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Journal of Economic Integration 2021 June;36(2) :308-338.
DOI: https://doi.org/10.11130/jei.2021.36.2.308
Trade Liberalization in APEC and Global Value Chain Participation: What Can Value Added Indicators Tell?

Dorothee Flaig 1 and Jared Greenville 2

1Hohenheim University, Germany
2Australian Bureau of Agricultural and Resource Economics and Sciences, Australia
Corresponding Author: Dorothee Flaig ,Email: dorothee.flaig@uni-hohenheim.de
Copyright ©2021 Journal of Economic Integration
ABSTRACT
Global value chains (GVCs) are an increasingly important driver of world trade, and they are relevant in analyzing border policies and trade agreements. Combining methods of value added decomposition and a computable general equilibrium model, we show how tariff liberalization in APEC impacts on measures of integration. The trade agreement increases GVC integration worldwide irrespective of membership. The effects differ by type of integration, namely, forward or backward, depending on the source of intermediate inputs, the membership of countries up- and downstream the supply chain, and the border protection in the base. The analysis reveals some limitations of the presented integration measures in a dynamic context. First, value added incorporates income related to policy measures, and decreasing integration can reflect a lower tax burden and a more efficient network. Second, changes do not allow interpreting the size of effects of underlying variables, and similar changes can result from various underlying developments.

JEL Classification
F13: Trade Policy; International Trade Organizations
F15: Economic Integration
C68: Computable General Equilibrium Models
O53: Asia including Middle East
Keywords: GVCs | Value added indicators | trade agreement | APEC
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