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

Author

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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.

Suggested Citation

  • Athukorala, Prema-chandra & Kohpaiboon, Archanun, 2009. "Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges," ADBI Working Papers 177, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0177
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    Cited by:

    1. 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.
    2. de Truchis, Gilles & Keddad, Benjamin, 2013. "Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 394-412.
    3. Eichengreen, Barry, 2009. "The financial crisis and global policy reforms," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 299-334.
    4. Park, Yung Chul, 2011. "The Global Financial Crisis: Decoupling of East Asia—Myth or Reality?," ADBI Working Papers 289, Asian Development Bank Institute.
    5. Siow Yue Chia, 2010. "Regional Trade Policy Cooperation and Architecture in East Asia," Trade Working Papers 22029, East Asian Bureau of Economic Research.
    6. Pomfret, Richard, 2014. "European crises and the Asian economies," Journal of Asian Economics, Elsevier, vol. 31, pages 71-81.
    7. Jayant Menon, 2013. "Can FTAs Support the Growth or Spread of International Production Networks in Asia?," Departmental Working Papers 2013-06, The Australian National University, Arndt-Corden Department of Economics.
    8. Park, Donghyun & Shin, Kwanho, 2010. "Can Trade with the People’s Republic of China Be an Engine of Growth for Developing Asia ," Asian Development Review, Asian Development Bank, vol. 27(1), pages 160-181.
    9. Prema-chandra Athukorala & Archanun Kohpaiboon, 2013. "Global Production Sharing, Trade Patterns and Industrialization in Southeast Asia," Departmental Working Papers 2013-18, The Australian National University, Arndt-Corden Department of Economics.
    10. 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 Jul 2014.
    11. Hamanaka Shintaro, 2012. "Trends of Trade Interdependence and Prolifiration of FTAs in Asia: 1980-2010," Global Economy Journal, De Gruyter, vol. 12(2), pages 1-23, June.
    12. repec:ilo:ilowps:459401 is not listed on IDEAS
    13. Dilip K. Das, 2012. "How did the Asian economy cope with the global financial crisis and recession? A revaluation and review," Asia Pacific Business Review, Taylor & Francis Journals, vol. 18(1), pages 7-25, January.
    14. repec:wsi:ceprxx:v:02:y:2013:i:02:n:s1793969013500088 is not listed on IDEAS
    15. Peter Draper & Andreas Freytag & Sören Scholvin & Luong Thanh Tran, 2016. "Is a ‘Factory Southern Africa’ Feasible?," World Bank Other Operational Studies 23788, The World Bank.

    More about this item

    Keywords

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

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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