1
Global Value Chain in East Asia

• Michitaka Nakatomi
• President
• Japan External Trade Organization(JETRO)

2
Implications of WTO/IDE study

• Issues of "global value chains" and "vertical
  specialization" highlighted
• Diversity and complementarities of production
  networks cause "fragmented value chains"
• The concept of "country of origin" is becoming
  increasingly difficult to apply
• Importance of lowering trade barriers
• A new trade regime is needed, as firms go beyond
  national boundaries

3
The regime should include

• Wider regional coverage
• Universality
• Elimination of trade barriers
• Freer movement of goods, services, capital,
  people and technologies
• Contribution to global business activities

4
Importance of WTO

• WTO as a universal regime
• WTO as a regime for ensuring companies'
  productions and activities globally
• Swift conclusion of Doha Round necessary
• A regime that provides solutions to business
  challenges is needed
• Not only tariffs, but also anti-dumping rules,
  trade facilitation, trade and investment,
  competition policy and intellectual property
  rights, etc.cf. Chapter IV of the study
  necessity to deal with NTMs
• Speed Business requires a regime which responds
  quickly to its needs.

5
Complementary regimes for WTO

• FTAs
• Bilateral
• Regional
• Plurilateral Agreements (such as ITA)
• Other bilateral or regional cooperation
• ? Consistency with WTO rules is required

6
Japan's action and global value chains in East
Asia

• Supply chains in East Asia
• Deepening of intra-regional trade
• The widespread system of supply chains
• Japan's support for WTO regime
• Only 17 of Japan's trade is with FTA partners
• A multilateral-based trade rule is the best
  solution

7
Major Flow of Intermediate Goods and Finished
Goods in Asia (Electrical/Electronic)
US/ Europe
1.6times (23.3?14.4)
5.9times(124.4?21.1)
6.5times (25.1?4.6)
South Korea
1.1times (27.4?24.2)
10.9times (29.4?2.7)
1.8times(8.2?4.7)
Japan
China/ Hong Kong
3.2times (36.7?11.6)
1.6times(8.7?5.4)
4.9times (21.9?4.5)
9.8times (43.8?4.5)
Taiwan
ASEAN
1.3times (19.1?15.1)
Flow of finished goods
Flow of intermediate goods
2.1times (35.1?16.8)
2008?1998
2008?1998
Electric/electronic machinery export value
(billion USD)
Source RIETI-TID(2009), White Paper on
International Economy and Trade 2010 (METI)
8
Intra-regional trade percentage in major regions
of the world
9
Japans support towards the multinationalization
of business
Vertical/horizontal integration across borders
1. Promotion of FDI
inward /outward FDI
See next page
2. Trade liberalization
3. Contribution to international trade
rules (ITA, ACTA etc.)
10
Japans Outward FDI by Country/Region
(International Investment Position, End of 2009)
Total 740 billion USD
Sources Prepared by JETRO from Ministry of
Finance and Bank of Japan balance of payment and
cross-border investment statistics, and Bank of
Japan foreign exchange rates.
11
Master Plan on ASEAN Connectivity

• To build the ASEAN Community by 2015, ASEAN
  designed a plan focused on Physical Connectivity
  (transportation, energy, ICT etc.), Institutional
  Connectivity (trade facilitation, MRAs etc.) and
  People-to-People Connectivity (tourism,
  education, culture etc.).
• ERIA, ADB, UNESCAP and other International
  Organizations helped the ASEAN Secretariat in
  drafting the work.
• The Master Plan was presented at the 17th ASEAN
  Summit in 2010.

Source ERIA
12
Japans support fostering

• 1. Connectivity in soft infrastructure
• 1) FTAs
• E.g. (Completed with)
• Singapore, Malaysia,
  Thailand, Indonesia, Brunei,
• Philippines, Vietnam, ASEAN,
  India
• (Under negotiation with) Korea,
  Australia
• (Under study with) China and
  Korea, Mongolia,ASEAN3,
• 
  ASEAN6
• 2) Trade facilitation
• 3) IPR protection, etc.
• 2. Connectivity in hard infrastructure
• Infrastructure development
• 3. People-to-people connectivity
• Human resource development (HRD)
• Creating connectivity in ASEAN and with
• the surrounding region