Meanwhile, intra-regional investment is growing, spurred on by regional integration. Increased Asian trade integration has often been preached as a means of bolstering exports and offsetting import reductions in a region where growth has been primarily export-driven; this explains the region’s theoretical enthusiasm for free trade. But practical efforts have been stymied by a few factors – namely Asian countries compete directly with each other in several key commodity markets and, despite a recent rise in intra-regional trade, historically Asian countries have had stronger trade links with developed countries than with each other.
The Asia-Pacific Economic Co-operation forum (APEC), formed a decade and a half ago, was perhaps the first move in the direct of regional integration. At an APEC ministerial meeting in Bogor, Indonesia, in 1994, the goal of achieving free and open trade and investment throughout the region was expressed and targets were set. Developed countries were to meet a 2010 deadline and developing countries 2020 – both of which are unlikely to be met.
At a November 2004 meeting in Santiago, Chile, APEC ministers endorsed a three-stage initiative to strengthen the role of regional trade agreements (RTAs) and free trade agreements (FTAs) in the APEC process. This initiative includes an overall APEC policy response, a set of clear transparency measures and a capacity building programme. It is intended to achieve high-standard FTA/RTA agreements in the region, and to ensure that these agreements contribute to achieving the APEC Bogor Goals and are consistent with the World Trade Organization.
To enhance transparency, APEC ministers have also approved a new reporting template to enable member countries to share information about their trade agreements beginning in 2005. APEC members have already concluded 40 FTAs and are negotiating 34 more.
However, there have recently been concerns that, post-9/11, the US has turned APEC into more of a security forum than an economic one, and annual APEC meetings increasingly seem to have become venues for bilateral rather than multilateral discussions, further clouding APEC’s purpose and direction.
Meanwhile, the Association of Southeast Asian Nations (ASEAN) set up its own free trade area a year ago. From the beginning of 2003, the six founding members (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) reduced their tariffs on one another’s goods to a maximum of 5%. The four newer members (Cambodia, Laos, Myanmar and Vietnam) are due to be further integrated into the free trade area, AFTA, and non-tariff barriers will be addressed and its scope expanded to new areas such as investment.
ASEAN leaders have pledged to create an economic community by 2020 to sit alongside security and socio-cultural communities. At a summit in Laos in November 2004, ASEAN reached a deal with China that will lead to the creation of the world’s largest free trade zone in addition to one with India. FTAs with Japan and South Korea are also in the pipeline.
Elsewhere in the region, efforts to encourage integration in south Asia began in 1985 with the creation of the South Asian Association for Regional Co-operation, comprising India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan and the Maldives.
A much-anticipated South Asian Free Trade Area is due to come into effect at the start of 2006, albeit five years behind schedule. This has led to hopes of a south Asian economic union and common currency – but these are unlikely to be realised unless substantial progress is made in addressing the region’s geopolitical tensions.