade HY has China continued to Trump administration, China removed agreements are on the horizon. W liberalise trade and investment ownership, regional and minimum According to Beijing’s latest Five-Year as doubts about, and opposition to, benchmark restrictions on foreign Plan and its Long-Range Objectives globalisation elsewhere rise? While the direct investment (FDI) in the financial Through the Year 2035 proposal, opposite is claimed to be true in some sector, leading to a boom in foreign China will actively pursue the developed countries, globalisation investment. China continued to reduce trilateral free trade area negotiation optimises China’s economic structure the length of its negative investment with South Korea and Japan; apply and improves efficiency. China’s list—which designates sectors where to join the Comprehensive and opening-up and development foreign investment is prohibited or Progressive Agreement for Trans- has contributed significantly to restricted—from over 100 items to 33 Pacific Partnership (CPTPP); and ongoing processes of Asian regional items. It also unilaterally reduced its continue to vigorously promote Belt integration, placing Asia in the lead as tariff rate from 9.8 per cent to 7.5 per and Road Initiative (BRI) construction the fastest growing and most dynamic cent. projects. So far, China has signed region in the world. In 2020, China signed the Regional 205 cooperation agreements with China has sought further Comprehensive Economic Partnership 171 countries and international liberalisation in investment and trade (RCEP) trade agreement with 15 organisations through the BRI. over the past few years, even during countries and the Comprehensive Globalisation in some developed

EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 33 countries, especially the United invested firms. will reshape worldwide trade and States and the United Kingdom, is Absorption of foreign technology economic patterns in three ways. said to have gone too far and led to and management, combined with First, China will transfer more labour- losses of efficiency. If only trade is a skilled domestic labour force and intensive industries to neighbouring liberalised efficiency will improve, other extensive supporting facilities and nearby countries, driving regional and benefits flow to all. If investment and networks, made Chinese private economic development and promoting liberalisation is carried out at the firms more competitive than those of the expansion of regional integration same time, however, certain industries other countries. Take Vietnam as an in Asia. Investment in manufacturing with comparative advantages in example. Its combination of foreign will also deepen BRI cooperation with some developed countries will technology, capital and domestic many of these countries. move out, and that can lead to a advantages was also highly competitive Second, China is trying to attract loss of high value-added products and its exports enjoyed rising market more foreign investment in high-tech and services and high-income jobs. share, though Chinese private firms industries, which will deepen and These and other consequences, if not maintained their global market expand Asian regional production attended to, include uneven income position successfully networks. In 2020, China became the distribution and losses of welfare in largest FDI destination in the world, these countries. This may be called a ECENTLY, ‘superstar’ exporters with most new investment going into globalisation trap that needs national R have targeted intermediate and services. policy attention. high-tech goods. Although a lot of Third, China provides a huge On the other hand, if a developing these export products are designed market for development and country actively attracts foreign by foreign firms, the manufacturing integration in other Asian countries. investment, it may create a ‘super mix’, or assembly lines are in China. This In decades past, East Asian economies that is, a mix of foreign factors such as provides Chinese enterprises with a such as Japan, South Korea, Taiwan, advanced foreign technology, capital chance to catch up and potentially Singapore and Hong Kong, adopted and open international markets, replace foreign firms. export-oriented strategies and were together with domestic factors In recent years, some industries in highly dependent on the US market. such as cheap labour, facilities and China have been moved out to nearby Trade volumes from East Asian networks. This ‘super mix’ creates new countries like Vietnam, Bangladesh economies account for about one- comparative advantages and can also and Cambodia. These moves represent third of the US market, which makes set up a globally competitive industry efficiency-enhancing upgrades, East Asian integration vulnerable with in a very short period of time. It can providing opportunities for China limited intraregional trade flows. reshape international competition to enter more efficient industries, as With China’s economic rise, other patterns in almost every sector and inefficient industries and lower-level markets in Asia will expand and the every market. jobs move out. proportion of intraregional trade will This is exactly what has happened This phenomenon has been a source increase. Meanwhile, dependence in China over the past 40 years. The of Chinese export competitiveness. on external markets will decline. country’s first superstar exporters were It could be argued that the stellar These factors will enable Asia to engaged in labour-intensive goods performance of Chinese exports is not become an even larger production manufacturing. Most of them were the result of unfair practices or theft and consumption centre and further in the processing trade, importing of intellectual property rights. Rather, accelerate the eastward shift of the components and parts, with foreign- in addition to the mix of factors world’s economy. EAFQ invested firms most active in the 1980s mentioned above, China also has other and 1990s. Domestic private firms advantages such as a huge domestic Song Hong is a Professor, Senior Fellow then grew quickly and became the market, high-quality labour, extensive and Deputy Director-General at the major players in Chinese exporting. production-supply networks and Institute of American Studies, Chinese In 2020, these firms accounted for just substantial research and development Academy of Social Sciences (CASS). over 54 per cent of China’s exports, investment. about 36 per cent from foreign- China’s continued opening-up

34 EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 There has never been a more urgent time to use research to shape public debate, policy decisions and the well-being of our society.

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EAST ASIA FORUM QUARTERLY APRIL — JUNE 2021 35 Sustainable global trade for a better future

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