Australia's Foreign Economic Policy: a 'State-Society Coalition' Approach and a Historical Overview

This paper aims to explain the historical development of Australia's foreign economic policy by using an analytical framework called a 'state-society coalition' approach. This approach focuses on virtual coalitions of state and society actors that share 'belief systems' and hold similar policy ideas, goals and preferences, as basic units (policy subsystems) of policy making. Major policy changes occur when a dominant coalition is replaced by another. The paper argues that, in Australia, there have been three major state-society coalitions in the foreign economic policy issue area: 'protectionists', 'trade liberalisers' and 'optional bilateralists'. The rise and fall of these coalitions resulted in distinctive shifts of Australia's foreign economic policy in the 1980s towards unilateral and multilateral liberalisation and in the late 1990s towards bilateral trade and investment arrangements.

Financial Cooperation in East Asia

This paper addresses the rationale for financial cooperation in East Asia. It begins by giving a brief review of developments after the Asian currency crisis, and argues that enhancing regional financial cooperation both quantitatively and qualitatively will require: (1) upgrading surveillance capabilities in the region, and (2) creating a clear division of labor between regional institutions and the IMF. It also mentions the issue of membership and the background forces that have led to the duplication of similar forums in East Asia. Although the concern over crisis management is the central issue in East Asian financial cooperation, other issues such as exchange rate policy coordination and fostering regional capital markets are discussed as well.

Myanmar's Economic Relations with China: Can China Support the Myanmar Economy?

Against the background of closer diplomatic, political and security ties between Myanmar and China since 1988, their economic relations have also grown stronger throughout the 1990s and up to 2005. China is now a major supplier of consumer and capital goods to Myanmar, in particular through border trade. China also provides a large amount of economic cooperation in the areas of infrastructure, energy and state-owned economic enterprises. Nevertheless, Myanmar’s trade with China has failed to have a substantial impact on its broad-based economic and industrial development. China’s economic cooperation apparently supports the present regime, but its effects on the whole economy will be limited with an unfavorable macroeconomic environment and distorted incentives structure. As a conclusion, strengthened economic ties with China will be instrumental in regime survival, but will not be a powerful force affecting the process of economic development in Myanmar.

Trade and Business Cycle Correlations in Asia-Pacific

Recent empirical studies challenge the traditional theory of optimum currency areas by arguing that a monetary union enhances trade and business cycle co-movements among its member countries sufficiently as to obviate the need for national monetary policy. This paper examines the empirical relationship between trade and business cycle correlations among thirteen Asia-Pacific countries, paying particular attention to the structural characteristics of their economies and other issues not explored fully in the literature. According to our result, although trade is relevant to the business cycles of individual countries, the main determinant of their international correlations is not the geographical structure of their trade but what they produce and export --more specifically the extent to which their output and exports are concentrated on electronic products.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Globalization and the Evolution of the Supply Chain: who gains and who loses?

This paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the re-location of plants into the periphery. In particular, when the process of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

Chairmanship in ASEAN+3:A Shared Rule of Behavior

ASEAN+3 is a cooperative framework among ASEAN members and the countries of Japan, China and Korea. It functions at the senior official, ministerial and summit levels. This article concerns how institutions in ASEAN+3 affect development of the direction and nature of this framework. ASEAN+3 is regarded as a loose framework that has regularized meetings as its main activity but has no organizational settings such as the secretariat. Little institutional analysis has been conducted on the development of this framework. This article introduces 'Chairmanship' as an analytical concept in which the chair or chairing member plays an important role in preparing and managing meetings. 'Chairmanship' is therefore an institution with an organizational element. It is also a shared rule of behavior among member states in that the chair's roles are not explicitly written in documents. Thus, it can be argued that the ASEAN+3 framework has an institution with an organizational element that affects development of its characteristics.

Rules of Origin and Local Content in East Asia

Rules of Origin (RoO) are an integral part of all trade rules. In order to be eligible for Common Effective Preferential Tariffs (CEPT) under AFTA and similar arrangements under the ASEAN-China FTA, a product must satisfy the conditions relative to local content. The paper tries to calculate local content as well as cumulative local content in East Asian economies, with use of the Asian International Input-Output Tables; it also investigates factors of change in local content by applying decomposition analysis. The paper finds that the cumulation rule increased local content of the electronics industry more significantly than local content of the automotive industry, and the contribution of the cumulation rule increased in the period 1990-2000, due to rising dependency on neighboring ASEAN countries and China.

Is It Worthwhile for Indonesia to Rush into a Free Trade Deal with Japan?

This report represents a preliminary attempt to refine some basic ideas on the potential impact Indonesia might experience from a free trade arrangement with Japan, using a forward-looking, multi-regional, multi-sectoral applied general equilibrium model of global trade to capture growth effects through capital accumulation paying attention to the changes in the patterns of interregional capital flows that might happen even before the policy change occurs. The simulation results revealed that the welfare gains of rushing into trade liberalization with Japan are not so large. This makes out that taking time over negotiations might be the best choice for Indonesia if the government places priority on convincing the Indonesian people that a free trade deal with Japan will definitely bring positive effects, while proceeding rapidly might be the answer if the country is serious about recovering the welfare levels that might be lowered by free trade arrangements among Malaysia, the Philippines, and Japan.

Border Industry in Myanmar: Turning the Periphery into the Center of Growth

The Myanmar economy has not been deeply integrated into East Asia’s production and distribution networks, despite its location advantages and notably abundant, reasonably well-educated, cheap labor force. Underdeveloped infrastructure, logistics in particular, and an unfavorable business and investment environment hinder it from participating in such networks in East Asia. Service link costs, for connecting production sites in Myanmar and other remote fragmented production blocks or markets, have not fallen sufficiently low to enable firms, including multi-national corporations to reduce total costs, and so the Myanmar economy has failed to attract foreign direct investments. Border industry offers a solution. The Myanmar economy can be connected to the regional and global economy through its borders with neighboring countries, Thailand in particular, which already have logistic hubs such as deep-sea ports, airports and trunk roads. This paper examines the source of competitiveness of border industry by considering an example of the garment industry located in the Myanmar-Thai border area. Based on such analysis, we recognize the prospects of border industry and propose some policy measures to promote this on Myanmar soil.

Development of Border Economic Zones in Thailand: Expansion of Border Trade and Formation of Border Economic Zones

In the wake of economic globalization and development in Thailand, movement of people and commodities at the Thai borders is also becoming pronounced. Economic interdependence between Thailand and neighboring countries is growing through border customhouses. As a policy, Thailand is trying to stimulate trade and investment with neighboring countries following the ACMECS (Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy) scheme. In this report, first, movement of people and goods at the borders will be examined. Second, clarification of where and how development is proceeding will be presented. Last, this study will attempt to review the perspectives of policies on neighboring countries after Thaksin.

Normative Influences of "Special and Differential Treatment" on North-South RTAs

Recently, there has been a surge in bilateral and regional trade arrangements between developed and developing countries, which are known as North-South RTAs. Under the current legal system of the WTO, North-South RTAs are governed by Article XXIV of the GATT or Article V of the GATS, which means such RTAs must be reciprocal and must cover substantially all the trade. On the other hand, there is another category of rules on RTAs based on the so-called Enabling Clause, which, in exceptional circumstances, provides special and differential treatment (SDT) for RTAs among developing countries. This paper considers the applicability of the SDT concept to North-South RTAs by examining why rules on RTAs and the concept of SDT were incorporated into the GATT/WTO legal framework so as to permit the derogation of most-favored-nation (MFN) obligations.

The Effect of Product Classifications on the Formulation of Export Unit Value Indices: A Comparison of Export Unit Value Indices based on SITC and HS

With the globalization of economic activity, the relative weight of foreign trade in national economic activities has increased, and the question of how to measure trends in the value and quantity of international trade has become an important issue for policy-makers and economists. This paper compares the chain-linked indices formulated by Masato Kuroko, based on HS this fiscal year for individual industry categories and countries with chain-linked indices based on SITC-R1 codes, in order to study how changes in the quality composition of the same products, which cannot be considered using unit value indices based on SITC-R1 codes, can be considered using unit value indices based on the more detailed HS product classifications.

Intra-regional trade between China, Japan, and Korea : before and after the financial crisis

East Asian economies have been heavily dependent on the U.S. and EU markets, especially for the export of final goods. Therefore, once the financial crisis hit Western economies hard, the East Asian economies lost their major markets.Their production networks then worked to the region's disadvantage and stifled industrial development.This reflects the vulnerability of the East Asian economies which have adopted an export-led growth strategy. Such vulnerability needs to be addressed to prevent future economic crises, as well as to sustain economic growth. This paper examines the trade structure of the three countries-China, Japan, and Korea-before and after the Lehman Shock, and discusses how the three countries should cooperate in addressing imbalances in the trade structure.