Asia Pacific Trade Ties Boost Regional Growth

Asia Pacific continues to witness a surge in intra-regional free trade agreements (FTAs), driven by the region’s rapidly growing consumption demand and strong economic performance. Free trade is crucial for the region’s future growth prospects, as it helps to boost trade flows, investment, employment and consumption. However, businesses will face tougher competitive pressures, while countries may benefit disproportionately from free trade deals and become more dependent on external demand.

  • Economic integration among Asia Pacific economies has become stronger since the 2010s, as reflected by a growing number of intra-regional FTAs being concluded and negotiated. This includes major trade negotiations, such as the Trans-Pacific Partnership (TPP) and ASEAN’s (Association of Southeast Asian Nations) Regional Comprehensive Economic Partnership.
  • The surge in regional FTAs has been driven by the region’s strong economic growth, rising disposable income and growing interdependence among regional economies. Asia Pacific is, in fact, the largest export market of its own region, accounting for 51.1% of total goods exports in 2014,up from 49.5% in 2009.
  • Economies in the region will benefit from stronger regional trade ties, owing to growing trade flows and increased investments and employment. Growth in many parts of Asia Pacific remained largely trade-driven, as exports accounted for more than half of total GDP in Singapore, Taiwan and Malaysia.
  • More FTAs will contribute to improve the region’s business environment, while benefiting consumers, thanks to greater consumer choice. The growth of intra-regional trade has also helped Asia Pacific to reduce the region’s reliance on Western demands.
  • Nevertheless, more FTAs will enhance competitive pressures for businesses and can contribute to higher income inequality, as they promote cheaper goods from low-wage countries. Also, there are concerns that countries will benefit disproportionately from FTAs, due to their different economic structures and competitiveness. China continues to dominate regional trade, accounting for 37.5% of the region’s total goods exports in 2014.

To learn more, download Euromonitor internationals free white paper: “An Introduction to Regional FTAs in Australasian Markets: Business Perspectives from India and China.”