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121. The Effects of SPSs and TBTs on Innovation: Evidence from Exporting Firms in Viet Nam

Author:
Duc Anh Dang and Vuong Anh Dang
Publication Date:
06-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBTs) in destination markets may affect firms’ performance. In this paper, we examine how meeting foreign standards affects exporting firms’ innovation, reflected in the product quality, production processes, skills, and technological acquisition. The analysis relies on official regulations on non-tariff measures released by the United Nations Conference on Trade and Development (UNCTAD) and panel data for manufacturing firms in Viet Nam during 2013–2015. To correct for the potential endogeneity of SPS measures and TBTs and measurement errors, we use the number of SPS measures and TBTs imposed on other Association of Southeast Asian Nations (ASEAN) Member States as an instrument variable. Our results indicate that a higher number of SPS measures and TBTs applied by destination countries increases the probability of Vietnamese exporting firms’ skill acquisition. SPS measures also have higher positive impacts on product quality improvement and skill acquisition in the food processing sector. The SPS measures and TBTs have larger impacts on small firms than large firms. Foreign firms tend to acquire more technology and skills than domestic firms when facing SPS measures and TBTs by importing countries. Higher SPS measures and TBTs have more effects on the probability of acquiring skills by state-owned firms. However, the propensity of product quality and technological acquisition of non-state firms is much higher than that of state-owned firms when facing a greater level of SPS measures and TBTs.
Topic:
International Trade and Finance, Science and Technology, Governance, Innovation, and Trade
Political Geography:
Asia and Southeast Asia

122. Potential for India’s Entry into Factory Asia: Some Casual Findings from International Trade Data

Author:
Mitsuyo Ando, Kenta Yamanouchi, and Fukunari Kimura
Publication Date:
06-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite its impressive economic growth in the past few decades, India is slow in adopting a task-by-task international division of labour or international production networks (IPNs). Using international trade data for international comparison from multiple angles, this paper visualises the position of India – particularly in machinery IPNs and information and communication technology (ICT) services. Although machinery industries are at the centre of IPNs in East Asia, the paper clearly visualises that India has not yet participated in Factory Asia. Rather, trade data indicate that India is still engaged in import-substituting industrialisation. The paper also argues that ICT services are a strength for the Indian economy, and its competitiveness could be utilised effectively by combining new technologies with traditional industries such as manufacturing. India still has huge potential for utilising the mechanics of a new international division of labour to accelerate economic growth, innovation, and poverty alleviation.
Topic:
Globalization, International Trade and Finance, Labor Issues, Manufacturing, Industry, and Global Value Chains
Political Geography:
India and Asia

123. Tracking the Ups and Downs in Indonesia’s Economic Activity During COVID-19 Using Mobility Index: Evidence from Provinces in Java and Bali

Author:
Yose Rizal Damuri, Prabaning Tyas, Haryo Aswicahyono, Lionel Priyadi, Stella Kusumawardhani, and Ega Kurnia Yazid
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
A timely and reliable prediction of economic activities is crucial in policymaking, especially in the current COVID-19 pandemic situation, which requires real-time decisions. However, making frequent predictions is challenging due to the substantial delays in releasing aggregate economic data. This study aims to nowcast Indonesia’s economic activities during the COVID-19 pandemic using the novel high-frequency Facebook Mobility Index as a predictor. Employing mixed-frequency, mixed-data sampling, and benchmark least-squares models, we expanded the mobility index and used it to track the growth dynamics of the gross regional domestic product of provinces in Java and Bali and performed a bottom-up approach to estimate the aggregated economic growth of the provinces altogether. Our results suggested that the daily Facebook Mobility Index was a considerably reliable predictor for projecting economic activities on time. All models almost consistently produced reliable directional predictions. Notably, we found the mixed data sampling-autoregressive model to be slightly superior to the other models in terms of overall precision and directional predictive accuracy across observations.
Topic:
GDP, Economy, Mobility, Pandemic, and COVID-19
Political Geography:
Indonesia, Asia, and Southeast Asia

124. Is the COVID-19 Pandemic Recasting Global Value Chains in East Asia?

Author:
Nobuaki Yamashita and K. Fukasaku
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper assesses how the current COVID-19 pandemic is shaping global value chains in East Asia after the formidable disruptions inflicted by the health crisis. Some have expressed the view that global value chains would readjust and production processes would move home, i.e. reshoring, facilitated by the recent movement of protectionism measures in the post-pandemic world. We evaluate such concerns and examine the role of policy with a focus on non-tariff measures in East Asia.
Topic:
Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:
East Asia and Asia

125. Economic and Emission Impact of Australia–China Trade Disruption: Implication for Regional Economic Integration

Author:
Xunpeng Shi, Tsun Se Cheong, and Michael Zhou
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the debates on supply chain resilience and the economic and emissions impact of supply chain rerouting using Australia and China trade as an example. The estimations demonstrate that, in both export and import cases, a trade embargo between Australia and China, despite being compensated by alternative supply chains, will cause gross domestic product loss and emissions increases for both countries. Moreover, even if all other countries gain from the markets left by China, many of them suffer from overall gross domestic product loss and emissions increase. The findings that ASEAN and China may also suffer from an Australia–China trade embargo, despite a gain in trade volume, suggests that no country should add fuel to the fire. The results suggest that countries need to defend rules-based trading regimes and continuously promote regional economic integration.
Topic:
Regional Cooperation, Economy, Global Value Chains, Carbon Emissions, and Economic Integration
Political Geography:
China, Asia, Australia, and Southeast Asia

126. East Asian Integration and Its Main Challenge: NTMs in Australia, China, India, Japan, Republic of Korea, and New Zealand

Author:
Yan Lili Ing and Grace Hadiwidjaja
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
While East Asia has been moving forward with its regional integration agenda, one main challenge remains and is growing – non-tariff measures (NTMs). Animal, vegetable, and food products tend to be more regulated than other products, largely due to quality and safety standards. NTMs affect 66%–98% of total trade in those sectors. Our paper presents the frequency index, coverage ratio, and prevalence score to measure NTMs in the region. They are highest amongst food, vegetable, and animal products; and vary amongst other products, depending on the economy. We find that the high frequency index of NTMs does not necessarily translate to a high value of coverage ratio for trade. One explanation could be that countries tend to regulate imported goods which compete with the domestic products more than imported goods which they need.
Topic:
Globalization, International Trade and Finance, Regional Cooperation, Tariffs, Non-Tariff Measures, and Economic Integration
Political Geography:
Japan, China, India, Asia, South Korea, Australia, Southeast Asia, and New Zealand

127. Impacts of COVID-19 on the Energy Demand Situation of East Asia Summit Countries

Author:
Shigeru Kimura, Ikarii Ryohei, and Endo Seiya
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The coronavirus disease (COVID-19) pandemic has brought us a ‘New Normal’ life style and the lockdown has severely harmed economic growth, with many countries estimated to record negative economic growth in 2020. Due to the high correlation between energy demand and economic growth, energy demand is also affected. Against this background, ERIA analyses how energy demand has decreased as a result of the COVID-19 pandemic using East Asia Summit (EAS) energy outlook models that are regularly updated by ERIA and apply an econometric approach. The outlook models cover the Association of Southeast Asian Nations (ASEAN) 10 countries plus seven countries – Australia, China, India, Japan, Republic of Korea, New Zealand, and the United States. According to gross domestic product (GDP) growth estimates for EAS countries in 2020, only three countries – China, Lao PDR, and Viet Nam – show positive growth, though less than 2%, and the others show negative growth. Total Final Energy Consumption (TFEC) of the EAS countries fell in 2020, but it is expected to rebound in 2021 and projected to return to the originally forecast trend of energy demand up to 2050. Once official energy statistics become available, a comparison between model results and actual statistics will be made to understand how the energy outlook models trace the impact of the pandemic on energy demand.
Topic:
Energy Policy, Pandemic, COVID-19, and Models
Political Geography:
East Asia and Asia

128. Feeling the Pulse of Global Value Chains: Air Cargo and COVID-19

Author:
Christopher Findlay, Hein Roelfsema, and Niall Van De Wouw
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper focuses on air cargo market development, with special attention to the connections between countries in Asia, the European Union, and the United States. Before the coronavirus disease (COVID-19) crisis, we show that participation in global value chains played a crucial role in how countries in Asia increased their exposure to the European Union market, which was hit hardest by the COVID-19 crisis. Analysing the effects of the crisis in 2020- using a fuzzy set complexity approach and recent high-frequency data on air cargo transport - we show that such demand effects, together with domestic contraction conditions, explain a large share of variation in air cargo dynamics across countries in Asia. However, we also show that implementing best practices in pandemic control positively impacts air cargo recovery for countries that cannot rely on export market rebounds. After reviewing the convergence in air cargo business models since 2010, the paper continues to assess recovery options. The main conclusion is that business models will converge on long haul point-to-point models that combine passengers and cargo, moving away from the current hub and spoke system.
Topic:
Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:
Asia and Southeast Asia

129. Exploring Digital Economic Agreements to Promote Digital Connectivity in ASEAN

Author:
Sarah Y. Tong, Yao Li, and Tuan Yuen Kong
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper explores modules and articles on cooperation concerning the digital economy that are applicable for Association of Southeast Asian Nations (ASEAN) countries under certain circumstances. It investigates the progress of and obstacles to ASEAN’s digital connectivity, as well as features of existing Digital Economic Agreements and digital economy-related articles in other agreements. We propose the use of a differentiated strategy and steps to promote integration for ASEAN countries covered in this research.
Topic:
Economics, Globalization, International Trade and Finance, Digital Economy, and Digitalization
Political Geography:
Asia and Southeast Asia

130. Domestic Tourism as a Pathway to Revive the Tourism Industry and Business Post the COVID-19 Pandemic

Author:
Jennifer Chan
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This research aims to explore the potential of domestic tourism as a means to revitalise the tourism industry from the perspectives of local residents and tourism players. A quantitative online survey focused on domestic travel behaviour, motivation, places of interest, travel preferences, and willingness to travel within Malaysia; it was answered by 219 Malaysians. Interview data were collected using structured, open-ended interview questions through emails to eight respondents from tourism associations, five from the hotel sector, and two from the travel and tour sector. Data collection was carried out from 10 January to 15 February 2021. The findings reveal that domestic tourism has the potential to revive the tourism industry. A high percentage of respondents indicated the desire to travel domestically and being motivated by attractive tour packages at discounted prices. COVID-19 has impacted tourist behaviour and attitudes towards travelling, and people prefer to travel domestically rather than overseas. Furthermore, tourism players acknowledged the potential to revive the tourism industry and business via domestic tourism. Despite this, declarations of health, safety issues, flight availability, travel restrictions, and quarantine durations are key barriers to stimulating domestic tourism and rebuilding the tourism industry.
Topic:
Tourism, Public Health, Pandemic, and COVID-19
Political Geography:
Malaysia and Asia

131. Technical Barriers to Trade and the Performance of Indian Exporters

Author:
Pavel Chakraborthy and Rahul Singh
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
We study the effects of technical barriers to trade (TBTs) imposed by destination markets on prices, marginal costs, and markups of Indian manufacturing exporters. Using detailed firm-product-level data on prices and production from PROWESS, we first identify the underlying component of prices (i.e. marginal costs and markups), and use those as our outcomes of interest in the second stage. We find that (i) introduction of TBTs by importing countries increases marginal costs by 5% and prices by 4%, (ii) there is considerable heterogeneity based on exporters’ initial productivity, (iii) productive exporters (those belonging to the lower deciles) experienced an increase in marginal costs and decrease in markups compared to low productivity exporters, and (iv) overall effects are driven by private firms (both domestic and foreign) belonging to intermediate input industries.
Topic:
Globalization, International Cooperation, International Trade and Finance, and Exports
Political Geography:
India and Asia

132. Effective Rates of Protection in a World With Non-Tariff Measures and Supply Chains: Evidence from ASEAN

Author:
Ben Shepherd
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The concept of effective rate of protection expresses protection on a sector’s final output relative to protection affecting its inputs. As such, it is well adapted to analysing the effects of trade policy from a supply chain standpoint. This paper makes two contributions to the literature on effective rates of protection. First, it draws on the literature on trade in value added to highlight an alternative to the traditional measure that better accounts for supply chain trade by considering both direct and indirect input use. Second, it includes data on ad valorem equivalents of non-tariff measures, which are increasingly important as trade policy instruments. In an analysis covering 17 aggregate goods sectors, I find that average tariff only effective rates of protection in ASEAN averaged 6.9% and ranged from zero to 23.4% in 2018. By contrast, effective rates including non-tariff measures averaged 14.0% and ranged from –6.2% to 44.0%. While patterns of escalation and even effective taxation differ substantially across sectors, most countries practice a tariff and NTM trade policy that is broadly neutral between input and output sectors, but which causes low to moderate isolation from world markets. Given the complexity of tariffs and NTMs from a supply chain perspective, there would likely be reductions in economic waste accompanying substantial simplification.
Topic:
Economics, Globalization, International Cooperation, International Trade and Finance, Protectionism, Non-Tariff Measures, and Supply Chains
Political Geography:
Asia and Southeast Asia

133. Reconciling Tax and Trade Rules in the Digitalised Economy: Challenges for ASEAN and East Asia

Author:
Jane Kelsey
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
As the digital economy expands in scale, scope, and form it poses major challenges for public revenue and tax policy and administration in Asia and other parts of the global South. When attempts led by developed countries at the OECD-led Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to agree on new norms for taxing digital giants like Facebook, Google, and Amazon stalled, individual countries, including a number of developing countries in Asia, began developing their own responses, notably the adoption of digital services taxes. High-level compromises have recently been announced at the OECD, but the details are yet to come and are not expected to address the needs of developing countries to effectively tax the activities of digital giants operating from offshore. As countries seek effective and workable means to tax the digitalised economy, existing and proposed international rules on digital trade in free trade agreements, and plurilateral moves to develop electronic commerce rules in the World Trade Organization, may fetter their ability to do so. To date, very little attention has been paid in trade negotiations to the consequences of these developments for countries’ tax regimes. Nor have the adequacy, effectiveness, and workability of the tax exceptions in trade and investment agreements been properly re-assessed. Many governments are only becoming aware that trade rules may constrains their ability to regulate the (poorly understood and fast moving) digital domain after they have signed up to them. A series of investigations by the US government under Section 301 of the US Trade Act 1974 into digital services taxes, including those adopted by India and proposed by Indonesia, provides a real-world basis on which to assess how binding and enforceable digital trade rules might be used to challenge digital tax measures at the unilateral, bilateral, and multilateral levels. In highlighting these risks, the paper aims to provide a framework for the tax and trade divisions of governments in ASEAN and East Asia to reflect together on the potential for proposed digital trade rules to impact negatively on their public revenue.
Topic:
International Cooperation, International Trade and Finance, Digital Economy, Tax Systems, Commerce, and Digitalization
Political Geography:
Asia and Southeast Asia

134. The EU–China Comprehensive Agreement on Investment: Lessons Learnt for Indonesia

Author:
Yan Lili Ing and Junianto James Losarili
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The European Union (EU) and China have recently reached an agreement: the EU–China Comprehensive Agreement on Investment (CAI). As one of the most recent investment agreements concluded by the EU, the paper aims to assess specific concessions made in the agreement, and provides lessons learnt for Indonesia on the ongoing negotiations of the Indonesia–EU free trade agreement, the Comprehensive Economic Partnership Agreement (IEU CEPA). The paper will present an overview of the main areas covered under the CAI, assess the potential impacts of the CAI on EU investment into Indonesia, and set out lessons that can be learnt from the CAI.
Topic:
Economics, International Cooperation, International Trade and Finance, European Union, and Investment
Political Geography:
China, Europe, Indonesia, and Asia

135. A Firm-level Analysis of the Impact of the Coronavirus Outbreak in ASEAN

Author:
Wasim Ahmad, Rishman Jot Kaur Chahal, and Shirin Rais
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the impact of the coronavirus pandemic on economic integration in the ASEAN-6 region. The study finds that the pandemic’s impact can be easily traced using stringency, bilateral exports, and tourist arrivals, indicating significant implications for the economic integration process. The firm-level analysis suggests that although the coronavirus outbreak’s uniformly impacted firms, the extent of the effect varies across ASEAN-6 nations. Large firms are strongly impacted by the pandemic. Overall, the findings of this study are relevant for policymakers and academia.
Topic:
Tourism, Global Markets, Public Health, Pandemic, and COVID-19
Political Geography:
Asia and Southeast Asia

136. Central Banks' Responses to COVID-19 in ASEAN Economies

Author:
Charan Singh and Panitra Kumar Jena
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The effect of the COVID-19 pandemic on public health, social life, economic conditions, and financial markets has been significant for Association of Southeast Asian Nations (ASEAN) economies. The main objective of this study is to understand the response of central banks to COVID-19 in 10 ASEAN economies, i.e., Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. In this study, panel data as well as time-series data have been used to see the impact of COVID-19 on macroeconomic variables and financial variables. The period of the study ranges from 23 January 2020 to 11 December 2020. The first part of the study shows the trend analysis of macroeconomic variables of ASEAN economies and a descriptive analysis of various measures taken by the central banks of ASEAN economics. Further, a comparative analysis of monetary measures with advanced countries is depicted. Further, empirical findings of ARCH and GARCH indicate that recent as well as past COVID-19 news has a significant impact on stock market volatility in select ASEAN countries.
Topic:
Banks, Fiscal Policy, Pandemic, COVID-19, Financial Institutions, and Banking
Political Geography:
Asia and Southeast Asia

137. COVID-19 and Regional Solutions for Mitigating the Risk of Small and Medium-sized Enterprise Finance in ASEAN Member States

Author:
Farhad Taghizadeh-Hesary, Han Phoumin, and Ehsan Rasoulinezhad
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
One of the significant challenges small and medium-sized enterprises (SMEs) face is their difficulty in accessing finance. One way to reduce the risk of lending to SMEs is through the credit guarantee scheme (CGS). In this paper, we assess the determining factors of the optimal credit guarantee ratio for the banking industry in four Association of Southeast Asian Nations (ASEAN) countries, namely Indonesia, Singapore, the Philippines, and Malaysia, by employing statistical techniques and econometric models. The empirical findings prove that the loan default ratio (nonperforming loan/loan, or NPL/L) is the optimal credit guarantee ratio’s main determining factor. Our empirical findings confirm that in the ASEAN region, to help SMEs survive in the emergency stage of COVID-19, the credit guarantee ratio needs to be increased. Gradually, when moving to the new normal stage, the ratio needs to be lessened. Our results show that the credit guarantee ratio should vary for different countries based on the macroeconomic climate and also for each bank or, in other words, for banks with similar financial soundness. Governments should give a higher guarantee ratio to sound banks, whilst less healthy banks should receive a lower guarantee ratio. The study also provides policy recommendations for establishing a regional credit guarantee scheme in ASEAN to promote regional economic cooperation at the SME level for greater economic integration.
Topic:
Finance, Public Health, Pandemic, COVID-19, and Credit
Political Geography:
Asia and Southeast Asia

138. Aviation Market Development in the New Normal Post the COVID-19 Pandemic: An Analysis of Air Connectivity and Business Travel

Author:
Xiaowen Fu, David A. Hensher, Nicole T. T. Chen, and Junbiao Su
Publication Date:
09-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study quantifies the effects introduced by the COVID-19 pandemic on air connectivity and passenger travel behaviour. Our analysis suggests that the pandemic has led to significant connectivity loss at all airports, especially at large hubs and tourism destinations. Low-cost carriers’ operations at these airports, whose main targets are price-sensitive, non-business travellers, have been significantly reduced, too. There is preliminary evidence that network carriers at hub airports played more important roles amid the pandemic, likely due to the benefits associated with their hub-and-spoke networks. Connectivity losses at the smallest airports tended to be temporary and limited. These airports had limited aviation services to start with and, thus, it was not too costly to maintain the minimum connectivity. Empirical results obtained from a passenger preference study indicate that traveller subgroups are impacted in different ways. When there is no online meeting option, nearly 80% of the respondents prefer, and are willing to pay for, pandemic control measures. These ‘pro-control’ passengers perceive such measures and the associated high costs/fares as valuable and necessary to lower the health-related risks during air travel. When there is an online meeting option, the share of such passengers decreases to 44.5%, with the remaining 55.5% exhibiting disutility for the increased price and time associated with pandemic control measures. The average willingness-to-pay for pandemic control measures decreases significantly, whereas the value of time saved at health checkpoints increases significantly. The aviation industry thus faces a ‘double-hit’ problem: operation costs will increase due to pandemic control measures, and the resultant inconvenience and extra time and costs further reduce travel demand. Unlike previous short pandemics, business travel is likely to suffer with an extended decline until the pandemic is fully controlled. These results call for financial and operational support for aviation services, especially at major airports and tourism destinations. Because these large airports are expected to be profitable post the pandemic, they may resort to low-cost finance from the capital market in the short term. Because the value of time saved at checkpoints is very high, it is more important for government agencies to make the pandemic control and health measures efficient and smooth. For operations such as vaccination records, stakeholders in different countries should cooperate to facilitate seamless control and pleasant air travel experiences.
Topic:
Development, Financial Markets, Business, Public Health, Pandemic, COVID-19, and Travel
Political Geography:
Asia and Southeast Asia

139. COVID-19, Air Transportation, and International Trade in the ASEAN+5 Region

Author:
Anming Zhang, Xiaoqian Sun, Sebastian Wandelt, Yahua Zhang, Shiteng Su, and Ronghua Shen
Publication Date:
09-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper provides an in-depth description of the coronavirus disease (COVID-19) pandemic and its interactions with air transportation in the Association of Southeast Asian Nations (ASEAN)+5 region, and then links the changes in air connectivity to trade using a gravity regression model. We find that almost all the countries probably reacted too late in their decision to reduce flights in the early stage of the pandemic. As the pandemic evolved, most countries have significantly cut the number of flight connections, especially international flights. The reduced connectivity is found to have a significantly negative impact on trade for time-sensitive merchandise that is essential to consumers and businesses. This points to the importance of the region seeking alternative arrangements to restore air connectivity. We offer a way to construct optimal travel bubbles by using risk indexes introduced here. Other policy issues such as uniform standards and regulations, and regional ‘open skies’, are also discussed.
Topic:
International Trade and Finance, Pandemic, COVID-19, and Travel
Political Geography:
Asia and Southeast Asia

140. The Trade Restrictiveness Index and Its Impact on Trade Performance in Selected East Asian Countries

Author:
Norlin Khalid, Muhamad Rias K.V. Zainuddin, Tamat Sarmidi, Sufian Jusoh, Faliq Razak, and Mohd Helmi Ali
Publication Date:
09-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper aims to investigate the effect of non-tariff measures (NTMs) on trade in selected East Asian countries. In doing so, we first estimate the ad valorem equivalent (AVE) of NTMs and construct an augmented trade restrictiveness index (ATRI) by measuring the overall external regulations imposed by importing countries. Second, we analyse the effect of the AVE and trade restrictiveness index (TRI) of importing nations on the exports of various sub-sector products for each country in selected East Asian countries. Based on a standard gravity model framework, we perform a Poisson pseudo maximum likelihood (PPML) regression at the sectoral level (Harmonized System 2-digit) for total exports and major sub-sectors (agri-food, health, logistics, and manufacturing). The findings show that the ATRI has a negative and significant relationship towards bilateral exports for total exports, manufacturing, and logistics sub-sectors. The negative impacts of the ATRI also highlight that trade barriers play a significant role in bilateral exports. NTM restrictions (proxied by the calculated AVE of NTMs) imposed by importing countries have mixed results for technical and non-technical measures. Where technical measures have negative and significant impacts on bilateral exports for total exports, manufacturing, and health sub-sectors. This implies that implementation of technical NTMs such as sanitary and phytosanitary (SPS) and technical barrier to trade (TBT) measures in importing nations adversely affect bilateral exports for these sub-sectors. This is in line with our hypothesis, as exporters may face difficulties in meeting the current NTM specifications, leading to lower bilateral exports. In addition, the results show that most trade agreements have a positive and significant relationship with ASEAN and East Asia countries’ bilateral exports, suggesting that free trade agreements enhance trade between countries.
Topic:
Economics, Globalization, International Trade and Finance, and Non-Tariff Measures
Political Geography:
East Asia and Asia