East Asian Integration: Goods, Services and Investment
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East Asian Integration The growth of world trade has been stagnant in recent years and trade liberal- isation has now been challenged. The recent rise of antiglobalisation calls for a better integration in East Asia. How should East Asia manage its openness? This book provides profound analyses on how FTAs affect trade in the region, rules of origins, non-tariff measures and restrictiveness in services and investment. It gives insight into how East Asian countries should shape their trade, investment and industrial policies. This book helps to answer the question of what kind of a better integration this should be and how East Asia can realise it. Lili Yan Ing is Lead Advisor, the Ministry of Trade of Republic of Indonesia. She was a Senior Economist at the Economic Research Institute for ASEAN and East Asia (ERIA) and Senior Lecturer at University of Indonesia. Martin Richardson is Professor of Economics at the Australian National University. Shujiro Urata is Professor of Economics at Waseda University and Senior Advi- sor to the President of ERIA. Routledge-ERIA Studies in Development Economics ASEAN and Regional Free Trade Agreements Edited by Christopher Findlay Age Related Pension Expenditure and Fiscal Space Modelling Techniques and Case Studies from East Asia Edited by Mukul G. Asher and Fauziah Zen Production Networks in Southeast Asia Edited by Lili Yan Ing and Fukunari Kimura The Indonesian Economy Trade and Industrial Policies Edited by Lili Yan Ing, Gordon H. Hanson and Sri Mulyani Indrawati Social Protection Goals in East Asia Strategies and Methods to Generate Fiscal Space Edited by Mukul G. Asher, Fauziah Zen and Astrid Dita World Trade Evolution Growth, Productivity and Employment Edited by Lili Yan Ing and Miaojie Yu Emerging Global Trade Governance Mega Free Trade Agreements and Implications for ASEAN Edited by Lurong Chen, Shujiro Urata, Junji Nakagawa and Masahito Ambashi East Asian Integration Goods, Services and Investment Edited by Lili Yan Ing, Martin Richardson and Shujiro Urata For more information about this series, please visit www.routledge.com/ Routledge-ERIA-Studies-in-Development-Economics/book-series/ERIA East Asian Integration Goods, Services and Investment Edited by Lili Yan Ing, Martin Richardson and Shujiro Urata LONDON AND NEW YORK First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 selection and editorial matter, Economic Research Institute for ASEAN and East Asia (ERIA); individual chapters, the contributors The right of Economic Research Institute for ASEAN and East Asia (ERIA) to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. The Open Access version of this book, available at www.taylorfrancis.com, has been made available under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 license. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Ing, Lili Yan, editor. | Richardson, Martin, 1960– editor. | Urata, Shujiro, 1950– editor. Title: East Asian integration : goods, services and investment / edited by Lili Yan Ing, Martin Richardson and Shujiro Urata. Description: Abingdon, Oxon ; New York, NY : Routledge, 2019. | Series: Routledge-ERIA studies in development economics | Includes bibliographical references and index. Identifiers: LCCN 2018060179 Subjects: LCSH: East Asia—Economic integration. | East Asia—Foreign economic relations. | East Asia—Commerce. | Regionalism—East Asia. Classification: LCC HC460.5 .E2744 2019 | DDC 337.1/5—dc23 LC record available at https://lccn.loc.gov/2018060179 ISBN: 978-1-138-35962-8 (hbk) ISBN: 978-0-429-43360-3 (ebk) Typeset in Galliard by codeMantra Dedicated to Our Children with Much Love Michelle and Han Na L.Y.I. James and Emmett M.R. Shuzo, Shinji and Shiro S.U. Professor Olivier Cadot, a significant contributor to this volume, passed away on March 20th, 2019. Olivier was not only an outstanding economist, he was a fine human being and a friend to many, all over the world. He is a wonderful friend with a beautiful mind. He will be missed professionally and personally. The editors also wish to dedicate this vol- ume to his family and to his memory. Vale, Olivier. Contents List of figures ix List of tables xi Acknowledgements xv Notes on contributors xvii 1 Introduction 1 Lili Yan Ing, MartiN Richardson and ShuJiro Urata 2 Trends of FTAs in East Asia from the 1990s to the 2010s: defensive and competitive regionalism 6 ShuJiro Urata 3 Economic effects of East Asian integration on Southeast Asia 25 Ken Itakura 4 The evolving structure of Southeast Asia- China trade 47 Zhihong YU 5 The impacts of ASEAN FTAs on trade in goods 76 Misa Okabe 6 The use of FTAs: the Thai experience 114 Archanun Kohpaiboon and Juthathip Jongwanich 7 How restrictive are ASEAN’s Rules of Origin? 143 Olivier Cadot and Lili Yan Ing 8 Non-tariff measures and harmonisation: issues for East Asian Integration 171 Olivier Cadot and Lili Yan Ing viii Contents 9 The impacts of services trade restrictiveness on the productivity of manufacturing sectors in East Asia 205 Cosimo Beverelli, MatteO Fiorini and Bernard HoekmaN 10 An international investment agreement for East Asia: issues, recent developments and refinements 230 Junianto James LosarI Index 257 List of figures 2.1 Regional Trade Agreements (FTAs and Customs Unions) in the World 10 3.1 Tariff Reduction Schedule, 2011–2035 27 3.2 Annual Growth Rate of ASEAN’s Real GDP (in percent), 2011–2035 32 3.3 Effects of the RCEP on ASEAN’s Real GDP (Cumulative Deviation from the Baseline, in percent) 33 3.4 Effects of the RCEP on Real GDP for ASEAN Member States (Cumulative Deviation from the Baseline, in percent) 34 3.5 Effects of the RCEP on Export Volume for Indonesia, Lao PDR and the Philippines, Scenario 3 (Cumulative Deviation from the Baseline, in percent) 40 4.1 China’s Exports to and Imports from ASEAN 51 4.2a Shares of the Top Five HS Products in ASEAN’s Exports to China 66 4.2b Shares of the Top Five Products in ASEAN’s Imports from China 66 4.3a Share of the Top Five Products in BCLM’s Exports to China 67 4.3b Share of the Top Five Products in BCLM’s Imports to China 67 5.1 The Number of FTAs among East Asian Countries 78 5.2 Shares of Exports and Imports of ASEAN with Australia, China, Japan, Korea and New Zealand 79 6.1 Export Performance of Thailand vis-à-vis Major FTA Partners between Pre- and Post-Signing of FTAs (as a share of Thai’s total imports) 115 6.2 Relative Importance of Tariff Exemption Schemes in Thailand between 2006 and 2015 135 6.3 Import Share of Major FTA Partners between Pre-and Post-Signing of FTAs (Share of Thai’s Total Imports) 136 7.1 Types of Product-Specific RoOs 147 7.2 A Representative Value Chain with Cumulation 148 7.3 ASEAN Member States’ MFN and Preferential Average Tariffs 151 7.4 ASEAN’s Total Imports from Its Main Trading Partners (in percent) 153 7. 5 Distribution of MFN Tariffs in Chapters 84–86 (Machinery and Electronics Products) 154 x List of figures 7.6 Foreign Content of Exports, by Exporting Country 155 7.7 AVEs of RoOs, All Sample 160 7.8 AVEs of RoOs, Selected Sectors (in percent) 162 8.1 Why Variable Sourcing Costs Matter More than Fixed Enforcement Costs 175 8.2 Coverage Ratio for Imports from Regional Partners 177 8.3 Mutual Recognition of Conformity-Assessment Procedures Yields Large Cost Reductions 180 8.4 Map-Like Representation of Regulatory Distances 185 8.A1 Shephard’s Diagram (Distortions due to the 2-Dimensional Projection) 200 9.1 Technological Dependence from Producer Services 213 9.2 STRI across RCEP Members 214 9.3 Governance Institutions across RCEP Members 215 9.A1 Estimated Marginal Effect of Reducing Barriers to Trade in Financial Services as a Function of Economic Governance 228 9.A 2 Estimated Marginal Effect of Reducing Barriers to Trade in Telecommunications Services as a Function of Economic Governance 228 9.A3 Estimated Marginal Effect of Reducing Barriers to Trade in Transport Services as a Function of Economic Governance 229 9.A4 Estimated Marginal Effect of Reducing Barriers to Trade in Professional Services as a Function of Economic Governance 229 List of tables 2.1 Tariff Elimination Rates for ASEAN+1 FTAs 12 2.2 Comparison of Issues Coverage for CPTPP and RCEP 18 2.3 Tariff Elimination Rate for CPTPP (% Share in Total Number of Tariff Lines) 19 3.1 Average Applied Tariff Rates for the ASEAN Member States (%), 2019 29 3.2 Effects on Real GDP, 2035 (Cumulative Deviation from the Baseline (percent), Billion US Dollar, in Constant 2011 Price) 36 3.3 Effect on Investment, 2035 (Cumulative Deviation from the Baseline (percent), Billion US Dollar, in Constant 2011 Price) 37 3.4 Effects on Export Value, 2035 (Cumulative Deviation from the Baseline (percent), Billion US Dollar, in Constant 2011 Price) 38 3.5 Effects on Import Value, 2035 (Cumulative Deviation from the Baseline (percent), Billion US Dollar, in Constant 2011 Price) 39 3.6 Effects on Sectoral Output Volume for ASEAN Member State under Scenario 3, 2035 41 3.A1