Thailand’s Participation in Global Value Chain under Changing International Economic Landscape: The Case of RCEP and CPTPP

Abstract

This paper investigates Thailand's position in Global Value Chains (GVCs) and analyzes supply chain linkages in the RCEP, CPTPP and its potential expansion, including India, the United States, the United Kingdom, and China. Employing the GVCs framework, the study addresses data constraints and unveils a moderate increase in Thailand's backward linkage from 1995 to 2018, while its forward linkage remains steady.  The intra-bloc GVC analysis underscores robust supply chain connections within RCEP and CPTPP blocs.  As an ASEAN member, Thailand deepens its GVC participation via the RCEP bloc, and joining CPTPP could fortify Thailand’s global trade linkages position.  Subsequently, VECM results validate the existence of long-term relationships, and VEC Granger Causality results reveal short-term causal relationships within the supply chain of Thailand’s production and its trading partners, based on monthly data from January 2011 to July 2023.  These evidences further ascertain Thailand's supply chain linkages with its trade partners, notably highlighting robust linkages between Thailand and China. Although backward linkages prove resilient across all trading partners, forward linkages suggest unstable supplies of Thai products.  Two policy implications emerge: Thailand's weakened position in GVC and supply chain links underscore the urgent need for Thailand to upgrade its domestic production capabilities, enhancing economic integration especially to attract foreign direct investment and hence, improve the country’s competitiveness. Additionally, taking part in CPTPP trading bloc can be crucial for Thailand to strengthen its GVC participation and moving up the value chain via efficiency and productivity enhancement, especially with the potential inclusion of China in CPTPP.  The dominance of Chinese economy in the region elaborates greater supply chain benefits relative to the US or UK taken into consideration the size of the economy, possibility of technology transfer and catching up, and the geographical location.

 Keywords: GVC, Supply Chain, RCEP, CPTPP, Thailand, VECM

References

Athukorala, P., & Kohpaiboon, A. (2014). Trade Patterns in East Asia: Implications for the Debate on Mega-FTA Initiatives. Thailand and the World Economy, 31(4), 67–94.

Balassa, B. (1965). Trade liberalisation and “revealed” comparative advantage, The Manchester School of Economic and Social Studies, 33(2), 99-123.

Borin, A., & Mancini, M. (2017). Follow the value added: Tracking bilateral relations in global value chains. Retrieved December 3, 2023 from https://mpra.ub.uni-muenchen.de/82692/1/MPRA_paper_82692.pdf

Chang, P.-L., & Nguyen, T. B. P. (2019).  Global value chains and the CPTPP. Retrieved January 3, 2023 from https://ink.library.smu.edu.sg/soe_research/2283

Cheng, D., Wang, X., Xiao, Z., & Yao, W. (2016). How Does the Selection of FTA Partner (s) Matter in the Context of GVCs? The Experience of China (Working Paper).  Retrieved from https://rigvc.uibe.edu.cn/docs/20160329212257271109.pdf

Choi, N. (2019). Deeper regional integration and global value chains (Working Paper No.19-02). Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3700722

Durongkaveroj, W. (2022). Emphasis on domestic value added in export in the era of global value chain: evidence from Thailand. Journal of Industrial and Business Economics, 50(3), 703-729.

González, J. L. (2017). Mapping the participation of ASEAN small-and medium-sized enterprises in global value chains. OECD Trade Policy Papers. Paris: OECD Publishing.

Granger, C. W., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of econometrics, 2(2), 111-120.

Gujarati, D., & Sangeetha, N. (2007). Basic econometrics (4), New Delhi: Tata McGraw-Hill.

Hoang, N. H., & Hoan, T. Q. (2019). Vietnam and the CPTPP: Achievements and Challenges.  Retrieved February 3, 2023 from https://www.iseas.edu.sg/wp-content/uploads/pdfs/ISEAS_Perspective_2019_41.pdf

Hummels, D., Ishii, J., & Yi, K.-M. (2001). The nature and growth of vertical specialization in world trade. Journal of international Economics, 54(1), 75-96.

Ingot, S. R., & Laksani, D. D. (2019). Indonesia Global Value Chain Participation in Regional Comprehensive Economic Partnership (RCEP). Advances in Economics, Business and Management Research, 98, 159-163.

Intarakumnerd, P. (2017). Upgrading in global value chains: the cases of high, mid and low technology sectors in Thailand. Asian Journal of Innovation and Policy, 6(3), 332-353.

Kaplinsky, R., Terheggen, A., & Tijaja, J. (2011). China as a final market: The Gabon timber and Thai cassava value chains. World Development, 39(7), 1177-1190.

Kasikorn Research Center. (2021). CPTPP vs RCEP China’s interest in CPTPP membership. Retrieved February 3, 2023 from https://kasikornresearch.com/en/analysis/k-econ/economy/Pages/CPTPP-z3282.aspx

KKPResearch. (2021). Export turning point when the world starts not paying attention to Thailand (In Thai). Retrieved February 3, 2023 from https://www.kkpfg.com/en/news/2021072064916

Kohpaiboon, A. (2005). Industrialization in Thailand: MNEs and global integration. (Ph.D., Dissertation), Australian National University.

Kohpaiboon, A. (2009). Global integration of Thai automotive industry (ERTC Discussion Paper No.0016). Faculty of economic Thammasat University. Retrieved from https://www.econ.tu.ac.th/uploads/discussion_paper/file/20200805/bchjn0135789.pdf

Kohpaiboon, A. (2015). FTAs and supply chains in the Thai automotive industry. ASEAN and Regional Free Trade Agreements, (pp. 247-273). Routledge.

Kohpaiboon, A. (2019). Services in Thailand and Participation in Global Value Chains. Journal of Southeast Asian Economies, 36(2), 224-243.

Kohpaiboon, A., & Jongwanich, J. (2022). Restrictiveness of RCEP Rules of Origin: Implications for Global Value Chains in East Asia. (ERIA Discussion Paper Series No.455). Retrieved from https://www.eria.org/uploads/media/discussion-papers/FY22/Restrictiveness-of-RCEP-Rules-of-Origins-Implications-for-Global-Value-Chains-in-East-Asia.pdf

Kohpaiboon, A., Kulthanavit, P., Vijitnopparat, P., & Soonthornchawakan, N. (2010). Global recession, labour market adjustment and international production networks: Evidence from the Thai automotive industry. ASEAN Economic Bulletin, 27(1), 98-120.

Koopman, R., Wang, Z., & Wei, S.-J. (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459-494.

Korwatanasakul, U., & Paweenawat, S. W. (2020). Trade, global value chains, and small and medium-sized enterprises in Thailand: A firm-level panel analysis. (Working Paper No.1130). Retrieved from https://www.adb.org/sites/default/files/publication/604661/adbi-wp1130.pdf

Kumar, S. (2020). India’s Position in RCEP Global Value Chain. IOSR Journal of Humanities and Social Science. (12), 24-32.

Kuroiwa, I. (2017). The automotive value chain in Thailand. (Working Paper DP-2016-33). Retrieved from https://www.eria.org/ERIA-DP-2016-33.pdf

Lee, C., & Cheong, I. (2017). Regional contents in exports by major trading blocs in the Asia-Pacific region. Journal of Korea Trade. 21(2), 145-160.

Lu, S. (2019). Regional Comprehensive Economic Partnership (RCEP): Impact on the integration of textile and apparel supply chain in the Asia-Pacific region. Fashion Supply Chain Management in Asia: Concepts, Models, and Cases, (pp.21-41). Singapore: Springer.

Mukherjee, A., & Goyal, T. M. (2016). Integrating South and Southeast Asia through services value chain: The cases of India and Thailand. Asia-Pacific Journal of Rural Development, 26(2), 37-71.

Nagengast, A., & Stehrer, R. (2014). Collateral imbalances in intra-european trade? Accounting for the difference between gross and value added trade balances. (Working Paper 107). Retrieved from https://wiiw.ac.at/collateral-imbalances-in-intra-european-trade-dlp-3468.pdf

Nagengast, A. J., & Stehrer, R. (2016). Accounting for the differences between gross and value added trade balances. The World Economy, 39(9), 1276-1306.

Padilla, M. A. E., Handoyo, R. D., & Sugiharti, L. (2019). Production networks under The ASEAN Plus Six. A good deal or a threat? Entrepreneurship and Sustainability Issues, 7(1), 81-91.

Pananond, P. (2013). Moving along the value chain: Emerging Thai multinationals in globally integrated industries. Asian Business & Management, 12(1), 85-114.

Sucharitakul, C., Wongwaisiriwat, S., Pangsapa, T., Manopiya-anan, W., & Prajongkarn, W. (2018). Weighing up Thailand’s benefits from global value chains. (BIS Papers No.100). Retrieved from https://www.bis.org/publ/bppdf/bispap100_w.pdf

UNCTAD, O. (2013). Implications of global value chains for trade, investment, development and jobs. [Joint report of the OECD, WTO, UNCTAD for G20 Leaders’ Summit]. Retrieved February 3, 2023 from https://unctad.org/system/files/official-document/unctad_oecd_wto_2013d1_en.pdf

Wei, S.-J., & Yu, X. (2021). Semi-inclusive regional economic agreements in the pacific: a perspective from global value chains. China Economic Journal, 14(2), 171-186.

Yang, C. G. (2022). A study on the changes in the ICT industry after the COVID-19 pandemic. Industrial Management and Data Systems, 123(1), 64-78.

Ye, M., Meng, B., & Wei, S.-j. (2015). Measuring smile curves in global value chains. (IDE Discussion Paper No.530). Institute of Developing Economie. Japan External Trade Organization (JETRO). Retrieved from https://www.researchgate.net/publication/303755763_Measuring_Smile_Curves_in_Global_Value_Chains

Zhao, T. (2018). An Empirical Research on Status and Influencing Factors of Global Value Chain Based on GVC Position Index. Proceedings of the 2018 2nd International Conference on Management, Education and Social Science (ICMESS 2018). Atlantis Press.

Zhou, Y., Chen, S., & Chen, M. (2019). Global value chain, regional trade networks and Sino-EU FTA. Structural Change and Economic Dynamics, 50(C), 26-38.