Is East Asia's Economic Fate Chained to the West?¹

Abstract

This paper analyzes to what extent East Asia's integration into global value chains (GVCs) has made the region more vulnerable to business cycle shocks in the West. We identify different channels through which business cycle shocks in the West can propagate to East Asian countries via global value chains. We next demonstrate that standard measures of external dependence are biased since they do not adequately capture the effects of these various GVC channels. Finally, we apply our framework to gain new insights into the role of GVCs in triggering East Asia's trade collapse during the Global Recession of 2008–2009.

Keywords:

• Global value chains
• supply chain shock
• external dependence
• East Asia
• Global Recession

Additional information

Notes on contributors

Alyson C. Ma

Alyson C. Ma is an Associate Professor of Economics at the University of San Diego. Her main area of research is international trade with a focus on the Chinese economy. She has published in topics pertaining to China's role in the global value chain, foreign direct investment and wage inequality across Chinese provinces, market structure and pricing strategy in China's automobile industry, and the impact of U.S.-China trade on employment and wages in the U.S.-Mexico border region.

Ari van Assche

Ari Van Assche is an Associate Professor of International Business at HEC Montreal, and a research fellow at the Montréal-based research centers CIRANO and IRPP. He holds a BA and an MA in Chinese studies from the Katholieke Universiteit Leuven and a PhD in economics from the University of Hawaii at Manoa. His research focuses on the organization of global value chains and their implication for trade and competition policies. On this topic, he has published widely in academic journals and has consulted for various Canadian and international governmental organizations including DFAIT, the Asian Development Bank and the World Bank.