The Sunday Leader

Six Asian free trade agreements: A brief overview of performance

Asia has seen a surge in the number of trade agreements within the region over the last one and a half decades. Economic analysts have some key observations on how some of these Asian free trade agreements have performed during the last several years in terms of trade flows, markets, productivity, and employment and foreign exchange earnings, according to a compilation by the Ministry of Development Strategies and International Trade, ahead of the launch of Sri Lanka’s National Export Strategy.

1. ASEAN-China Free Trade Area – July 2005

Over the past decade, trade and investment between ASEAN member states and China have expanded significantly under the ambit of the ASEAN China Free Trade Area (ACFTA). Under the agreement, the six original ASEAN members and China decided to eliminate tariffs on 90% of their products by 2010, while Cambodia, Lao PDR, Myanmar, and Vietnam – commonly known as CLMV countries, had until 2015 to do so. Since the signing of the agreement, China has consistently maintained its position as ASEAN’s largest trading partner.

In 2015, ASEAN’s total merchandise trade with China reached US$346.5 billion, accounting for 15.2 % of ASEAN’s total trade. Additionally, ASEAN received US$8.2 billion in foreign direct investment (FDI) from China in 2015, placing China as ASEAN’s fourth largest source of FDI. By 2020, ASEAN and China are committed to achieving a joint target of US$1 trillion in trade and US$150 billion in investment through ACFTA.

2. ASEAN-India Free Trade Area – 1 January 2010

The ASEAN-India Trade in Goods Agreement came into force on January 1, 2010. The signing of the agreement paved the way for the creation of one of the world’s largest free trade area markets, creating opportunities for over 1.9 billion people in ASEAN and India with a combined GDP of US$4.8 trillion. AIFTA creates a more liberal, facilitative market access, and investment regime among the member countries. The agreement set tariff liberalisation of over 90% of products traded between the two dynamic regions. Accordingly, the tariffs on over 4,000 product lines were agreed to be eliminated by 2016, at the earliest.

3. China-Singapore Free Trade Agreement (CSFTA) – 1 January 2009

Tariff elimination for about 95% of Singapore’s exports to China from 1 January 2010 ensures tariff free importing for most products. More than 85% of Singapore’s exports to China have enjoyed zero-tariff rates since 1 January 2009 and an additional 10% have been duty-free since 1 January 2010. According to the statistics of Singapore, in January-June 2013, China-Singapore bilateral trade totaled US$ 42.45 billion with a year-on-year growth of 6.1%, of which, US$ 21.61 billion was export to China and US$ 20.85 billion was import from China, up by 3.2% and 9.2% year-on-year respectively, with a trade surplus of US$ 760 million, down by 58.6%.

China is Singapore’s third largest export market and the largest source of imports. Singapore exports to China are mainly such products as machinery and electronic products (53.1%), mineral products (13.6%), chemical products (10.3%) and plastics and rubber (9.4%).

Singapore imports from China are mainly machinery and electronic products (60.2%) as well as mineral products, base metals and chemical products. Singapore’s FTAs have been instrumental in helping Singapore-based businesses to strengthen cross-border trade by eliminating or reducing import tariff rates, providing preferential access to services sectors, easing investment rules, improving intellectual property regulations, and opening government procurement opportunities.

4. Japan-Singapore Economic Partnership Agreement (JSEPA) – 30 November 2002

The Japanese market has always been a tough case for foreign exporters and firms with its numerous barriers; tariff and non-tariff trade barriers, as well as institutional, cultural barriers, etc. As such, the liberalisation measures brought about by this bilateral FTA are expected to have a significant positive impact on both export and import flows between the two countries.

Since Singapore is a country with relatively few trade barriers in place and Japan is taking on more of the trade barrier reductions in this FTA agreement, Singapore’s exports to Japan are expected to be more affected by the implementation of this FTA. This agreement led to an increase in Japan’s zero-tariff commitments from 34% of total tariff lines under the World Trade Organization (“WTO”) to 77% (Singapore FTA Network).

In particular, tariffs were removed from 98.5% of Japan-Singapore trade in goods from an initial level of 65%. It was also termed “new age partnership agreement as it further included issues like regulatory reforms, cooperation in science and technology, media and broadcasting, electronic commerce, human resource development, promotion of SMEs in both countries and collaboration on education and training. Singaporean exporters expected to gain the most from this FTA are those of chemicals and petroleum, electrical and electronic products, plastic goods, pharmaceuticals, instrumentation gear, transport equipment and fabricated metal products (Business Times Singapore English, 2007).

The liberalisation following the JSEPA was also significant in the service sector with Japan expanding its commitments from 103 services sectors under WTO to 135 (Singapore FTA Network). Regarding the impact on income elasticity, the hypothesis of an increase in income elasticity of demand for both exports and imports is expected to hold true here since the removal of trade barriers via this bilateral FTA will enable a more timely response by both to variations in income.

For Singapore’s exports to Japan, the JSEPA is predicted to have a reinforcing effect on the price elasticity of demand based on the assumption that the trade liberalisation measures will increase the responsiveness of export demand to variations in prices.

5. U.S.-Singapore Free Trade Agreement – 1 January, 2004

It was the first U.S. FTA signed with an Asian nation and the first FTA signed by President George W. Bush. The FTA resulted in immediate zero tariffs on all U.S. products. Overall Trade in Goods between the United States and Singapore was $35.7 billion in 2005, an increase of 2.24% over 2004. Trade in 2004, the first full year of implementation, was $34.9 billion, an increase of 10.3% over 2003’s trade of $31.6 billion. U.S. exports to Singapore grew to $20.6 billion in 2005 compared to $19.6 billion in 2004, a 5.3% increase.

U.S. exports to Singapore in 2004 increased 18.8% over 2003’s $16.5 billion. U.S. imports from Singapore decreased to $15.1 billion in 2005 from $15.3 billion in 2004, a 1.6% decrease. U.S. imports in 2003, prior to the FTA implementation, were $15.1 billion.

The U.S. trade surplus with Singapore tripled during the first year of FTA implementation, reaching $4.3 billion in 2004, and $5.5 billion in 2005. In 2005, Singapore was our 11th largest trading partner (exports and imports combined). Singapore ranks 2nd on the World Bank Group’s Index on ‘Ease of Doing Business in 2006’, one position above the United States and just below New Zealand.

6. The Vietnam-South Korea Free Trade Agreement – December 20th, 2015.

Le An Hai, deputy head of the Ministry of Industry and Trade’s Asia-Pacific Market Department, said bilateral trade between the two countries had soared 87-fold, from $500 million in 1992, to $43.4 billion last year. Last year, South Korea was the third largest trade partner (after Hong Kong and mainland China) and the fourth largest export market for Vietnam, according to the General Department of Customs. There are 6,130 FDI projects from South Korea in Viet Nam, with total registered capital of $54 billion, according to the ministry.

In addition, the free trade agreement (FTA) between Vietnam and the Republic of Korea (VKFTA), which took effect in 2015, reduced more than 90% of tariffs in a bid to increase Vietnamese exports to the country, according to Hai.

The FTA has created new export opportunities for more than 500 Vietnamese products, especially agro-forestry and aquatic products such as shrimp, crab and fish.

Comments are closed

Photo Gallery

Log in | Designed by Gabfire themes, pub-1795470547300847, DIRECT, f08c47fec0942fa0