Catalog

Trade and structural change in East and Southeast Asia: Implications for growth and industrialization

Introduction

East and Southeast Asian economies have been among the most dynamic participants in global trade, particularly trade in manufactures, led initially by Japan, then by the newly industrialized economies (NIEs) of Hong Kong, China; Korea; Singapore; and Taipei,China, and more recently by the People's Republic of China (PRC) and five members of the Association of Southeast Asian Nations (ASEAN-5-Indonesia, Malaysia, Philippines, Thailand, and Viet Nam). In contrast, India and South and Central Asia have not yet made much of an impact and to date remain small players in global manufacturing trade.¹

The latter half of the 20th century for the first time provided a worldwide institutional framework for open trade under the auspices of the General Agreement on Tariffs and Trade (GATT) and its successor the World Trade Organization (WTO). At the same time that global tariffs were being cut in successive rounds of GATT/WTO negotiations, more and more countries experimented with bilateral and regional preferential trade agreements, particularly after the completion of the Uruguay Round in 1995.

The Asian Development Outlook 2006 (ADB 2006) provided a detailed discussion of the global trend toward bilateralism in trade and some forward-looking estimates of the possible impact of various liberalization scenarios for the Asian region. It found that the region's trade opportunities could best be obtained through the combination of unilateral reforms and multilateral, nondiscriminatory reduction of trade barriers. Deeper integration in the region could also provide additional scope for growth provided it was done in a manner that avoided emergence of hub-and-spoke systems that are based upon bilateral agreements with inconsistent coverage and rules.

This chapter provides a review of trade and structural change in the region and examines the state of regional integration in manufacturing trade using recent historical data with a focus on East and Southeast Asia. The key issues addressed include the role trade plays in facilitating structural change and industrial development, the rising share of intraregional trade and intra-industry trade, and the controversies relating to the role of the PRC regarding the impacts of Asia's giant on manufacturing competition for foreign direct investment (FDI) and trade. It also addresses the question of whether East and Southeast Asian trade and growth are uncoupling from global trade and growth.