Siow Yue Chia,  Singapore Institute for International Affairs: The paper discusses the theoretical reasons for trade hub formation and the evolution of trade hubs in East Asia, specifically the trends and economic implications of the China-Japan twin-hub pattern with a rising China and a declining Japan. The likely effect of the integrated ASEAN Economic Community (AEC) on the trade hubs in East Asia is also discussed.

Major findings of the paper are as follows:

First, the paper reconfirms the existence of the Japan-China twin-hub pattern in East Asia as addressed in Baldwin (2004). However, it was not driven by free trade agreements (FTAs), as postulated by Baldwin, but global and regional production networks and value chains (GPN and GVC), with private companies establishing production sites in the various countries driven by differential costs rather than FTA tariff preferences. Also, the twin-hub pattern appeared much earlier, in the early...

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