Trade patterns and global value chains in East Asia: - IDE-JETRO

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Trade Patterns and Global Value Chains in East AsiaA. An overview of Asia’s tariff commitments to the WTOAs we saw in the previous chapter, the lowering oftransaction costs through better infrastructure has beenkey to promoting global value chains in Asia. Anotherkey element in facilitating trade is lower tariffs, or duties.At the WTO, a major focus of free trade negotiationshas been market access, or tariff, issues. Specifically,the negotiations aim to reduce the tariff ceilings towhich members are formally committed, known as their“bound” levels, and so increase the transparency oftrade relations.A WTO member’s tariff commitment to the WTO laysdown the maximum duty that it can impose on specificimports (bound duty) and the number, or percentage,of products that it has formally agreed to bind (bindingcoverage). Out of the 153 WTO Members, 111 have“bound” – set maximum tariffs – for at least 90 per centof their products. In Asia, Japan and Chinese Taipeiboth have almost full binding coverage and low boundduty levels. It is also worth mentioning that only in Asiaare there two economies that are duty free on boundproducts, even if the binding coverage is much less than90 per cent. These are Hong Kong (China) and Macao(China).Figure 1 gives an overall picture of tariff commitmentson goods in terms of binding coverage and bound dutylevels for all WTO members (the European Union isrepresented as one). The vertical left axis represents themember’s average bound duty level, while the verticalright axis shows the corresponding binding coveragerepresented by the shaded area. But while bound ratesare the rates to which members are formally committedunder WTO agreements, in practice they often applylower levels of duty. These actual levels are called“applied” tariffs.Figure 1Bound duty commitments of WTO members (percentage)All WTO members180Members with at least 90% binding coverage(sorted by increasing average bound duty)Members with less than 90% binding coverage(sorted by decreasing binding coverage)100160901408012070Average bound duty10080605040Binding coverage60304020201000Japan China Indonesia MalaysiaChineseTaipeiViet NamKorea,Rep. ofBinding coverageThailandIndiaSingaporePhilippinesHong Kong(China)Average Bound dutySource: WTO (2010a).38
B. Applied tariffs in Asia are low and still decreasingI. From massdemand to globalsupply chainsIn the Asian region, applied tariffs under the WTO’smost favoured nations (MFN) principle are generally low,mostly in the 5-10 per cent range (see Figure 2 for MFNapplied tariff levels). The MFN principle guards againstdiscrimination by ensuring that all WTO member statesbenefit from the best tariff terms that any member isprepared to offer. India and the Republic of Korea deviateslightly from this pattern of low applied tariffs, with ratesof 12.9 per cent and 12.1 per cent, respectively. ButIndia has been cutting its applied tariffs, with averagerates down 19.5 percentage points in 2009 comparedto 2001 levels.II. Organizationof the globalproduction processIII. Infrastructureservices in globalvalue chainsIV. The evolutionof tariff policiesV. Foreign directinvestmentVI. IntegrateddiversityFigure 2Latest applied duties in the world (percentage)Source: WTO (2010a).Range of MFN applied dutiesin selectedAsian economiesDuty free - 2.5%2.5% - 5.0%5.0% - 7.5%7.5% - 10.0%10.0% - 12.5%12.5% - 15.0%15.0% +No available datain rest ofthe WorldVII. An evolutionaryperspective onproduction networksin the Asia-US regionVIII. Trade inintermediate goodsIX. Vertical tradeand trade invalue addedX. Cross-regionalspillover ofeconomic growth39
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Page 73 and 74: Figure 7Labour content of net trade
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The increasing internationalization
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