Comments on Asian Trade and Regional Integration David - - PowerPoint PPT Presentation

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Comments on Asian Trade and Regional Integration David - - PowerPoint PPT Presentation

Dec 23, 2023 109 likes •386 views

Comments on Asian Trade and Regional Integration David Roland-Holst, UC Berkeley Three topics: Regionalisms Rationale Structural Trade Barriers and Infrastructure Demand Side Perspective Pan Asia Conference, SCID and SIEPR,

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2 June 2006 Roland-Holst 1 Pan Asia Conference, SCID and SIEPR, Stanford

Comments on Asian Trade and Regional Integration

David Roland-Holst, UC Berkeley

Three topics:

  • Regionalism’s Rationale
  • Structural Trade Barriers and

Infrastructure

  • Demand Side Perspective
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2 June 2006 Roland-Holst 2 Pan Asia Conference, SCID and SIEPR, Stanford

East and Central Asia South Asia Southeast Asia

People’s Rep. of China Hong Kong, China Republic of Korea Taipei,China Central Asia Mongolia ASEAN Oceana India Nepal Pakistan Sri Lanka Bangladesh

A Schematic View of ADB Developing

Asian Trade and Growth Patterns

Member Countries

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2 June 2006 Roland-Holst 3 Pan Asia Conference, SCID and SIEPR, Stanford

GDP

Southeast Asia South Asia East and Central Asia

I mports

Southeast Asia South Asia East and Central Asia

Population

Southeast Asia South Asia East and Central Asia

Trade GDP Population

Macro Conditions, 2005

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2 June 2006 Roland-Holst 4 Pan Asia Conference, SCID and SIEPR, Stanford

Asian Trade Flows, 2005

(percent of total Asian trade) Extra-regional demand remains a primary economic driver. Intra-Asian trade is far from reaching its potential.

Southeast Asia South Asia East and Central Asia

14.2 4.6 0.5 29.3 5.0 3.2 0.4 0.4 0.2 0.1 22.1 6.9 2.0 2.4 8.8

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2 June 2006 Roland-Holst 5 Pan Asia Conference, SCID and SIEPR, Stanford

Baseline Per Capita GDP Growth

(annualized percent change, 2005-2025)

  • 1

1 2 3 4 5 6 7 8 PRC Sri Lanka Philippines Thailand Viet Nam Hong Kong, China Malaysia India Korea Indonesia Bangladesh Taipei,China Singapore Australia, NZ United States Latin America Rest of World Europe 17 Japan

Real GDP/Cap Pop

On a global basis, Asia continues to represent superior growth.

Sources: DRI, Oxford Econometrics, IMF.

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2 June 2006 Roland-Holst 6 Pan Asia Conference, SCID and SIEPR, Stanford

Four Virtues of Asian Regionalism

Asian regional integration offers three

  • pportunities:
  • 1. Immense new market potential
  • 2. Diversification toward superior growth rates
  • 3. Structural differentiation – more rapid evolution

from established North-South patterns of trade and specialization

  • 4. Convergence – Leveraging regional dynamism

for the poorest neighbors

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2 June 2006 Roland-Holst 7 Pan Asia Conference, SCID and SIEPR, Stanford

Beyond WTO, FTA, etc… Structural Barriers to Trade

  • Structural barriers to regional trade are now

more important than tariffs.

  • Policies and investments that reduce trade

margins and transactions costs can accelerate regional growth dramatically.

  • Infrastructure, both hard (roads and

bridges) and soft (“Asian OECD”), is the key to meeting this challenge.

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2 June 2006 Roland-Holst 8 Pan Asia Conference, SCID and SIEPR, Stanford

Trade Costs Have Fallen, but Remain High

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2 June 2006 Roland-Holst 9 Pan Asia Conference, SCID and SIEPR, Stanford

Structural Barriers Matter More than Tariffs/NTBs

(2025 Real GDP, percent change from Baseline)

East and Central Asia Southeast Asia South Asia

2% annual reduction in trade margins

20 40 60 80 100 120 140 160 P R C J a p a n K

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e T h a i l a n d V i e t N a m B a n g l a d e s h I n d i a S r i L a n k a Global AsiaFTA AsiaFTA2

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2 June 2006 Roland-Holst 10 Pan Asia Conference, SCID and SIEPR, Stanford

Structural Barriers and Infrastructure

Infrastructure’s contribution can be seen from three perspectives:

  • 1. Keynesian – Aggregate demand and

employment stimulus.

  • 2. Ricardian – Reducing trade margins and

intensifying comparative advantage.

  • 3. Neoclassical – Endogenous growth

benefits.

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2 June 2006 Roland-Holst 11 Pan Asia Conference, SCID and SIEPR, Stanford

Keynesian Stimulus

  • Infrastructure spending is a popular means of

direct long term or transitory employment stimulus – Examples: WPA (US), Work Relief (PRC), Japan (heavy counter-cyclical and recurrent fiscal commitments)

  • Because of its generality, this kind of spending can

be targeted across a wide spectrum of regions and socio economic groups

  • For public good infrastructure multiplier effects are

generally quite substantial

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2 June 2006 Roland-Holst 12 Pan Asia Conference, SCID and SIEPR, Stanford

Ricardian Stimulus

By reducing trade margins, infrastructure: 1. Intensifies comparative advantage 2. Improves international terms of trade 3. Improves rural terms of trade (pro-poor) and 4. Extends the horizon of profitable investment and marketing

1

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2 June 2006 Roland-Holst 13 Pan Asia Conference, SCID and SIEPR, Stanford

Neoclassical Stimulus

Modern economic theory recognizes many endogenous growth factors, and these can be greatly facilitated by infrastructure: – Productivity enhancement – Technology diffusion – Information diffusion – Supply chain articulation and other network externalities – Human capital development (migration)

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2 June 2006 Roland-Holst 14 Pan Asia Conference, SCID and SIEPR, Stanford

Demand as a Regional Growth Driver:

Regional Import Demand Composition(2005)

SEAsia South Asia PRC Hong Kong, China Taipei,China Korea South Asia E&C Asia Indonesia Malaysia Philippines Singapore Thailand Viet Nam E&C Asia SE Asia Bangladesh India Sri Lanka

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2 June 2006 Roland-Holst 15 Pan Asia Conference, SCID and SIEPR, Stanford

East Asian Trade Triangle 2000

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2 June 2006 Roland-Holst 16 Pan Asia Conference, SCID and SIEPR, Stanford

East Asian Trade Triangle 2020

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2 June 2006 Roland-Holst 17 Pan Asia Conference, SCID and SIEPR, Stanford

Petroleum

  • 120
  • 100
  • 80
  • 60
  • 40
  • 20

20 40 60

1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4

Million Metric Tons

China’s Net Oil Exports

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2 June 2006 Roland-Holst 18 Pan Asia Conference, SCID and SIEPR, Stanford

Oil Imports Now Equal China’s Trade Surplus

  • 4
  • 2

2 4 6 8 1996 1997 1998 1999 2000 2001 2002 2003 2004 Percent of GDP Oil Imports Trade Suplus Surplus Before Oil

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2 June 2006 Roland-Holst 19 Pan Asia Conference, SCID and SIEPR, Stanford

Soy Products

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2 June 2006 Roland-Holst 20 Pan Asia Conference, SCID and SIEPR, Stanford

China and East Asia

  • Head-to-head export global competition

with China will continue to be difficult.

  • More attention should be given to

leveraging opportunities presented by East Asia’s fastest growing internal market.

  • In these areas, the best strategy for East

and Southeast Asia is to pursue globalism through more comprehensive regionalism.

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2 June 2006 Roland-Holst 21 Pan Asia Conference, SCID and SIEPR, Stanford

Other Issues

  • ASEAN and Japan
  • The Role of Private Agency
  • China, India, and Initial Conditions – a

cautionary perspective

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2 June 2006 Roland-Holst 22 Pan Asia Conference, SCID and SIEPR, Stanford

Thank You

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2 June 2006 Roland-Holst 23 Pan Asia Conference, SCID and SIEPR, Stanford

The Asian Trade Triangle

  • My own forecasts indicate the emergence of a

systematic pattern of triangular trade between China, the Rest of East and Southeast Asia, and the Rest of the World

  • This Trade Triangle reveals that China’s export

expansion offers significant growth leverage to its neighbors.

  • Chinese absorption will emerge to dominate

regional demand. Provided Asian economies do not isolate themselves from this process, the net effect

  • f China’s growth can be hugely positive.
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2 June 2006 Roland-Holst 24 Pan Asia Conference, SCID and SIEPR, Stanford

Private Agency and Network Externalities

  • Supply chain decomposition has been a salient

trend in recent Asian growth

  • The corresponding intermediate trade linkages are

increasingly responsible for the majority of value creation

  • The foreign capital, technology, and demand

allocation accompanying this propagates growth and, because of wage competition, can promote convergence

  • Infrastructure is a prerequisite for effective

participation in this regional production sharing

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2 June 2006 Roland-Holst 25 Pan Asia Conference, SCID and SIEPR, Stanford

A Regional Example - Bamboo Capitalism

  • Network externalities in local production and finance

allow complete markets to sprout from nodes in a global root system of intermediate supply.

  • This culminating aspect of global supply chain

decomposition has created a diverse and vibrant population of independent local industries around the East Asian region.

  • Many emergent enterprises are still bound to their

roots by ownership or contracts

  • But increasingly they arise independently, promoting

the dynamics of global competitiveness and innovation.

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2 June 2006 Roland-Holst 26 Pan Asia Conference, SCID and SIEPR, Stanford

Regional Public and Private Investment

(Asian inbound Aid and FDI, USD Billions)

20 40 60 80 100 120 140 160

1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3

ODA-Asia FDI-Asia

Clearly, we have entered an Age of Complementarity.

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2 June 2006 Roland-Holst 27 Pan Asia Conference, SCID and SIEPR, Stanford

Asian FDI – Top Ten Destinations

FDI is very unequally distributed.