Future of trade agreements in Asia
Globalisation has been one of the resounding economic phenomena of the modern age. Free movement of goods, labour and capital across various geographies has been augmented by agreements and policies that have allowed companies to relocate parts of their production processes and dip into cheap resources in emerging markets. As such the biggest beneficiaries of this era have been emerging market economies. These countries have been able to rapidly cut down on poverty and jumpstart development. Bilateral trade deals, multilateral charters and the prominence of international organisations and financial institutions such as the World Trade Organization, the International Monetary Fund and the World Bank, have been a resounding consequence of this period. However, the world economy is entering a phase of skeptism towards globalisation. This is largely motivated by populist politicians in advanced economies and resentment from the middle class disgruntled over job opportunities and stagflation.
Asia has become one of the most successful regions in the age of hyperglobalisation. World trade increased phenomenally after China's accession to the World Trade Organisation (WTO) in December 2001. According to WTO rules, China cut import tariffs and abolished market restrictions.
Since 2008 and the Global Financial Crisis, global trade growth has moderated. International free-trade agreements (FTAs) have become harder to conclude with rising protectionist sentiment. For its part, China has become embroiled in a number of trade complaints and disputes, though these have not led to major conflicts.
China's rise as a major global economy helped develop external sectors of many smaller Asian nations which supplied the country with resources and technology.
China is now the largest trading partner of most exporting countries in Asia. In 2016, Asia along with Europe and North America, accounted for 88% of global trade according to the WTO. The integrated sub-region of the Association of South East Asian Nations (ASEAN) accounted for 7% of global trade.
Free trade agreements took off in Asia from the early 2000s. According to WTO, 17% of total global regional trade agreement (RTA) are in force in Asia. This is second only to Europe which has 20% of all RTAs in force.
Outlook in Asia
Prospects for FTA and multilateral deals are positive in Asia. With the US turning away from trade liberalisation, China now has the opportunity to set the rules of engagement for south-south trade.
China said it wants to push ahead and promote an Free Trade Area of the Asia-Pacific (FTAAP), to which the 21-member APEC aspires. However, given much of its domestic market remains closed to foreign competition, countries may doubt the depth of China's commitment to trade and investment liberalisation.
To review the full report, please see the attached Future Watch study.