Asian economies face important policy challenges regarding the use of free trade agreements (FTAs): primarily their scope and their impact on regionalization trends. These topics are the front line of contemporary negotiations and of interest to policymakers. This column examines these challenges based on new data on the business impacts of FTAs and contents of existing FTAs. It also discusses political economy considerations of FTA consolidation in Asia and its potential connection with North America and Europe. Asia’s rise as the “global factory” over the past several decades was underpinned by outward-oriented development strategies and multilateralism. FTAs, as trade-policy instruments in the region, were largely absent until the 1990s. [Read more]
Since the People’s Republic of China (PRC) surpassed Japan as the world’s second largest economy in 2010, guessing when the PRC would eclipse the United States (US) as the world’s largest economy has been an exciting game among PRC watchers. On 10 February came the surprising news that the PRC had surpassed the US to become the world’s No. 1 trading nation, after both countries officially announced their 2012 trade figures. According to the US Department of Commerce, total US trade in 2012 amounted to $3.82 trillion, about $50 billion short of the PRC’s exports and imports of $3.87 trillion, estimated by China Customs. [Read more]
Slowing growth and rising unemployment sometimes induce economies to become more inward-oriented with restrictive policies. Indonesia shows early signs of such tendencies and its future growth may be at risk. The experience of high performing East Asian economies, however, suggests that outward-oriented policies and infrastructure investment support sustainable growth. Indonesia’s growth slowed to 6.2% in 2012 from 6.5% in 2011. Its growth in the previous decade was below 6%. A slight dip notwithstanding, a turnaround seems to be continuing in this resource-rich economy once seen by the West as a basket case of crony capitalism during the 1997–1998 Asian financial crisis. [Read more]
The pattern of world energy trade has changed significantly in recent decades and this is having profound implications for global geopolitics. Several Asian economies, particularly the People’s Republic of China (PRC) and India, have emerged as the region’s most conspicuous energy consumers because of their phenomenal economic growth. On the supply side, the world’s largest energy producers are located in the geographically proximate regions of Central Asia, the Middle East, and Russia. A complementary relationship between these energy exporters and suppliers is evident and is being strengthened, connecting together Central and East Asia, parts of India, the Persian Gulf, and Russia. [Read more]
East Asia’s attitude toward free trade agreements (FTAs) has changed. Slow progress in global trade talks has led to a surge in FTAs across Asia. With the World Trade Organization (WTO) Doha Round trade talks stalled, Asian countries see FTAs as a way of liberalizing trade and investment and sustaining economic recovery. The number of signed and implemented FTAs in the region has increased from three in 2000 to more than 60 in 2012, sparking concerns about an Asian “noodle bowl” of agreements. Critics worry about overlapping rules of origin (ROOs) requirements, which may be costly to business, especially small and medium-sized enterprises (SMEs), and argue that this wave of agreements will undermine the multilateral liberalisation process. [Read more]
The formation of a Free Trade Area of the Asia–Pacific (FTAAP) has been intensively discussed in recent years. However, it is anticipated that such an Asia-Pacific Economic Cooperation (APEC)-wide FTA would take many years to negotiate and involve numerous studies among all the APEC members, currently 21 in number. The Trans-Pacific Partnership (TPP) could be a viable alternative. It is intended to be a “high-quality, comprehensive 21st century FTA” that will promote economic integration in the Asia-Pacific region. In addition to deep commitments to tariff reductions, it aims to cover services trade, investment, intellectual property, government procurement, competition policy, labor, the environment, and many other issues affecting trade and investment. [Read more]
East Asia’s substantially market-led economic integration is a very complex process and is leading to some surprising effects. One example is that of Australia’s booming trade and investment with the People’s Republic of China (PRC), which is pushing up the value of the Australian dollar, and consequently enticing Australian companies to outsource business processing services to the Philippines. Over the past decade, Australia has enjoyed one of the best economic performances of any OECD country. While many structural reforms over the past few decades and sound macroeconomic management have underpinned this, Australia’s closer relationship with the PRC has also played a major role. [Read more]
On 11 December 2011 the People’s Republic of China (PRC) marked the 10th anniversary of its entry into the World Trade Organization. The PRC’s trade statistics over the past decade have been impressive: despite the fragile global recovery, its exports surged 31% to reach $1.6 trillion in 2010, more than six times the value in 2000. For the first time, the PRC overtook Germany to become the world’s largest exporter. The PRC’s high-tech exports were valued at $490 billion and accounted for 31% of its total exports in 2010. A report from European Commission in 2009 concluded that the PRC had surpassed the United States, Japan and the 27 states of the European Union to emerge as the world’s largest high-tech exporter. According to statistics from the US Department of Commerce, in 2010 the PRC even ran a $94 billion surplus in advanced technology products to the US, an undisputed world leader in technology innovation. [Read more]
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