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

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Trade Patterns and Global Value Chains in East AsiaFigure 8Tariff escalation in selected Asian economies, 2009 (percentage)35302520151050Republic of KoreaIndiaThailandViet NamChinese TaipeiJapanChinaPhilippinesMalaysiaIndonesiaRaw Semi-processed ProcessedSource: WTO, Integrated Database.E. Effective protection rates become highly “ineffective” in global supplychainsClosely related to the issue of tariff escalation is thenotion of effective protection. When tariff escalation issteep, all firms that produce finished products will benefitfrom high protection. They will be able to sell dear andbuy cheap. On the other hand, firms selling intermediategoods will scarcely benefit from high tariff protection,and will have to pay high duties for any processed goodsthey need to import. In the latter case, their effectiveprotection rate (EPR) will be low. It may even be negativeif the duty paid on the inputs is higher than any nominalprotection received on the output.Effective protection becomes highly “ineffective” whencountries participate in international supply chainsbecause an increasing volume of traded industrial outputis made of intermediate goods (see Chapter VIII). Effectiveprotection, computed for each industry according to itsinput-output structure, and the corresponding tariffs, hasbeen decreasing over time in East Asia and the UnitedStates. But some sectors, like textiles and clothing,automobiles, and some food industries, still benefitfrom high levels of effective protection (see Figure 9).However, according to 2005 data, negative protectionis now relatively rare, unlike in previous decades.Overall, the trend towards lower applied tariffs has beeninstrumental in reducing negative protection.There is a tendency for highly protected sectors to seetheir effective protection rate reduced over time. Therate of correlation between the level of EPR in 1995 andthe variation between 1995 and 2005 is negative andrelatively large (-0.7) across all sectors and countries,indicating a tendency towards a more neutral, flatter tariffstructure.44
Figure 9Effective protection rate (percentage) in 2005 and changes 1995-2005, United States and selected Asianeconomies1009080706050403020100-10-20I. From massdemand to globalsupply chainsII. Organizationof the globalproduction processIII. Infrastructureservices in globalvalue chainsIV. The evolutionof tariff policies-30-40-50-60Iron oreShip-buildingElectronics and electronic productsOther metallic oreNon-metallic ore and quarryingCrude petroleum and natural gasNon-ferrous metalForestryAll products (simple average)Leather and leather productsBeverageOther made-up textile productsKnitted productsMeat and dairy productsTires and tubesPlastic productsNon-food cropsWearing apparelMotor vehiclesMilled grain and flourV. Foreign directinvestmentVI. IntegrateddiversityEffective protection rate 2005 Rate of variation 1995-2005Note: Simple average of effective protection rates calculated for 10 countries.Source: Elaborated on the basis of IDE-JETRO and WTO data.F. Non-tariff measures mitigate the benefits of low tariffsWhile tariffs have generally been falling, the trendtowards further trade liberalization is being mitigated byincreased use of what are termed non-tariff measures(NTMs). These are administrative instruments that canaddress legitimate public policy concerns but maylimit imports. They can cover anything from licensingand quantitative controls to health and phytosanitarymeasures. Governments resort to NTMs for a variety ofreasons, sometimes using them as trade policy tools.In 2007, a multi-agency support team of experts 2 onnon-tariff measures proposed the following definition ofNTMs: “Non-tariff measures (NTMs) are policy measures,other than ordinary customs tariffs, that can potentiallyhave an economic effect on international trade in goods,changing quantities traded, or prices or both.”Table 1 gives an overview of the types of NTMscommonly used. The principles of transparency and nondiscriminationare for the most part the only benchmarksby which NTMs and other trade policies are evaluatedunder WTO jurisdiction. Hence, the statistics on disputesettlement in Table 1 relate more to the issue of whetherthe NTMs or any other trade regulating instrumentsabide by WTO principles rather than to the “legitimacy”of these trade instruments per se.VII. An evolutionaryperspective onproduction networksin the Asia-US regionVIII. Trade inintermediate goodsIX. Vertical tradeand trade invalue addedX. Cross-regionalspillover ofeconomic growth45
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Page 9 and 10: Vertical specialization, an indicat
Page 11 and 12: I. From massdemand to globalsupply
Page 15: Box 2. About the verticality of pro
Page 19: EndnotesI. From massdemand to globa
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Page 25 and 26: China’s customs trade figures sho
Page 27 and 28: Figure 4Hong Kong’s (China) impor
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Page 41 and 42: B. Applied tariffs in Asia are low
Page 43 and 44: Bound tariffs serve to protect expo
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Page 55 and 56: Figure 4FDI inflows received by sel
Page 57 and 58: C. Foreign direct investment: From
Page 63 and 64: Figure 1Industrial specialization o
Page 65 and 66: Figure 3The skyline charts of the c
Page 67 and 68: The Republic of Korea, Chinese Taip
Page 69 and 70: Figure 5Development of cross-nation
Page 71 and 72: Table 2 shows disaggregated results
Page 73 and 74: Figure 7Labour content of net trade
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Page 83 and 84: B. Intermediate goods drive world t
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The increasing internationalization
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