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20th Lecture - International Trade with Prof. Fukunari Kimura

Date: Thursday, 15 June 2023

Time: 13.00 - 14.30 GMT+7

Platform: Zoom Meetings & YouTube Livestream

Speaker: :Prof. Fukunari Kimura, Chief Economist at Economic Research Institute for ASEAN and East Asia (ERIA) and Professor, Faculty of Economics at Keio University

Moderator: Novriest Umbu Walangara Nau, M.A (International Relations Lecturer at Universitas Kristen Satya Wacana)

International Trade: Export Control and East Asian Value Chains in the US-China Confrontation

There are 2 contrasting views in Japan now on supply chain-decoupling. Daily news in mass media is so pessimistic. We really need to prepare for the worst scenario without talking about the cause. But at the same time, if we look at the trade statistics or how factory Asia works, international production networks in East Asia, factories in Asia, are really moving very up to date. Export control, just a part of the US-China confrontation that started from so-called tariff war, both sides impose tariffs on important groups on the other side. That was a starting point. But from data of half of 2018, the import is shifting through export controls on high-tech related products, so I’d like to consider that aspect. And it is really crucial to quantitatively comprehend the extent of decoupling of supply chains for balanced policy discussion.

Policies for Defensive and Offensive Decoupling

In the context of middle powers such as Japan, walking between super powers. “Defensive” decoupling policies: means policy measures to decouple supply chains to avoid sudden disruptions of the supply of some important items due to geopolitical turmoil. For example, because of geopolitical turmoil, the import of rare arts coming from one super power country will suddenly stop. We have to prepare for that kind of situation. “Offensive” decoupling policies: means the policy measures to decouple supply chains to hit the opponents in the strategic competition. For example, export of some high-tech related products to some specific super power. So, in the case of Japan, most of the decoupling policies for supply chains are defensive so far.

Policy Implication for The Japanese Government

Offensive decoupling does not go without cost for Japan’s exporting firms of items directly or indirectly related to export controls. Both defensive and offensive decoupling are costly if they work against market forces. However, offensive decoupling is likely to hit Japanese industries/firms with international competitiveness. Supply chain decoupling seems to end up with “partial”. Therefore, the borderline between the economy under strict trade controls and the “rest” of the economy must be set as clearly as possible.


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