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71. Labour Market Impacts of Import Penetration from China and Regional Trade Agreement Partners: The Case of Japan

Author:
Kazunobu Hayakawa, Tadashi Ito, and Shujiro Urata
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The impacts of imports on the domestic labour market have been hotly debated recently. The purpose of this paper is to empirically examine the effects of not only imports from China but also those under regional trade agreements (RTAs) on employment in Japan. As in previous studies in the literature, we found that the rise in import penetration from China significantly decreases employment in Japan. However, import penetration under RTA regimes is found to have insignificant effects on employment. The finding suggests that the increase in imports under RTA regimes might not be harmful to the domestic labour market. In addition, we did not find significant effects of import penetration via input–output linkages. This insignificant result may be because imports by Japanese manufacturing firms are mostly conducted in the form of intra-firm trade, enabling them to avoid negative impacts on employment.
Topic:
International Trade and Finance, Regional Cooperation, Labor Issues, Employment, and Manufacturing
Political Geography:
Japan, China, and Asia

72. Trade Reform and the Evolution of Agglomeration in Vietnamese Manufacturing

Author:
Đoàn Thi Thanh Ha and Hông Quỳnh Nguyen
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
It is well-documented that agglomeration contributes to productivity growth. However, concentrations of workers could also lead to increasing regional income disparities. Therefore, understanding the evolution of agglomeration is relevant for the formulation of industrial policy and inclusive growth. This study documents the extent, pattern, and determinants of agglomeration in Vietnamese manufacturing during 2002–2016, a period when substantial economic reform took place. Our major findings are three-fold. First, agglomeration, as measured by the Ellison–Glaeser index, has declined since the mid-2000s. Second, there exists significant sectoral heterogeneity in the level and trend of agglomeration. Third, we do not find a significant impact of trade and foreign direct investment on agglomeration per se. However, foreign direct investment in port districts does contribute to disagglomeration.
Topic:
International Trade and Finance, Reform, Manufacturing, and Productivity
Political Geography:
Asia and Vietnam

73. Technological Advancement, Import Penetration, and Labour Markets: Evidence from Thai Manufacturing

Author:
Đoàn Thi Thanh Ha
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper examines the impacts of advanced technology on a possible change in workers’ skills, wages, and employment due to such technological advancement. Three proxies of advanced technologies are used in the study: (i) information and communications technology, (ii) intensity of robot use, and (iii) value of e-commerce. Our study compares the effects of technological advancements on labour market outcomes with import penetration, delineating into raw materials, capital goods, and final products. Our results show that in Thailand, the impact of advanced technology in pushing workers out of the job market is limited. Instead, it tends to affect reallocation of workers between skilled and unskilled positions. The results vary amongst proxies of technology and sectors. It seems that workers in comparatively capital-intensive industries, including automotive, plastics and chemicals, and electronics and machinery, are the most affected by advanced technology. Dampened wage/income is found only in some proxies of technology and sectors. Our results show less concern of negative impacts induced by imports, particularly imports of capital goods and raw materials, on employment status and income than technological advancement.
Topic:
Science and Technology, Labor Issues, Employment, Manufacturing, Job Creation, and Labor Rights
Political Geography:
Asia and Thailand

74. Robotics Technology and Firm-level Employment Adjustment in Japan

Author:
Bin Ni and Ayako Obashi
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Unlike studies that analyse the impact of robotics technology on employment at the industry or firm level, this study investigates cross-division employment adjustment within a firm in an industry with large penetration and diffusion of robotics technology. By examining the changes in the composition of employment, we measured job creation and destruction at the division level and explored whether robotics technology, as a leading example of automation, not only displaces workers but also introduces new jobs in favour of labour. We made use of unique, division-level employment data for Japan’s manufacturing firms, together with industry-level data on the installation of industrial robots. We found that industry-level adoption of robots positively affects the rates of firm-level job creation and job destruction. Because the magnitude of the impact is larger for job destruction, robot adoption has an overall negative impact on firms’ net employment growth. Our finding suggests that the labour displacement effect of robotics technology and the emergence of new jobs due to technological change coexist even at the firm level.
Topic:
Science and Technology, Manufacturing, Artificial Intelligence, and Job Creation
Political Geography:
Japan and Asia

75. Manufacturing and Brexit report briefing

Author:
David Bailey, Caroline Flint, Mike Hawes, Jill Rutter, and Anand Menon
Publication Date:
06-2020
Content Type:
Video
Institution:
UK in a Changing Europe, King's College London
Abstract:
This briefing on our new report looked at the impacts of Brexit on the UK’s manufacturing sector, with speakers: Professor David Bailey, lead report author and senior fellow, UK in a Changing Europe Caroline Flint, former Labour MP for Don Valley Mike Hawes, chief executive, Society of Motor Manufacturers & Traders Jill Rutter, senior research fellow, UK in a Changing Europe Professor Anand Menon, director, UK in a Changing Europe
Topic:
European Union, Brexit, and Manufacturing
Political Geography:
United Kingdom and Europe

76. Next Steps for US Trade, Manufacturing, and Supply Chains After COVID-19

Author:
Thomas J. Duesterberg
Publication Date:
07-2020
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
The imperative to return supply chains to the United States for products important to national defense, medical security, and competitiveness in key industrial and technology sectors is not new. The explosive growth of the Chinese manufacturing sector, its mercantilist challenge to the world trading system, and its impact on jobs and industrial leadership in the United States is well known and well documented. This challenge has prompted new research and policies to help reverse the erosion of US supply chains. US technology leadership has been undermined by China’s forced technology transfer, theft of intellectual property, and subsidization of traditional and new higher technology sectors. In turn, the loss of global markets and US manufacturing jobs have resulted in social problems of increasing devastation to communities in industrial areas. China’s economic growth depends, in a historically unprecedented way, on its export model and the suppression of domestic consumption. This results in a cycle of overproduction, expansion of external spheres of economic influence, and dumping of products abroad. In recent years, the United States has begun to challenge the Chinese model. However, much work remains to be done to accomplish the goal of ending mercantilist practices, establishing a level playing field for US producers, and reinvigorating domestic production. Critical supply chains for US national defense and high technology leadership have become overly dependent on China and other foreign sources. The vulnerability of supply chains has been demonstrated by interruptions in supply of key materials by both natural disasters and political decisions such as Beijing’s cutoff of rare earth metals a decade ago. More recently, in July 2020, the production of critical personal protective equipment was interrupted by massive flooding in the interior of China. Beyond Beijing’s unfair practices, China is a continental economy with the ambition to displace the United States as the leader in the global economy of the 21st century and has the economies of scale to represent a serious, long term threat to US leadership and markets. The COVID-19 pandemic has accelerated these preexisting trends and underscores the importance of bringing industrial supply chains, including medical products, back to the United States. First, the cut-off of medical supplies, not just from China but from Europe and other allies, brought the vulnerabilities of relying on outside sourcing into clearer and more immediate focus. Ninety countries blocked the exports of medical products during the early months of the pandemic. Second, border closures around the world, even within the European Union (EU), added to the worries about supply chain interruptions, including for workers and logistics. Seventy percent of the world’s points of entry restricted foreign travelers at some point as the pandemic grew. Third, border closures and supply chain interruptions increased tensions between nations, especially between the United States and China, which was criticized for its suppression of information at the start of the pandemic. Beijing’s brazen imposition of a new security law in Hong Kong while the world was preoccupied by the pandemic further eroded its global standing, especially in Europe. Fourth, the economic collapse due to the pandemic response again focused attention on the need to create more domestic jobs, including those in the hard-hit industrial sector. Finally, all these developments led allies such as the United Kingdom, Japan, and the EU to advance new policies meant to bring production back to home territories. These trends support initiatives to increase the resiliency of domestic production, even beyond the parameters of defense and medical security.
Topic:
Economics, Science and Technology, Manufacturing, Trade, COVID-19, and Supply Chains
Political Geography:
China, Asia, North America, and United States of America

77. Effectiveness of Industrial Policy on Firms’ Productivity: Evidence from Thai Manufacturing

Author:
Juthatip Jongwanich and Archanun Kohpaiboon
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper examines the role of industrial policy on firms’ productivity, using 3 years of panel data on Thai manufacturing as a case study. A range of industrial policy tools is defined – tariff measures, subsidies, and investment incentives through the Board of Investment (BOI) – which are the main tools used in Thailand. The effect on firm productivity of partial trade liberalisation undertaken through free trade agreements (FTAs) signed between Thailand and its trading partners is also examined. The key finding is that trade openness and research and development (R&D) are more crucial in fostering firms’ productivity than industrial policies. This is especially true for the narrow definition of industrial policy focusing on trade policy protection, measured by the effective rate of protection. In addition, the FTA-led trade liberalisation effect fails to add substantial competitive pressure and make firms improve productivity. Our results show that sectors benefiting from subsidies show noticeably lower productivity than others. Our study found weak support for investment promotion policy through the BOI, even when the domestic competitive environment is considered in our analysis.
Topic:
Industrial Policy, Manufacturing, and Productivity
Political Geography:
Asia and Thailand

78. Input Allocation Behaviour on Tariff Changes: The Case of Indonesia’s Manufacturing Industries

Author:
Samuel Nursamsu, Dionisius Narjoko, and Titik Anas
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Can firms reallocate their imported inputs to domestic sources when faced with import tariffs? To answer this question, we analyse the input allocation behaviour of Indonesian medium and large-sized manufacturing firms in responding to the movement of import tariffs from 2000 to 2013 by utilising plant-level input data of Indonesian manufacturing. We find that an increase in tariffs only creates a weak substitution effect. Our findings indicate that firms reallocate their inputs towards domestic sources, although this is accompanied by a decrease in the firms’ value added. This implies that domestic inputs are worse substitutes for imported inputs and that firms’ capacity to switch over to domestic products is limited, suggesting that firms will immediately switch back to importing when the tariff is removed. We find no evidence that firms make any adjustment towards more domestic-oriented input composition over time; and heterogeneity exists within the result, as industries with a strong basis in the domestic market are more capable of adjusting.
Topic:
Industrial Policy, International Trade and Finance, Tariffs, and Manufacturing
Political Geography:
Indonesia and Asia

79. Foreign Direct Investment and Labour Market Dynamics in a Developing Country: Evidence from Indonesian Plant-Level Data

Author:
Toshiyuki Matsuura and Hisamitsu Saito
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the impact of inward foreign direct investment on the wages and employment of skilled and unskilled workers in Indonesian manufacturing plants. Entry of multinational enterprises affects local labour markets through spillovers as well as labour and product market competition. Our results show that spillovers increase the labour demand of local plants for unskilled workers, but increased wages due to severe labour market competition reduce the demand for skilled workers. We also find that product market competition causes resource reallocation from low- to high-productivity plants. Thus, attracting inward foreign direct investment effectively enhances aggregate productivity growth, but may retard the transition to skill-intensive production in Indonesian manufacturing.
Topic:
Development, Foreign Direct Investment, Manufacturing, and Labor Market
Political Geography:
Indonesia and Asia

80. Dual Use in the DPRK

Author:
Margaret Croy
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
Several states have succeeded in extracting “yellowcake” uranium from phosphoric acid as part of the phosphate fertilizer production process. The Democratic People’s Republic of Korea (DPRK) has both the means and motivation to undertake such work, thus significantly altering existing open-source assessments of how much yellowcake uranium North Korea could produce annually, which in turn affects estimates of how many nuclear warheads DPRK can make. There is ample rationale for the DPRK to pursue this method of uranium extraction. The dual usage of existing infrastructure would both conceal the activity and make it more difficult for international audiences to positively identify and condemn. The DPRK certainly needs fertilizer, and the information on how to extract uranium from its production is readily available. Lastly, this method of yellowcake production embodies the policy of byungjin—parallel nuclear-weapon development and economic expansion—a hallmark of Kim Jong Un’s strategy. Given these factors, the rationale for the pursuit of this method is clear. The evidence is even more so. The first section of the paper explains the science behind uranium extraction from phosphoric acid produced as an intermediary in the production of fertilizer from phosphate rock. The second section highlights some of the historical cases of states using this method to obtain uranium. The third section elucidates the reasoning and rationale for using this method in the DPRK, and the fourth section examines the open-source evidence available indicating that this method of obtaining uranium—however uncommon—is in use in the DPRK today, and is likely to continue and expand in scale.
Topic:
Science and Technology, Mining, Manufacturing, and Uranium
Political Geography:
Global Focus