Free Trade Agreements in Asia Pacific Present Opportunities for Economies and Businesses

Asia Pacific has witnessed a surge in free trade agreements (FTAs) since the 2010s, reflecting the region’s greater economic integration. The surge in trade agreements creates many opportunities for economies and business:

• More regional and bilateral agreements on free trade will boost trade flows in the region and support economic growth, as many regional economies remain export-driven. In 2014, exports accounted for more than half of total GDP in Vietnam, Singapore, Thailand, Taiwan and Malaysia.

• A rising interdependence among Asia Pacific economies will also help reduce the region’s reliance on Western demands and mitigate the impacts of slowdowns in the United States and Europe. Asia Pacific has now become the largest export market of its own region as a whole, accounting for 51.1% of total goods exports in 2014, up from 49.5% in 2009. The share of Asia Pacific’s exports to Europe and North Africa to total exports declined gradually from 33.6% in 2009 to 31.2% in 2014.
• The rise of free trade will contribute to improve the business environment in Asia Pacific, as FTAs often require relaxation of trade and other business regulations. This will reduce the cost of doing business and benefit manufacturers and retailers, owing to better entry to markets and products. A difficult business environment remains an issue in some regional economies, such as Indonesia and Pakistan, as reflected by their low rankings in the World Bank’s Ease of Doing Business Index with Indonesia at 114th for and Pakistan at 128th out of 189 countries in 2015, respectively.
• Easier trade flows will enhance investments and production, thus creating more jobs in the region. Foreign investments and employment in Asia Pacific have been negatively affected by the global economic downturn since 2008-2009. In 2014, foreign direct investment (FDI) inflows reached 1.9% of the region’s total GDP, down from 2.3% in 2008. Asia Pacific’s unemployment rate went up slightly from 4.4% of the economically active population in 2008 to 4.9% in 2014.
• Consumers in Asia Pacific will benefit from growing regional trade ties, as goods from other countries in the region will provide them with greater consumer choice, possibly at lower prices.

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