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1. At the Crossroads: The TPP, AIIB, and Japan's Foreign Economic Strategy

Author:
Saori N. Katada
Publication Date:
05-2016
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
In 2015, two mega-initiatives took shape that will affect economic relations in the Asia-Pacific region: the US-promoted Trans-Pacific Partnership (TPP) trade agreement and the China-led Asian Infrastructure Investment Bank (AIIB). Although they address different needs, both are expected to have profound effects on Asia's economic governance in the near future, and will shape economic norms in the Asia Pacific and beyond. Japan has joined the TPP but stayed out of the AIIB, decisions that might seem counterintuitive considering its history of resisting trade liberalization and of promoting infrastructure investment. Is Japan simply favoring its US ally over rival China? Or is it that Japan's position on the TPP and AIIB aligns with its own economic priorities, and enhances its geo-economic advantage? With a US-China competition over economic ideas and regional strategies, Japan occupies a unique position that may allow it to influence the direction of Asia-Pacific economic governance, which is now being battled out by the two "titans."
Topic:
Economics, International Trade and Finance, Political Economy, and Treaties and Agreements
Political Geography:
China and Asia

2. S-Japan Relations and Southeast Asia: Meeting Regional Demands

Author:
Saul P. Limaye and Tsutomu Kikuchi
Publication Date:
01-2016
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
Until recently, Southeast Asia had not been a region of sustained focus for the US-Japan relationship. But the situation is changing. The international relations of the Asia-Pacific is becoming more "multipolarized." This requires the US and Japan to think about the future of the region beyond the issue of US-China relations, which has preoccupied past discussions. A number of nations and institutions in the Asia-Pacific region will substantially affect the region's future. Southeast Asian nations and the Association of Southeast Asian Nations (ASEAN) are among them. A new era of more coordinated, sustained, and combined commercial and security involvement by the US and Japan in Southeast Asia may be at hand. In light of these changes, the East-West Center in Washington (EWCW), in collaboration with the Japan Institute of International Affairs (JIIA), and through the support of the Sasakawa Peace Foundation (SPF), initiated a dialogue with Southeast Asians about their perspectives on how the US-Japan relationship and alliance could or should approach cooperation with the region.
Topic:
Security, Economics, Markets, and Peacekeeping
Political Geography:
United States, Japan, China, and Asia-Pacific

3. From Catching Up to Forging Ahead in Advanced Manufacturing—Reflections on China’s Future of Jobshina's Evolving Role in Latin America: Can it Be a Win-Win?

Author:
Dieter Ernst
Publication Date:
03-2016
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper explores what we know about possible employment effects of the 10-year plan, issued by the State Council on May 19, 2015, entitled Made in China 2025. MIC2025 was designed to address China’s emerging labor shortage challenge. To achieve this goal, the plan seeks to boost labor productivity through an increased use of robots and through network-based upgrading of the entire industrial value chain and related services. How might the projected increase in labor productivity affect the creation and quality of jobs in China? Will China’s push into advanced manufacturing now move the country’s manufacturing employment closer to the pattern of “employment de-industrialization” observed in the US and other industrialized countries? How China will cope with the advanced manufacturing challenge for employment will have major implications not only for the US and other industrialized countries, but also for emerging economies and, most importantly for the majority of developing countries that are still struggling as latecomers to labor-intensive industrial manufacturing. The paper lays out objectives of the MIC 2025 plan and highlights a failure of Chinese policy makers to take into account employment effects and other labor market issues when they design their grand visions of industrial policy. The paper finds that until 2014, manufacturing has acted as an employment absorber in China. However new data on unemployment, labor force participation and income inequality signal that China may now be moving towards an “employment de-industrialization” pattern, unless enough knowledge-intensive service jobs will be created in China’s growing information economy. The paper concludes with implications for policy and further research.
Topic:
Economics, International Political Economy, Markets, and Labor Issues
Political Geography:
China

4. Beyond Manufacturing: Developing the Service Sector to Drive Growth in the PRC

Author:
Wei Wang, Gemma Estrada, Jurgen Conrad, Sang-Hyo Lee, and Donghyun Park
Publication Date:
05-2016
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
As demand from global markets declines, slowing exports of manufactured goods from the People's Republic of China means the country must increasingly rely on domestic markets for growth. Unlike manufactured goods, services—those "intangible" products that include everything from transportation to scientific research to real estate services—are geared more toward domestic markets. Services, then, will be key to the rebalancing process. However, while the service sector has grown rapidly in the PRC, it continues to lag behind other countries at similar stages of development. In addition, the sector is dominated by traditional low-end types of services, rather than knowledge-intensive services. Heavy regulatory burdens, barriers to trade in services, and an unfavorable policy environment have been major obstacles to upgrading the sector and improving its competitiveness. Policy reform should focus on strengthening competition to raise productivity, with the goal of increasing not only the number of jobs and contribution to GDP, but also of positioning the service sector to compete internationally and spur export growth.
Topic:
Economics, Markets, Reform, and GDP
Political Geography:
China

5. Unconventional Monetary Policy, Spillovers, and Liftoff: Implications for Northeast Asia

Author:
Marcus Noland
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
Unconventional monetary policy (UMP) has had predictable effects. How exit plays out is scenario-dependent. Quantitative easing has had the predictable effect of encouraging currency depreciation and some partner countries may have attempted to offset these exchange rate effects. Korea presents a particularly interesting case: it is relatively small and relatively open and integrated, in both trade and financial terms, with the United States and Japan, two practitioners of UMP. Authorities have acted to limit the won's appreciation primarily against the currency of China, not the US or Japan. Nevertheless, Korea's policy is a source of tension with the US. Under legislation currently being considered, the currency manipulation issue could potentially interfere with Korean efforts to attract direct investment from the US and create an obstacle to Korea joining the Trans-Pacific Partnership.
Topic:
Economics, International Trade and Finance, Political Economy, Monetary Policy, and Foreign Direct Investment
Political Geography:
Asia

6. Alternative Waste Solutions for the Pacific Region: Learning from the Hawai’i Experience

Author:
Jordan P. Howell
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
With limited space and ever-growing trash, the islands of the Pacific share unique challenges managing their solid wastes. The traditional approach has been to collect waste in open dumps and landfills. But overwhelmed sites and unsanitary conditions are driving governments to seek alternative solutions. Hawai'i has implemented "resource recovery" systems in past decades to deal with waste, including an innovative energy-from-waste project on O'ahu, and a recycling/composting program on Maui that focuses on diverting material from landfills. While both have been successful in reducing waste and generating products, the programs have also endured unexpected delays and problems. Despite differences in scale and capacity, the Hawai'i experience offers insights for other Pacific islands into how to tackle their own solid waste management issues, and create systems and policies that deliver the greatest ecological and economic benefits.
Topic:
Climate Change, Economics, Energy Policy, Governance, and Climate Finance
Political Geography:
Hawaii and United States of America

7. China’s Hidden Obstacles to Socioeconomic Rebalancing

Author:
Boy Lüthje and Christopher A. McNally
Publication Date:
10-2015
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
The global financial crisis of 2008-09 led to a policy consensus in China that its socioeconomic development model needed rebalancing. China's rapid development has been based on extensive growth reliant on exports, low wages, environmental exploitation, and the manufacturing of cheap products. China's current plans identify paths to economic rebalancing through intensive growth driven by rising investment in new technologies and manufacturing processes, improved wages and skills, and improved worker and environmental protections. Two industries, automotive and information technology, demonstrate the experience of and opportunities for rebalancing. Both offer improved employment conditions with better wages, but continue to incorporate large swaths of low-wage employment with little protection for workers' health and the environment. Economic rebalancing in China, therefore, has so far only appeared in pockets. Institutional safeguards for wages and labor standards remain constrained by powerful alliances among multinational corporations, Chinese state-owned/private enterprises, and the Chinese state.
Topic:
Economics, Political Economy, Labor Issues, and Financial Crisis
Political Geography:
China

8. From Catching Up to Forging Ahead: China’s Policies for Semiconductors

Publication Date:
01-2015
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
China, the world's leading exporter of electronic products, faces a fundamental dilemma. It is the largest and fastest-growing market for semiconductors, the core component of those electronics products. Yet, at least 80 percent of the semiconductors used in China's electronics products must be imported. As a result, China's trade deficit in semiconductors has more than doubled since 2005 and now exceeds the huge amount it spends on crude oil imports. To correct this unsustainable imbalance, China's new strategy to upgrade its semiconductor industry seeks to move from catching up to forging ahead in semiconductors. The strategy calls for simultaneously strengthening advanced manufacturing and innovation capabilities in China's integrated circuit (IC) design industry and its domestic IC fabrication, primarily through foundry services. Drawing on policy documents and interviews with China-based industry experts, this study takes a close look at the objectives, strategy, and implementation policies of China's new push in semiconductors and examines what this implies for China's prospects in this industry. The study shows that China's new policy resorts to private equity investment rather than subsidy as the tool of industrial policy. The government participates in equity investment and claims it will do so without intervening in management decisions. This policy is expected to reduce the cost of investment funds for a selected group of firms, which is to form a "national team" in the semiconductor industry. China's new policy to upgrade its semiconductor industry through innovation does not represent a radical break with its deeply embedded statist tradition. Within these boundaries, however, the study detects important changes in the direction of a bottom-up, market-led approach to industrial policy. In response to the rising complexity and uncertainty of today's semiconductor industry, the government seems more open to experimentation with new approaches to investment finance and flexible, bottom-up policy implementation, based on multilayered industrial dialogues with private firms. China's policies to forge ahead in semiconductors, thus, provide an interesting example of its current efforts to move from investment-driven catching up to an innovation-driven development model.
Topic:
Economics, International Trade and Finance, Oil, Science and Technology, and Financial Markets
Political Geography:
China

9. Unconventional Monetary Policy, Spillovers, and Liftoff: Implications for Northeast Asia

Author:
Marcus Noland
Publication Date:
11-2015
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
Unconventional monetary policy (UMP) has had predictable effects. How exit plays out is scenario-dependent. Quantitative easing has had the predictable effect of encouraging currency depreciation and some partner countries may have attempted to offset these exchange rate effects. Korea presents a particularly interesting case: it is relatively small and relatively open and integrated, in both trade and financial terms, with the United States and Japan, two practitioners of UMP. Authorities have acted to limit the won's appreciation primarily against the currency of China, not the US or Japan. Nevertheless, Korea's policy is a source of tension with the US. Under legislation currently being considered, the currency manipulation issue could potentially interfere with Korean efforts to attract direct investment from the US and create an obstacle to Korea joining the Trans-Pacific Partnership.
Topic:
Economics, International Trade and Finance, Markets, Monetary Policy, and Financial Markets
Political Geography:
Korea and Asia-Pacific

10. The ASEAN Economic Community: What Stands in the Way?

Author:
Jon Dorsch
Publication Date:
09-2015
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
At the end of 2015 the Association of Southeast Asian Nations (ASEAN) will announce the establishment of the ASEAN Economic Community (AEC). In theory, this agreement should produce an association-wide economic integration. However, following the announcement, and for the foreseeable future, ASEAN member states will continue in significantly less than full regional economic integration. Why? Some observers believe that the AEC plans involve an "overly ambitious timeline and too many ill-thought-out initiatives." Others point to ASEAN's traditional aversion to legally binding agreements. While progress has been made in reducing or eliminating intra-ASEAN trade tariffs, substantial non-tariff barriers to trade persist. However, for most member states, the ASEAN market is relatively small while external markets, especially China, are growing rapidly. Given this outward-orientation for ASEAN trade, is the lack of an unhindered regional market really a problem?
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
China and Asia