China’s global value chain push can reboot trade
G20 finance ministers dropped pledges to resist all forms of protectionism in a recent meeting, sending a dangerous signal. Yet, looking at the bigger picture, it will be difficult to reverse the trend of globalization that is mainly driven by the global value chain.
Various forms of antiglobalization or de- globalization, including protectionism and separatism, have not only affected the in- depth development and cooperation of economic globalization, but have also impeded the growth in global trade. According to a WTO forecast last September, world trade was estimated to grow around 1.7 percent in 2016, compared with the 6.9 percent annual growth rate from 1990 to 2007, marking the slowest pace of trade growth since the financial crisis.
Globalization has been experiencing a deep adjustment. Given shrinking global demand and sluggish growth, governments are increasingly seeking to protect local industries during times of economic hardship, and trade protectionism is getting stronger. According to statistics from Global Trade Alert Report released in 2016, “since 2010 between 50 and 100 protectionist
China needs to take the opportunity in the reshaping of the global value chain to enhance the country’s industrial structure competitiveness so as to promote a new round of globalization.
measures were implemented in the first four months each year, and in 2016 the total had exceeded 150. Group of 20 members were responsible for 81 percent of protectionist measures implemented in 2015.”
Since China’s accession to the WTO in 2001, the country has become increasingly involved in the global value chain, which has expanded and deepened significantly. Since 2009, China has been the world’s largest exporter of goods for several consecutive years, with its exports value accounting for about 11 percent of total world trade. In 2011, China’s trade in value added surged to $ 1.57 trillion, surpassing Germany and the US and becoming the largest economy in terms of trade in value added. The country’s trade has been characterized by the following structural features in recent years.
First, China has held the leading position in regional trade in Asia, especially East Asia, since 2005. It has also become the largest trading partner of Japan, South Korea, India, Singapore and other major Asian traders.
Second, in terms of the current development of intermediate goods trade, East Asian countries rely more on trade with China than with Western countries. Public statistics showed that China’s imports of intermediate goods from East Asia accounted for a big part of its total imports of intermediate goods. Meanwhile, the proportion of intermediate goods produced by Asian nations has jumped sharply in China’s total export volume in recent years, highlighting the Asian value chain.
Third, since 2010, China has been actively connecting manufacturers in Japan, South Korea, the EU, Australia, the US and Mexico, laying out a well- connected global value chain and becoming an important hub in the global value chain and global intermedi- ate goods trade.
China needs to take the opportunity in the reshaping of the global value chain to enhance the country’s industrial structure competitiveness so as to promote a new round of globalization. In particular, the country should make use of the Free Trade Area for the AsiaPacific ( FTAAP) platform to facilitate trade rules and a governance framework for the global value chain.
With the Trans- Pacific Partnership Agreement ( TPP) shelved, China’s active promotion of the FTAAP as an important way to push forward the Asia- Pacific regional trade integration has gained increasing support. According to a joint research report by scholars from Australia, China, South Korea and New Zealand, under the three conditions of liberalization of trade in goods, liberalization of trade in goods plus trade facilitation, and tariff elimination plus trade facilitation and liberalization of trade in services, the FTAAP will raise the APEC’s combined GDP by 0.55 percent, 2.26 percent and 2.33 percent, respectively. For China, the benefits from the FTAAP will be 2.7 times as high as that from the Regional Comprehensive Economic Partnership. For the US, benefits from the FTAAP will be 2.5 times as high as that from the TPP.