ADB says FTAs not cause of trade boom in Asia

Free trade agreements cannot be credited for the increase in intra-Asian trade as they are often restrictive in scope and difficult to implement, the Asian Development Bank (ADB) said today.
Despite the fact that there were 190 FTAs involving at least one Asian country at the last count in January, only a small percentage of the region's exporters and importers are using the agreements, the ADB said.

"There is a misperception about FTAs," head of the the ADB's Office of Regional Economic Integration Iwan Azis said.
"Is this increased trend of intra-Asian trade because of the growing number of FTAs in the region? My short answer is definitely no," he said at the launch of the bank's latest report, Asian Economic Integration Monitor.

Azis said the Manila-based ADB had carried out a survey of how many importers and exporters in Asia were using the FTAs and the percentages were 'very small'.

About 55 per cent of Asia's total trade was done within the region in 2011, up from 45 per cent 10 years ago, he said, adding that the increase was mainly due to 'unilateral liberalisation' by economies.

It was driven by market conditions as Asian countries traded more with each other as the eurozone debt crisis and feeble US economic recovery curbed demand for the region's exports.

Azis, however, said that FTAs in the future can help boost intra-Asian trade if their conflicting provisions are harmonised and implemented.

"Yes, the number of FTAs has been growing but it's becoming a noodle bowl," he said.

The proliferation of FTAs "has created a tangled web of overlapping bilateral and plurilateral trade arrangements," ADB said in its report.

"While these are clear evidence of regional cooperation, they are often restrictive in scope and not all aspects are easy to implement," it said.

"Differences across FTAs such as varying schedules for phasing out tariffs, different rules of origin and exclusion lists, and differences in rules on anti-dumping can limit their effectiveness and weaken efficiency," the report said.

FTAs have proliferated worldwide, including in Asia, after talks under the Doha round of the World Trade Organisation (WTO) collapsed in 2006 largely due to disagreements over farm subsidies.