Time for Asia to Think Big

Estimated reading time: 3 minutes

Trade was high on the agenda for world leaders at the recent Asia-Pacific Economic Cooperation (APEC) Summit in the Philippines – and the discussion was timely. Asia today has the opportunity to lead the most ambitious push for free trade since the creation of the World Trade Organization 20 years ago.

The Trans-Pacific Partnership (TPP), the ASEAN Economic Community and the Regional Comprehensive Economic Partnership are important efforts to liberalise trade and investment. But these overlapping agreements point to a grander project: one comprehensive agreement to create a free-trade zone spanning the entire Asia-Pacific region.

With global economic growth at its slowest since the financial crisis, there is an urgent need to help businesses by boosting trade. It is not too soon to start gathering support for a region-wide pact, even as we wait for an APEC study into the practical issues that would need to be overcome. Experience shows it will take time to align thinking on what a pact should look like, and more time again to negotiate it.

The best way to understand the potential benefits is to look at the most ambitious agreement underway – the TPP, which is awaiting ratification by its 12 members.

The TPP encompasses 870 million people in a diverse group of 12 Pacific Basin countries that extend from New York to Singapore and from Tokyo to Santiago de Chile. The combined gross domestic product of its members is USD28 trillion, and together they account for more than 25 per cent of global trade.

The core of the deal is a reduction in tariffs, which will allow smoother trade, especially for those countries that are reliant on manufactured goods for export. It also covers 21st century issues such as e-commerce and regulatory reform.

Vietnam will benefit from the implementation of the TPP, with HSBC research pointing to a potential 14.3 per cent gain in the country's GDP by 2025. Its exports of apparel and electronics will receive a boost. And over the long term, its manufacturing sector could become more sophisticated, while state-owned enterprises will be challenged to reform as they face increased competition.

The whole region may benefit from the liberalisation of services under the TPP. Barriers to trade in services have traditionally been high in Asia. Reform could promote development not only through growth in the sector but also through improved quality of inputs from services for use in manufacturing and agriculture.

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