Trade in goods with internationalised production activities

Trade flows are broken down by types of products within the region (defined as the RCEP members) and outside it. There are differences between primary productions, parts and components and final goods. For all categories, intra-regional trade has grown faster than both world trade in total and East Asian trade with the rest of the world. The region was therefore becoming more integrated. The surge in component trade in evident in data for the 1990s, but again component trade in East Asia grew nearly twice as fast as that in the rest of the world. Both component trade (especially so) and final product trade slowed after 2000, but East Asia internally recorded faster growth in both categories. East Asian exports to the rest of the world are dominated by final products while imports from the rest of the world are mainly primary and processed products. There are various methods of identifying the extent of activity in value chains in the regions, using data from input-output tables, rather than the categorisation of trade products. The position of various countries in value chains and the drivers of participation in value chains including location advantages, decreases in trade costs, due to tariff cuts and efforts on trade facilitation, are identified. Significant issues remain in the region with respect to non-tariff barriers. Three current issues in the evolution of regional goods trade are discussed. With respect to the impact of China, China’s growth has created opportunities for the rest of the region, rather than crowding out other exports. With respect to opportunities for small firms, an issue which is critical to the question of the inclusiveness of integration, a range of factors that might encourage participation in trade is identified. The relative importance for smaller firms of some of the barriers to exporting is noted. The durability of value chains, and the debate in the literature on the ‘trade slow down’, are reviewed.