Evaluation of Value Chain Connectedness in the APEC Region

Part 3 of a 4-phase analysis of Value Chain Resilience in the APEC region, this report examines Value Chain Connectedness by using value-added trade data to map the activity of value chains, with particular reference to the Asia-Pacific region and uses sophisticated network analysis techniques to provide a quantitative evaluation of Value Chain Connectedness. This report moves beyond existing work on Connectedness, which adopts a linear, point-to-point approach by using methodology which is firmly grounded in value chain activity as a complex, nonlinear, network phenomenon. Two sets of policy factors are found to have a significant impact on Value Chain Connectedness: trade facilitation and logistics; and behind the border issues, such as contract enforcement. Both sets of policies reduce the cost of doing cross-border business for value chains, and create a trade and investment environment where transactions are efficient, reasonably priced, rapid, and certain. Economies looking to improve their position in terms of Value Chain Connectedness could consider redoubling efforts in areas such as connectivity (which covers trade facilitation and logistics), and Ease of Doing Business (which covers many behind the border issues). APEC’s initiatives in this regard are welcome, and provide the basis for productive work going forward.