The 9th CJK Cooperation Dialogue

11-15-2022

Rule-based International Trade System

Chul ChungSenior Research Fellow

Critical Issues in the Global Trade and the World

Supply Chain
Disruption:
TechnologyDigital Tradeand SecurityandTransformation

ClimateChange andUnequal

Labor Issues

Recovery andRising
Inequality2

Where we are today Multilateral Trading System (MTS) and WTO in crisis‒

Protectionism and America Firsts in many countries US-China Strategic Competition‒

National security and economic security, technologies

 Global supply chain disruption‒Pandemic and lockdowns; golden age of globalization over? Deglobalization?

 Domestic politics dominates‒‒

Trade is one of the most contentious of political issues, both domestically andbetween governments
FTA negotiations? Not for the time being

 Return of industrial policy focusing on domestic manufacturing capacity‒

Semiconductor, electric vehicles and batteries, bioindustry, etc.

 Labor and environment (traditionally non-trade issues) take the first seat intrade talks‒

Jobs and employment, climate change and clean energy

So, whither trade policy?

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Trade growth slowed down since 2008 Global Financial Crisis (GFC):Deglobalization?
Slow down in goods trade, but not in services and digital trade
Trade in Goods (% of World GDP)
Ratio of trade relative to GDP growth

61%
in
2008

56.3%
In
2019
51.6%
In
2020

Source: World Bank

Source: IMF

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Digital Trade
Digital services trade through internet: mostly done in the form of mode 1 (Cross-border supply)

Digital services exports by sector(unit: billion dollars)Note: parentheses (growth rate); SF (insurance), SG (finance), SI(communication, computer information), SJ (other business services)
Source: Lee et. al (2022), KIEP (analysis conducted by employing the WTO TiSMoS (Trade in Services by Mode of Supply))

6Intra-region trade in Northeast Asia

“ What regional integration? De-regionalization due to GVC expansion? ”
Intra-CJK trade share slowing down not rising for the past 2 decades
China’s trade share has been decreasing with Korea and Japan
Year

2000 20092019

CJK share ofworld trade (%)

25.4

37.5

30.3

Growth of trade volume, 2000-2019
Ratio(2019/2000)

China JapanKorea

9.6

3.1

1.7

Look into the detail (CJK’s bilateral trade)

Statistics showChina: region’s darling (both K and J’s trade share with C rising)Japan: losing trade share from both China and Korea

Business community concerns and enablers for digital economy
 APEC Business Advisory Council survey on barriers to digital trade and economy

Challenges and implications for policy

Global rules and standards: consistency and transparency
Infrastructure and connectivity
Public private partnership
International cooperation essential

ChallengesandConcerns

Different rules
and standards(76%)

Fragmentationof digital rules
acrosscountries

Enablers:
Infrastructure!

Physicalinfrastructure

Noninteroperability

HumanRegulatoryof digital

infrastructure

infrastructure

system (56%)

9The Way Forward for Economic Cooperation
 Digital transformation and transition to carbon-neutral society important,but concerns for distortion of the market system and violation of trade rules Technology development and investment in human capital: keys to the problem‒

Low carbon technology, productivity, future generation

 Cooperation rather than negotiation for the time being‒

Trade-related areas for cooperation: supply chain resiliency, emerging
technologies, digital ecosystem, and trade facilitation (ROO harmonization)

 For the long haul? Trust building process crucial for sustainable supply chainand rules-based trade system‒‒‒‒Restore MTS? Rather, reestablish some sort of global trade order and rulesbased trade system; DSB first? MPIA not sufficient (legal issues)
Trade rules to address new trade issues such as climate change and digital
economyUtilize existing FTAs and regional mega-FTAs (RCEP/CPTPP; CJK/FTAAP) as
an effective channel for addressing outstanding issues
Trade policy for social cohesion and trust building; more inclusive policy
101112 The key to success lies in the provision of cumulative ROO rather than
expansion of membership.
Effects of Cumulation

Real GDP

Bilateral

Diagonal

Fullstatic modelCJK FTACJK FTA

China

0.06

0.57

1.22

Japan

0.04

0.35

0.73

Korea
0.03
1.5
capital accumulation model

3.38

China

0.16

1.15

2.42

Japan

0.38

1.41

2.73

Korea

0.21

4.45

9.86

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