Issues to be settled for East Asia to stabilize industrial chain

By Zhang Yansheng Source:Global Times Published: 2020/5/12 23:48:11

Illustration: Luo Xuan/GT

All three major production networks in the world - East Asia, North America and Europe - have encountered economic fallout from the deadly COVID-19. Regions more deeply involved in globalization with more complex technique requirements and closer international divisions of labor are being hit harder by the virus. 

With a relatively stable virus situation compared to other countries, it would be both challenge and opportunity for East Asian nations and the Association of Southeast Asian Nations (ASEAN) to prevent recurring outbreaks, as well as unblock transport and logistics, and resume industrial and value chains.

Preventing a second wave of infections is a critical premise for recovery. Countries and regions in East Asia are exploring a normalized virus prevention mechanism in which they could seek industrial chain collaboration and cooperation in outbreak prevention.

There are also three other vital issues which have to be settled before East Asia stabilizes its industrial chain and upgrades its value chain.

For starters, there's a common question of whether countries should jointly expand their domestic markets, boost consumption, increase investment and create opportunities for each other. In the past, it was the US and Europe that mainly offered markets and technology for the global production system, while East Asia offered manufacturing and human resources, and the Middle East and Africa offered energy and resources. Large quantities of goods produced in East Asia were previously sold to North America and Europe, where countries are still grappling with serious crises and largely reduced consumption demand. 

Secondly, the disruption in the supply of critical parts and components in North America and Europe has led to a gap in production. During its trade conflict with Japan last year, South Korea tried to find substitute for its Japan-made key semiconductor raw material, and there were indeed alternatives in the East Asian production network. It would be a choice for countries including China, Japan and South Korea to initiate a "backup project" to solve supply disruption issues in the US and Europe.

Resuming an East Asia production hub does not mean forming a closed system. It is important to effectively and properly involve other countries, including Russia, Africa and Latin America, as well as those in Europe and North America.

Given the previous regional integration progress, East Asian countries and ASEAN can make full use of the "10 plus 3" mechanisms and the China-Japan-South Korea free trade agreement (FTA), the Regional Comprehensive Economic Partnership (RCEP) and other systems to promote recovery amid the pandemic, and to establish new mechanisms based on combined efforts.

For instance, China and South Korea in late April established a fast-track entry system, or "green channel," for the bilateral transmission of important business and logistics, and the transport of personnel, offering a feasible cooperative mechanism for East Asia.

Under the premise of openness, the restoration of the East Asian production network is not only beneficial for local members, but will also contribute to the stabilization and development of the global economy.

The author is a chief researcher at the China Center for International Economic Exchanges.


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