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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 34, No. 1, pp.27-41
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2021
Received 02 Feb 2021 Accepted 02 Feb 2021
DOI: https://doi.org/10.22904/sje.2021.34.1.003

The Impact of COVID-19 and the US-China Confrontation on East Asian Production Networks

Fukunari Kimura
Fukunari Kimura, Professor, Faculty of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan. Chief Economist, Economic Research Institute for ASEAN and East Asia (ERIA), Sentral Senayan II, Jalan Asia Afrika No. 8, Gelora Bung Karno, Senayan, Jakarta Pusat 10270, Indonesia, Tel: +81 3 5427 1290 fkimura@econ.keio.ac.jp

JEL Classification: F13, F15

Abstract

International production networks (IPNs) in East Asia are facing two challenges, i.e., COVID-19 and the US-China confrontation. COVID-19 has generated three kinds of shocks on IPNs: negative supply shocks, positive demand shocks, and negative demand shocks. IPNs have adequately managed these shocks thus far and have been strengthening the relative position of Factory Asia in the world. Nevertheless, the US-China confrontation and its consequences of weakening the rule-based trading regime have enhanced uncertainties in the operations of IPNs. The decoupling pressure may come from either the US or China for middle powers in-between, even with the US Biden Administration. This study posits that the construction of a mega-free trade agreement (FTA) network may partially reduce policy risks and help form a pro-trade middle-power coalition.

Keywords:

COVID-19, the US-China trade war, international production networks, mega-FTAs, East Asia

Acknowledgments

The author would like to thank Professor Soyoung Kim for providing a great encouragement to complete this paper.

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