Main drivers of regional value chains in CAFTA: Does trade facilitation matter?

In the last decades, economic globalisation and the progress of ICT have promoted the international division of labour and optimisation of the global value chain. Moreover, improvements in incentives such as lower tariffs and more efficient border crossings have boosted international trade. Under this background, regional and sub-regional economic cooperation organizations, such as free trade area (FTA), have been developing rapidly and attracting many academic attentions. As the fastest growing FTA in the world, CAFTA is now the largest FTA in developing countries. This study focuses on the value-added network of various industries in the trade process inside CAFTA, and tries to explore the impact of trade facilitation on the DVA trade network of CAFTA. The results show that in the trade network of CAFTA, the proportion of added value of domestic trade in total exports keeps increasing, and the returned added value (RDV) increases significantly. Singapore, Vietnam, and Thailand hold relatively high positions in the production network, while China has a relatively low position. On the other hand, China and Thailand become the main beneficiaries after the establishment of CAFTA, while Singapore and Malaysia play a lesser role in trading networks. The results also show that trade facilitation has a significant positive effect on the DVA-INTrex and RDV trade networks, indicating that trade facilitation can significantly increase the domestic indirect value added and returned value added in the trade process. Moreover, the business environment (bus) is the most important factor, with efficiency and transparency of border administration (cus), availability, and use of ICTs (ict) contributing to the improvement.