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.