Asian trade: Long-term patterns and key policy issues

Fragmentation-based specialisation has become an integral part of the economic landscape of East Asia. Dependence on this new form of international specialisation is proportionately larger in East Asia, in particular in the Association of Southeast Asian Nations, than in North America and Europe. In this regard, an important recent development has been the rapid integration of China into regional production networks. This development is a counterpoint to the popular belief that China's global integration would crowd out other countries' opportunities for international specialisation. The rise of product fragmentation has strengthened the case for a global, rather than a regional, approach to trade and investment policymaking. Given the global orientation of the region's economies, we question whether there would be a significant benefit from current efforts to promote regional cooperation, unless the principle of 'open regionalism' is recognised. With both the Doha Round and APEC floundering, this is one of the major multilateral policy challenges of our time.