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Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges

Prema-chandra Athukorala () and Archanun Kohpaiboon
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Archanun Kohpaiboon: Asian Development Bank Institute

No 177, ADBI Working Papers from Asian Development Bank Institute

Abstract: This paper examines the export experience of East Asian economies in the aftermaths of the crisis against the backdrop of a systematic analysis of precrisis trade patterns. The analysis is motivated by the “decoupling” thesis, which was a popular theme in 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 precrisis policy stance favoring export-oriented growth? The findings serve to caution against a possible costly backlash against openness to foreign trade arising from the newfound enthusiasm for rebalancing growth (redressing the strong bias for exports in development policy), and make a strong case for a well-coordinated strategy to fight new protectionism, as part of a long-term commitment to nondiscriminatory multilateral and unilateral trade liberalization.

Keywords: decoupling; intra-regional trade; growth rebalancing; asia (search for similar items in EconPapers)
JEL-codes: F14 F15 O19 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-sea
Date: 2009-12-11
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