Policies promoting decarbonization strengthen ASEAN’s GVCs’ competitiveness

Association of Southeast Asian Nations (ASEAN) economies need to implement policies promoting decarbonization to strengthen its global value chains’ (GVCs) long-term competitiveness and resilience as they go “green”, according to a report released by the Asian Development Bank (ADB).

“This involves a careful balancing act—maximizing potential benefits of ASEAN GVCs and RVCs (regional value chains) while minimizing the risks and costs of decarbonization,” said the report, ASEAN and Global Value Chains: Locking in Resilience and Sustainability.

The report said policies that help offset the costs —reducing the impact of other components in trade costs— include adopting climate-smart non-tariff measures and low or zero tariffs on climate-smart goods and accelerating trade digitalization.

It also cited adopting climate-smart trade and transport infrastructure; and preparing for carbon pricing, including carbon border tax adjustments (CBTAs).

Border tax adjustments address carbon leakage which occurs when high-emission production moves to countries with less-stringent carbon policies, it said.

“These (CBTAs) also address producers’ concerns over losing competitiveness if domestic carbon pricing is higher than those of overseas competitors. The proposed European Union Carbon Border Adjustment Mechanism is the most advanced CBTA and is set to be in
effect in 2024,” it added.

Aside from decarbonizing GVCs, the ADB report said resilience also means securing the resource base through human skills development and making available technology more inclusive.

It said human skills development requires comprehensive labor market policies and institutions supported by strong social dialogue —between governments and organizations representing employers and workers.

“It is critical to have a strategy that can help transform these relationships, using employment and social protection policies that reduce gender inequality, make the labor market more inclusive, and invest across a broad range of skills development—to allow workers to move into higher value-added jobs within the value chain. Deep trade agreements with labor provisions can help strengthen the link between increased GVC participation and decent work,” it added.

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