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East Asia in World Trade: The Decoupling Fallacy, Crisis and Policy Challenges

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  • Prema-chandra Athukorala
  • Archanun Kohpaiboon

Abstract

This paper examines the export experience of China and other East Asian economies in the aftermaths of the global financial crisis against the backdrop of pre-crisis trade patterns. The analysis is motivated by the 'decoupling' thesis, which was a popular theme in the Asian policy circles in the lead-up to the onset of the recent financial crisis, and aims to probe three key issues: Was the East Asian trade integration story that underpinned the decoupling thesis simply a statistical artifact or the massive export contraction caused by an overreaction of traders to the global economic crisis and/or by the drying up of trade credit, which overpowered the cushion provided by intra-regional trade? What are the new policy challenges faced by the East Asian economies? Is there room for an integrated policy response that marks a clear departure from the pre-crisis policy stance favoring export-oriented growth? The findings caution against a possible policy backlash against openness to foreign trade arising from the new-found enthusiasm for rebalancing growth, and make a strong case for a long-term commitment to non-discriminatory multilateral and unilateral trade liberalization.

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File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2010/wp_econ_2010_05.pdf
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Bibliographic Info

Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2010-05.

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Length: 46 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:pas:papers:2010-05

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Keywords: global financial crisis; global production sharing; production networks; China;

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References

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  1. Prema-chandra Athukorala, 2005. "Product Fragmentation and Trade Patterns in East Asia," Asian Economic Papers, MIT Press, vol. 4(3), pages 1-27, October.
  2. Almunia, Miguel & Bénétrix, Agustín & Eichengreen, Barry & O Rourke, Kevin H. & Rua, Gisela, 2009. "From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons," CEPR Discussion Papers 7564, C.E.P.R. Discussion Papers.
  3. Prema-chandra Athukorala, 2009. "Production Networks and Trade Patterns:East Asia in a Global Context," Departmental Working Papers 2009-15, The Australian National University, Arndt-Corden Department of Economics.
  4. Yung Chul Park & Kwanho Shin, 2009. "Economic Integration and Changes in the Business Cycle in East Asia: Is the Region Decoupling from the Rest of the World?-super-," Asian Economic Papers, MIT Press, vol. 8(1), pages 107-140, January.
  5. Masahiro Kawai & Ganeshan Wignaraja, 2009. "The Asian “Noodle Bowl”:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.
  6. TAKAHASHI Katsuhide & URATA Shujiro, 2008. "On the Use of FTAs by Japanese Firms," Discussion papers 08002, Research Institute of Economy, Trade and Industry (RIETI).
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Cited by:
  1. Prema-chandra Athukorala, 2007. "The Rise of China and East Asian Export Performance: Is the Crowding-out Fear Warranted?," Departmental Working Papers 2007-10, The Australian National University, Arndt-Corden Department of Economics.
  2. Alyson C. Ma & Ari Van Assche, 2012. "Is East Asia’s Economic Fate Chained to the West?," CIRANO Working Papers 2012s-11, CIRANO.

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