The Role of Regional Trade Agreements in International Production Networks in Asia

252 Pages·2011·3.52 MB·English

What is ARTNeT? The Asia-Pacific Research and Training Network on Trade
(ARTNeT) is an open regional network of research and academic institutions
specializing in international trade policy and facilitation issues. Network
members currently include over 30 leading national trade research and
academic institutions from as many developing countries from East,
South, and Southeast Asia and the Pacific. IDRC, UNCTAD, UNDP,
ESCAP and the WTO, as core network partners, provide substantive
and/or financial support to the network. The Trade and Investment Division
of ESCAP, the regional branch of the United Nations for Asia and the Pacific, provides the
Secretariat of the network and a direct regional link to trade policymakers and other international
organizations.
ARTNeT aims at increasing the amount of policy-oriented trade research in the region
by harnessing the research capacity already available and developing additional capacity
through regional team research projects, enhanced research dissemination mechanisms, increased
interactions between trade policymakers and researchers, and specific capacity-building activities
catering to researchers and research institutions from least developed countries. A key feature
of the network’s operation is that its research programme is discussed and approved on an
annual basis during a consultative meeting of policymakers, research institutions and other
stakholders. For more information, please contact the ARTNeT Secretariat at artnetontrade
@un.org or visit www.artnetontrade.org.
Cover page photos: KMTC JAKARTA and Permanently Scatterbrained
i
Fighting Irrelevance:
The Role of Regional Trade Agreements
in International Production
Networks in Asia
A study by the Asia-Pacific Research and
Training Network on Trade
United Nations
New York, 2011 ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC
ii
Fighting Irrelevance:
The Role of Regional Trade Agreements in International
Production Networks in Asia
A Study by the Asia-Pacific Research and
Training Network on Trade
United Nations publication
Sales No. E.11.II.F.3
Copyright © United Nations 2011
All rights reserved
Printed in Thailand
ISBN: 978-92-1-120620-3
ISSN: 1020-3516
ST/ESCAP/2597
Reference to dollars ($) are to United States dollars, unless otherwise stated.
A space is used to distinguish thousands and millions.
The designations employed and the presentation of the material in this publication
do not imply the expression of any opinion whatsoever on the part of the Secretariat of the
United Nations concerning the legal status of any country, territory, city or area, or of its
authorities, or concerning the delimitation of the frontiers or boundaries.
The opinions, figures and estimates set forth in this publication are he responsibility
of the authors, and should not necessarily be considered as reflecting the views or carrying
the endorsement of the United Nations, ARTNeT members, partners or authors’ employers.
Mention of firm names and commercial products and services does not imply the
endorsement of the United Nations.
All material in this publication may be freely quoted or reprinted, but
acknowledgement is required, together with a copy of the publication containing the
quotation or reprint. The use of the publication for any commercial purposes, including
resale, is prohibited, unless permission is first obtained from the ARTNeT Secretariat.
Request for permission should state the purpose and the extent of reproduction.
This publication has been issued without formal editing.
iii
Preface
This publication brings together the main research outputs delivered under
a common theme “Regional trade agreements and international production networks” of the
Asia-Pacific Research and Training Network on Trade (ARTNeT) research programme,
Phase II (2008-2010). ARTNeT is an open network of national-level research institutions in
the region established by ESCAP and the International Development Research Centre
(IDRC), Canada. The network has benefited from steadfast support by its core partners, the
United Nations Conference on Trade and Development (UNCTAD), United Nations
Development Programme (UNDP) and World Trade Organization (WTO). Launched in 2004
with 10 member institutions, by the end of 2010 ARTNeT had grown to 30 institutional
members and 11 associate partners in 18 countries in the Asia and Pacific region.
ARTNeT’s operation is based on a three-pillar approach: (a) the implementation of
a demand-driven research programme; (b) the improvement of linking research to policy;
and (c) increasing applied research capacity in the region, especially of the least developed
and low-income developing country members. This book, as is the case with most of the
work published by ARTNeT, combines all three of these components. It presents research
on the topic that was endorsed by the Multi-stakeholders Steering Committee in 2007 (at the
inception of Phase II of ARTNeT), thus responding to the needs of policymakers and other
stakeholders in the region. Special care is taken to ensure that research is communicated
well so that its relevance for policymakers is not diminished. Last, but of equal importance,
the work and interaction of the research team with advisers and reviewers contributed to the
overall research capacity of the network’s members.
The study was divided into three parts. The introduction to part I presents the
research questions that were explored in the study and describes the structure of the book.
Chapter 2 summarizes the literature on determinants for existence and evolution of global
value chains and international production networks, the impact of changes in trade policy
and, more specifically, regional trade liberalization. Chapter 3 provides a synthesis of the
findings under each of the sectoral case studies in selected Asian countries: (a) the
automobile industry in China, India and Indonesia; (b) the computer hard drive sector in
Thailand; and (c) the textile and clothing sector in Bangladesh. Part II contains the sectoral
papers (chapters 4 to 8). Part III focuses on identifying some recommendations to
policymakers on how to approach trade liberalization under regional trade agreements in
order to benefit existing production networks and promote the development of new ones.
This study was undertaken by a regional team initially led by Dionious Narjoko and
then by Mochamad Pasha, both from Centre for Strategic and International Studies (CSIS),
Indonesia. They were supported by Raymond Atje, Director of CSIS. The details on the
research teams are bylined in each chapter. The ARTNeT secretariat expresses its
appreciation to all individuals and institutions involved in this study and looks forward to
receiving feedback from the policymaking and business communities.
Mia Mikic, Coordinator
ARTNeT Secretariat
v
CONTENTS
page
Preface..................................................................................................................... iii
Acknowledgements................................................................................................ vii
List of contributors................................................................................................. viii
Abbreviations and acronyms................................................................................. ix
PART I. REGIONAL TRADE AGREEMENTS AND INTERNATIONAL
PRODUCTION NETWORKS: CONCEPTS AND EMPIRICAL FINDINGS
1. Introduction ................................................................................................... 3
2. International production networks and trade liberalization: A literature
review............................................................................................................. 5
Dionisius A. Narjoko
3. Linkages between regional trade agreements and international
production networks: Evidence from five case studies in Asia .............. 39
Mochamad Pasha
PART II. CASE STUDIES
4. Trade liberalization and international production networks: The
automotive industry in China....................................................................... 77
Bala Ramasamy
5. Trade liberalization and international production networks: Experience
of the Indian automotive sector................................................................... 100
Biswajit Nag
6. Trade liberalization and international production networks: Indonesia’s
automotive industry...................................................................................... 131
Mochamad Pasha and Ira Setiati
7. Trade policy and international production networks: A company-level
case study of the Thai hard disk drive industry......................................... 153
Archanun Kohpaiboon
8. Development of the value chain in the textile and clothing sector of
Bangladesh: Is there a role for regional trade agreements? ................... 178
Khondaker Golam Moazzem and Md Tariqur Rahman
vi
CONTENTS (continued)
page
PART III. THE WAY FORWARD
9. Making regional trade agreements more relevant to the development of
international production networks.............................................................. 215
Mochamad Pasha
ANNEXES
1. Interview Questions...................................................................................... 224
2. Product Codes............................................................................................... 225
References............................................................................................................... 234
vii
Acknowledgements
We are pleased to acknowledge the work of the researchers and other persons who
were involved in the publication of this book. We would like to thank ARTNeT and IDRC,
Canada for their funding that made the research possible. We are grateful to Mia Mikic,
ARTNeT Coordinator, for providing guidance and expert advice. We applaud the dedication
and hardwork of the following researchers in producing their research reports, which form
the essence of this book – Archanun Kohpaiboon (Thailand), Khondaker Golam Moazzem
and Md Tariqur Rahman (Bangladesh), Biswajit Nag (India), Bala Ramasany (China), and
Ira Setiati (Indonesia), under the guidance of team leaders Dionisius Narjoko and
Mochamad Pasha with assistance from Raymond Atje, Director of CSIS.
In addition, the authors benefited from comments and suggestions provided by
Fukunari Kimura, Professor of Economics at Keio University and chief economist for ERIA,
during the research team meetings organized on 21 and 22 July 2008 in Bangkok, on
6 March 2009 in Manila, and in the initial phases of the project.
We also would like to thank the participants of two conferences, “Trade-led Growth
in Times of Crisis” in Bangkok, Thailand, organized by ARTNeT United Nations ESCAP, and
the “Workshop on Trade, Investment and Regional Integration: Lessons for Policymakers”
in New Delhi, which was organized by the Indian Institute for Foreign Trade for their
comments and suggestions on earlier drafts of this study.
Last but not least, we wish to express our gratitude to the businessmen who
provided the researchers with their insights during interviews and focus group discussions.
Soumyananda Dinda of the Trade and Investment Division, ESCAP, and several
anonymous referees provided useful comments in the editing stages of this book, which we
acknowledge with gratitude. Robert Oliver and Deanna Morris did style and manuscript
editing. Any remaining errors are the responsibility of the authors. The views and
calculations in this study are those of the authors and do not necessarily reflect the views of
the authors’ organizations, ARTNeT members, partners and the Secretariat of the United
Nations.
Dionisius A. Narjoko and Mochamad Pasha
Team leaders
viii
List of contributors
Archanun Kohpaiboon, Assistant Professor, Faculty of Economics, Thammasat
University, Bangkok, Thailand, e-mail: [email protected]
Bala Ramasamy, Professor of Economics, China Europe International Business
School (CEIBS), Shanghai, China, e-mail: [email protected]
Biswajit Nag, Associate Professor and Programme Director, Indian Institute of
Foreign Trade (IIFT), New Delhi, India, e-mail: [email protected]
Dionisius Ardiyanto Narjoko, Senior Researcher, Economic Research Institute for
ASEAN and East Asia (ERIA), Jakarta, Indonesia, e-mail: [email protected]
Ira Setiati, Senior Lecturer, Centre for Strategic and International Studies, Jakarta,
Indonesia, e-mail: [email protected]
Khondaker Golam Moazzem, Senior Research Fellow, Centre for Policy Dialogue
(CPD), Dhaka, Bangladesh, e-mail: [email protected]
Mochamad Pasha, Researcher, Department of Economics, Centre for Strategic and
International Studies (CSIS), Jakarta, Indonesia, e-mail: [email protected]
Md Tariqur Rahman, Senior Research Associate, Centre for Policy Dialogue (CPD),
Dhaka, Bangladesh, e-mail: [email protected], [email protected]
ix
Abbreviations and acronyms
ACFTA ASEAN-China Free Trade Agreement
AFTA ASEAN Free Trade Area
APEC Asia-Pacific Economic Cooperation
APTA Asia-Pacific Trade Agreement
APTIAD Asia-Pacific Trade and Investment Agreement Database
ARTNeT Asia-Pacific Research and Training Network on Trade
ASEAN Association of Southeast Asian Nations
BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and
Economic Cooperation
BOI Board of Investment (Thailand)
CAGR compounded annual growth rate
CBU completely built up
CBU complete built unit (chapter 4)
CEPT Common Effective Preferential Tariff
CKD completely knocked down
CM cut and make
CMT cut, make and trim
CoO Certificate of Origin
CV commercial vehicle
EBA Everything but Arms
EHS Early Harvest Scheme
EMS electronics manufacturing services
EPZ export processing zone
ESCAP Economic and Social Commission for Asia and the Pacific
FDI foreign direct investment
FTA free trade agreement
GATT General Agreement on Trade and Tariffs
GAIKINDO Gabungan Industri Kendaraan Bermotor Indonesia
(Association of Indonesia Automotive Industries)
GIAMM Gabungan Industri Alat-alat Mobil dan Motor (Indonesia
Automotive Parts and Components Industries Associations)
GSP Generalized System of Preferences
GSTP Global System of Trade Preferences
GVC global value chain
HDD hard disk drive
HS Harmonized System
ICT information and communications technology
IIT intra-industry trade