FTAs becoming convoluted — ADB

COOPERATION among Asian economies has strengthened in response to global financial and euro zone debt crises, according to the Asian Development Bank (ADB) but more has to be done to address overlapping free trade agreements and non-trade barriers.

“Regional integration progressed as the 2008-2009 global financial and euro zone debt crises brought greater cooperation to Asia; yet deepening cooperation will likely be more challenging,” noted the ADB in Asian Economic Integration Report released yesterday.

The real estate sector was at the epicenter of the global financial crises in 2008 as consumers defaulted on housing loans. The euro debt crisis followed in 2009.

ADB noted the increase in free trade agreements (FTAs) has been the “greatest” in Asia. Over 100 FTAs have been ratified, involving at least one Asian economy and creating an “Asian noodle bowl” as the Doha talks at the World Trade Organization faltered.

The “profusion of overlapping” FTAs must be addressed, ADB said. “By January 2013, ratified FTAs had more than tripled — 109 from 36 in 2002. There are 148 FTAs at various stages of development, bringing the total to 257,” it noted.

There are two ways to disentangle the FTAs: consolidation, which creates a regional FTA to harmonize bilateral FTAs; and multilateralizaton, which grants nondiscriminatory preferences to nonmembers.

The report also cited the need to tackle non-trade barriers that stand in the way of fuller integration in the region.

“Tariffs have come down but other barriers to trade, such as border administration, are significantly constraining greater integration,” according to a press release tied to the release of the report.

“The impact of regional trade blocs such as the upcoming Trans Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) is still unclear. They could compete or they may provide the building blocks for a global trade agreement.”

The TPP is an expansion of a free trade deal reached in 2005 among Brunei, Chile, New Zealand and Singapore. The four plus the US, Australia, Canada, Malaysia, Mexico, Peru and Vietnam are in negotiations for a bigger agreement.

The RCEP is trade agreement between members of the Association of Southeast Asian Nations and the six countries with which they have FTAs: Japan, China, India, South Korea, Australia and New Zealand,

ADB also noted that even with Asia posting an overall trade service deficit of $61.2 billion in 2011, India and Philippines had a surplus of $12.7 billion and $4.6 billion, respectively, in the same year. However, the surplus is “offset by deficits in transport.”

In 2011, India had a telecommunication, computer and information services (TCIS) surplus of $5.8 billion but a deficit in transport of $39.2 billion. Similarly, the Philippines in the same year had an $8.7 billion TCIS surplus but a transport deficit of$3.6 billion.

India’s TCIS surplus came from telecommunication services, which generated a $59.6 billion surplus in 2001. India is notable for having the second largest telecommunications network in the world and the lowest call tariffs.

ADB noted how India transformed its telecommunications industry in 1990s to “one with up to 74% foreign equity participation.” The low call tariffs are due to liberalization, which then resulted in increased and intense competition.

In the Philippines, 80% of the business process outsourcing players are call centers. ADB said call centers in the country succeeded due to “reliable telecommunications and affordable real estate.” – Kathryn Mae P. Tubadeza, Reporter, Businessworld

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