East Asia in World Trade: The Decoupling Fallacy, Crisis and Policy Challenges

Prema-chandra Athukorala () and Archanun Kohpaiboon

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This paper examines the export experience of China and other East Asian economies in the aftermaths of the global financial crisis against the backdrop of pre-crisis trade patterns. The analysis is motivated by the 'decoupling' thesis, which was a popular theme in the Asian policy circles in the lead-up to the onset of the recent financial crisis, and aims to probe three key issues: Was the East Asian trade integration story that underpinned the decoupling thesis simply a statistical artifact or the massive export contraction caused by an overreaction of traders to the global economic crisis and/or by the drying up of trade credit, which overpowered the cushion provided by intra-regional trade? What are the new policy challenges faced by the East Asian economies? Is there room for an integrated policy response that marks a clear departure from the pre-crisis policy stance favoring export-oriented growth? The findings caution against a possible policy backlash against openness to foreign trade arising from the new-found enthusiasm for rebalancing growth, and make a strong case for a long-term commitment to non-discriminatory multilateral and unilateral trade liberalization.

Keywords: global financial crisis; global production sharing; production networks; China (search for similar items in EconPapers)
JEL-codes: F15 F23 O53 (search for similar items in EconPapers)
Date: 2010
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Working Paper: East Asia in World Trade: The Decoupling Fallacy, Crisis, and Policy Challenges (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:pas:papers:2010-05

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