The document discusses the potential impacts of de-globalization trends on East Asian economies. It finds that world trade, foreign direct investment, and intra-East Asian trade have significantly contributed to East Asian income per capita and GDP growth based on regression analyses. It concludes that East Asian countries should boost intra-regional trade through agreements like RCEP to compensate for possible stagnation in world trade and maintain economic integration and welfare as de-globalization progresses.

1. TELISA AULIA FALIANTY
MASTER OF PLANING AND PUBLIC POLICY
UNIVERSITAS INDONESIA
Email : telisa.aulia@ui.ac.id
telisa97fe@gmail.com

2. INTRODUCTION
LITERATURE REVIEW
RESEARCH METHOD
RESULT AND ANALYSIS
CONCLUSION AND DISCUSSION

3.  US new administration since November 2016 has
shocking the world with new paradigm especially in
economic area. US new administration has argued for
protectionism and declared that decades of free-
trade policies were responsible for the collapse of
the American manufacturing industry. They believe
that globalization can bring more pain than gain.
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EMD_Asia_Growth World_Growth

4.  Price Waterhouse Coopers in Selvin and David (2011),
has made a projection of bilateral trade between 29
economies over the next two decades. One important
findings is China will overtake US ad dominate global
trade in 2030. By 2030, the emerging and developing
economies making up a significant share of global
output. In 2009, the largest bilateral trade (excluding
trade between neighbors) was between China and US.
Research Objectives:
 1.To measure the impact of world trade and FDI
inflows to East Asian income per capita and GDP
 2.To measure the impact of East Asian Trade to
income per capita and GDP
 3.To find alternatives for East Asia in surviving in
current de-globalization trend

5.  Trade theory has been developing from classical
to new trade theory. Classical economic theory
tells us that there are national gains from trade,
associated with the phrase comparative
advantage.
 Over the last two decades, scholars have
developed a ”New Trade Theory;" it suggests the
existence of additional benefits from trade,
which are termed dynamic. It is more realistic
than the classical theory, in that it takes into
account imperfect competition, increasing
returns to scale, and also changing technology.
 Frankel and Romer (1999) found the
statistically significant impact of trade on
economic growth.

6. • Frankel (2010) summarize that regional trading
arrangement reduce tariffs and other barriers within a
group of countries., There is a range from mild
Preferential Trading Arrangement to full-fledged Economic
Union. Often the members of such group are already linked
through common language, geographical proximity,
cultural ties, and other ties. According to his research, in
the gravity model, the formation of free trade area on
average raised trade by 70 to 170 percent.
• Busse and Koniger (2012) who also found a positive
impact of trade on economic growth. Besides trade,
expansion of trade through associated access to
additional technologies has a significant impact on
income growth as well. They used a System General
Method of Moments (GMM) estimator that allows for
causal relations between trade and growth. Hillebrand
(2010) found that the total effect of de-globalization reduced
world economic growth.

7.  Hillebrand (2010) found that the total effect
of de-globalization reduced world economic
growth.
 According to Organization for Economic
Cooperation and Development -OECD (2009),
protectionism has a high cost. By closing
borders or otherwise restricting markets,
consumers pay more, firms bear higher costs,
and choice is limited.

8.  Multiple Regression Model :
EAST ASIA_INCOME CAP= β0+ β1 WORLD_TRADEt + β2 EAST
ASIA_FDIt + β3 EAST ASIA_INVESTMENTt + β4 EAST
ASIA_LABORt + β5 INTRA_EAST ASIA_TRADEt+ εt……….(1)
Note:
 EAST ASIA_INCOME CAP=Total GDP of East Asia Countries, in
US$
 WORLD_TRADE= Value of World Trade, in US$
 EAST ASIA_FDI=FDI inflow to East Asia Countries, in million
US$
 EAST ASIA_INVESTMENT=investment of East Asia Countries,
in US$
 EAST ASIA_LABOR=Number of labor in East Asia Countries,
in thousand
 INTRA_East Asia_TRADE=Intra East Asia Trade, in million
US$

9.  We will use logarithmic form to have elasticity in
numbers directly and for comparability reasons. We
will run this regression by considering the multi-co-
linearity problem and run different specification
models as a further robustness check.
 Heitger (1987) stressed the general belief that
countries with a high engagement in international
trade perform much better than countries that
protect their home markets. He refers to this as the
“export led growth hypothesis”.
 We will link the relationship between trade and FDI
indicators to GDP in the case of East Asia countries.
The dependent variable used is East Asia GDP. We will
use yearly data from 1995 to 2015 for East Asia
countries. The data are collected from the ARIC-
ADB, World Development Indicator, World Bank, and
UNCTAD Stat.

10.  Because of data limitation and multicollinearity
potential, we divide control variable on two
regressions. Regression 1 is using INVESTMENT as
control variable and Regression 2 using LABOR.
 Regression 1
 LOG(INCOME_CAP) =5.672 + 0.250LOG(WORLD_TRADEt )+ 0.180 LOG(EAST ASIA_INVESTMENTt )
 (4.641)*** (2.872)** (1.337)**
 Adj R2=0.975, DW=1.94
 Regression 2
 LOG(INCOME_CAP)= -12.616 + 0.194 LOG(WORLD_TRADEt ) + 1.574 LOG(EAST ASIA LABORt )
 (-1..508)* (2.525)**
(2.304)**
 Adj R2=0.980, DW=1.800

11.  Regression 3
 LOG(INCOME_CAP)= 5.776 + 0.017 LOG(FDI_INFLOWt ) + 0.419 LOG(EAST ASIA INVESTMENTt )..(3.1)
 (1.218) (0.266) (1.403)
 Adj R2=0.958, DW=1.987

 LOG(GDP)= 42.07+ 0.041 LOG(FDI_INFLOWt ) + 0.286 LOG(EAST ASIA INVESTMENTt )…(3.2)
 (0.056) (2.722)** (3.165)***
 Adj R2=0.998, DW=2.131


Regression 4
 LOG(INCOME_CAP)= -31.194 + 0.008 LOG(FDI_INFLOWt ) + 3.172 LOG(EAST ASIA LABORt )…(4.1)
 (-4..508)*** (0.129) (5.408)***
 Adj R2=0.970, DW=1.884

 LOG(GDP)= -57.721 + 0.043 LOG(FDI_INFLOWt ) + 5.274 LOG(EAST ASIA LABORt )….(4.2)
 (-1.717) (2.265)** (2.200)**
 Adj R2=0.998, DW=1.591

12.  Regression 5
 LOG(INCOME_CAP)= 6.995 + 0.310 LOG(INTRA_EAST ASIA_TRADE )+ 1.372 LOG(EASTASIA INVESTMENTt )..(5.1)
 (7.576)*** (6.127)*** (0.912)
 Adj R2=0.979, DW=1.305

 LOG(GDP)= 273.063 + 0.064 LOG(INTRA_EASTASIA_TRADE ) + 0.242 LOG(EAST ASIA INVESTMENTt ).(5.2)
 (0.005)* (3.69)*** (2.831)***
 Adj R2=0.999, DW=1.785


 Regression 6

 LOG(INCOME_CAP)= -9.317 + 0.200 LOG(INTRA_EAST ASIA_TRADE ) + 1.372 LOG(EAST ASIA LABORt )..(6.1)
 (-1..918)* (4.433)*** (3.53)***
 Adj R2=0.979, DW=1.305



LOG(GDP)= -21.219 + 0.133 LOG(INTRA_EAST ASIA_TRADE ) + 2.579 LOG(EAST ASIA_LABORt )…(6.2)
 (-3.283)* (2.211)** (4.988)***
 Adj R2=0.975, DW=0.196

13. Figure 3 : US_East Asia Trade
and World Trade (in Million USD)
Figure 4: FDI Inflow and Outflow of
East Asian Members (in Million USD)
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
96 98 00 02 04 06 08 10 12 14
US_EASTASIA_TRADE WORLD_TRADE
0
100,000
200,000
300,000
400,000
500,000
600,000
96 98 00 02 04 06 08 10 12 14
FDI_INFLOW FDI_OUTFLOW
Source : ARIC ADB Source : UNCTAD Stat

14. Non ASEAN Member ASEAN Member
0.00
100,000.00
200,000.00
300,000.00
400,000.00
500,000.00
600,000.00
Japan China
South Korea Hongkong
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
Indonesia Malaysia Singapore
Philippines Thailand Vietnam
Source : ARIC ADB

15. RCEP TPP
First mooted November 2011 December 2009
Official negotiations May 2013-Present March 2010-October 2016
Total GDP US$ 21.2 trillion US$ 28.3 trillion
Population 3.4 billion 800 million
Primary Goal Address noodle bowl problem by
multilateralizingASEAN FTAs
Address new and traditional trade issues
through a comprehensive ‘twenty-first
century' FTA
Membership model ASEAN-plus-X model All Asia-Pacific countries
accession encouraged
Relationto regional
Architecture
Affirms principle ofASEAN
Centrality
Not tied to any existingorganization
Scope and coverage ‘WTO-consistent’only – mostly
focussed on tariffs
'WTO Plus' aspirations – 20 non-tariff
issues targeted
Major sponsor ASEAN-led in principle, strongly
backed by China
US-led
Commitment level Lower level of trade liberalization
(~90% tariff elimination)
High level of trade liberalization (~98%
tariff elimination)
Special treatment for
developing economies
Provided; consistent withASEAN-Plus-
One FTAs
None (may provide different schedules
to less developed economies for FTA
implementation)
Mode of agreement Gradual and sequential;
different components negotiated
and implemented under
different time schedules
Include all issues in a
‘single undertaking’
Source : Nurdianto (2017)

16. ASEAN Member Join TPP ASEAN Member Not Join TPP
Singapore Indonesia
Malaysia Philippines
Vietnam Thailand
Brunei Cambodia
Laos
Myanmar
East Asia Member Join TPP East Asia Member Not Join TPP
Japan South Korea
China
RCEP Member (Proposed)
East Asia Countries Non-East Asia Countries
All ASEAN Member India
China Australia
Japan New Zeeland
South Korea
Source : ERIA and author’s compilation

17.  The projection that China will overtake US in 2030 global
trade and the decision of US New Administration to
withdraw from TPP have changed the dynamic game in
global trade.
 This study shows the significance of world trade, FDI
Inflow, as well as intra East Asia trade to East Asia Income
per capita and/or GDP
 This study shows the significance of world trade to East
Asia Income per capita. East Asia members should be
active to sustain economic integration path even in the
current de-globalization trend. East Asia could increase
their intra-trade to compensate the possibility of
stagnancy in world trade after US New Administration and
also British Exit (Brexit).
 RCEP could become the media to strive the balance for
the needs of both developed and developing members of
East Asia. East Asia should sustain the economic integration
to achieve East Asia’s next growth frontier.

18.  The importance of East Asian intra-trade
provides optimism that even with declining
world trade, East Asia could survive in
maintaining the welfare and economic activities
by boosting East Asian intra-trade and
consistently working hard to sustain East Asia
integration.
 Regional Comprehensive Economic Partnership
(RCEP) that has been promoted by ASEAN and
China could become a potential source to
substitute the de-globalization powers and the
possibility of stagnancy in Tans Pacific
Partnership (TPP) after US New Policy.