Smile Curve and Its Linkages with Global Value Chains: A Sectoral Level Analysis

The goal of this paper is to shed light on how important the smile curve notion is at the sectoral level. In particular, we focus on how value added has shifted along the value chain when it comes to Asian exports. The idea and reasoning behind the "smile curve" in relation to global value chains have gained traction recently and have been examined at the level of individual firms. However, they are rarely recognized and examined at the sectoral level utilizing actual data for cross-national analysis. Using TIVA database for 2001 and 2011 time period, several conceptual value chain are investigated including exports of Base Metals, Computer Electronics, Electrical Machinery and Transportation equipment’s in Asian Economies. This paper focuses an idea to measure both the strength and linkages between producers and consumers of global value chain. The identified smile curve provides a very intuitive understanding of the roles played by different countries in various sectors and helps in identifying the benefits gained by them through their participation in global trade. ASEAN’s economic dynamism is expected to benefit from RCEP that will provide a platform for broader economic integration and help address concerns about the ‘noodle bowl’ effect of overlapping bilateral and regional agreements. RCEP will deliver tangible benefits through potential improvements in market access, more coherent trade facilitation, regulatory rules, reforming barriers and cooperation. The flying-geese (FG) theory of growth is in line with the dynamics of structural upgrading and interaction growth through trade and investment within a hierarchy of nations. The function of the Regional Comprehensive Economic Partnership in enhancing economic integration is also emphasized in the report.