Comment on “The Future of East Asia’s Trade: A Call for Better Globalization”

• Published date: 01 July 2018
• Date: 01 July 2018
• DOI: http://doi.org/10.1111/aepr.12221
• Author: Hal Hill

Comment on “The Future of East Asia’s

Trade: A Call for Better Globalization”

Hal HILL†

Australian National University

JEL codes: F1, F13, F15, F16, F6

Accepted: 16 March 2018

There is much to admire and agree with in the stimulating and comprehensive paper by

Pangestu et al. (2018). Pangestu et al. maintain that the “new normal,”of an increasingly

open global economy, that has underpinned East Asia’s strong and successful export orien-

tation, is under serious threat. They also argue that Asia needs to respond not by a resort

to protectionism but by continuing to open up unilaterally and by playing a constructive

role in keeping the global system open.

On factors explaining the slowdown in trade, the authors refer to the slower growth in

both productivity and innovation. The patent data do support the authors’contention that

innovation is slowing down, yet some of the predictions of the ongoing information tech-

nology (IT) revolution, robotization, and so on suggest that these data may be an imperfect

proxy. Pangestu et al. also contend that the maturation of global value chains (GVC)

explains the slower trade growth. The intuition here is that major producers like China

have less need to source inputs from other countries as their industrial competence sprea ds

ever more widely. Incidentally, the GVC are measured by the proxy of trade in machine

goods. Other authors (e.g. Athukorala) have an alternative Standard International Trade

Classification (SITC) definition. It might be interesting to know whether the results are sen-

sitive to the latter definition of GVC.

Pangestu et al. argue that rising economic and political uncertainty is just as important, if

not more so, than rising protectionism. I suspect that the jury is still out on this issue, espe-

cially as Pangestu et al. show clearly that the resort to nontariff measures (NTM) since the

global financial crisis has intensified. They caution that these NTM do not necessarilyindicate

rising protectionism. I would add the caveat that there are invariably protectionist interests

lurking behind (or gravitating to) calls for betterenvironmental or labor standards, and so on.

In their discussion on trade and inequality in Section 4, Pangestu et al. cite various studies

that globalization appears to be associated with rising intracountry (but not intercountry)

inequality.I would emphasize “appears”as the key consideration is surely how open economies

are managed. That is, as Pangestu et al. rightly emphasize, it is the accompanying policies that

matter –education and training, the tax system, social safety nets, geographic poverty traps,

and so on. This points to an argument that is now gathering global momentum, that the

†Correspondence: Hal Hill, Arndt Corden Department of Economics, College of Asia and the

Pacific, The Australian National University, Canberra 2601, Australia. Email: hal.hill@anu.edu.au

© 2018 Japan Center for Economic Research 239

doi: 10.1111/aepr.12221 Asian Economic Policy Review (2018) 13, 239–240