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Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges

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  • Athukorala, Prema-chandra

    (Asian Development Bank Institute)

  • Kohpaiboon, Archanun

    (Asian Development Bank Institute)

Abstract

This paper examines the export experience of East Asian economies in the aftermaths of the crisis against the backdrop of a systematic analysis of precrisis trade patterns. The analysis is motivated by the “decoupling” thesis, which was a popular theme in 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 precrisis policy stance favoring export-oriented growth? The findings serve to caution against a possible costly backlash against openness to foreign trade arising from the newfound enthusiasm for rebalancing growth (redressing the strong bias for exports in development policy), and make a strong case for a well-coordinated strategy to fight new protectionism, as part of a long-term commitment to nondiscriminatory multilateral and unilateral trade liberalization.

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File URL: http://www.adbi.org/working-paper/2009/12/11/3416.intra.regional.trade.east.asia/
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Bibliographic Info

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 177.

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Length: 48 pages
Date of creation: 11 Dec 2009
Date of revision:
Handle: RePEc:ris:adbiwp:0177

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Keywords: decoupling; intra-regional trade; growth rebalancing; asia;

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Cited by:
  1. Park, Yung Chul, 2011. "The Global Financial Crisis: Decoupling of East Asia—Myth or Reality?," ADBI Working Papers 289, Asian Development Bank Institute.
  2. Fukunari Kimura & Ayako Obashi, 2011. "Production Networks in East Asia : What We Know So Far," Microeconomics Working Papers 23216, East Asian Bureau of Economic Research.
  3. Gilles de Truchis & Benjamin Keddad, 2012. "South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates," AMSE Working Papers 1229, Aix-Marseille School of Economics, Marseille, France, revised 05 Nov 2012.
  4. Siow Yue Chia, 2010. "Regional Trade Policy Cooperation and Architecture in East Asia," Trade Working Papers 22029, East Asian Bureau of Economic Research.
  5. Park, Donghyun & Shin, Kwanho, 2009. "Can Trade with the People’s Republic of China be an Engine of Growth for Developing Asia?," ADB Economics Working Paper Series 172, Asian Development Bank.
  6. Eleonora Cutrini & Giorgio Galeazzi, 2012. "Can emerging economies decouple from the US business cycle?," Working Papers 41-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised May 2012.
  7. Kucera, David & Roncolato, Leanne & von Uexkull, Erik, 2010. "Trade contraction in the global crisis : employment and inequality effects in India and South Africa," ILO Working Papers 459401, International Labour Organization.
  8. Eichengreen, Barry, 2009. "The financial crisis and global policy reforms," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 299-334.

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