24/04/2024

For Asian regions, FTAs are game changers for expanding trade liberalisation through managing the global supply chain and cost burden for import-export. Apart from relaxing tariffs, it offers viable solutions to resolve behind-the-border barriers like temporary trade restrictions, goods shortages, and port closures. So, leveraging Free Trade Agreements FTAs across Asian boundaries ensures the smooth distribution of goods and services and attracts global investments. 

Growing economic prosperity and globalisation have led to growing FTAs like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), started in 2017, connecting Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Although the USA dropped out of this agreement, it was still one of the largest global FTAs, bringing members a global GDP of 13.5 to 14.5% with uplifting trade barriers. Another significant FTA is the Regional Comprehensive Economic Partnership (RCEP), which started back in 2012 to establish economic integration. RCEP brings together 15 countries for liberal trading, including Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand, and the Republic of Korea. This positively minimises the development gap, strengthens economic ties, and promotes trade. With 30% of the world’s GDP contributing, it is one of the largest free trade agreements.

Following the positive long-term impact, one of the recent FTAs that brought the USA and other countries together is the Indo-Pacific Economic Framework (IPEF), which enlarges overall economic integration. It connects the nations of Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. Unlike other FTAs, this agreement covers measures for supply chain security, the digital economy, clean energy, and anti-corruption measures. It favours Asian countries to avoid choosing between the USA and China and to act independently. 

Free Trade Agreements strengthen underdeveloped economies, enabling them to gain the advantage of imports and exports and increase their GDP growth. With this rise in international trading, companies are expanding with FTAs, saving costs through reduced tariffs for qualified goods, allowing sourcing imports between countries, transparent and standard rules, expanded export market, and access to new consumers in the global market. 

Thriving technologies like automation also contribute to source decisions, obtaining supplier & customer certificates, and performing BOM analysis. Supply chain and trade compliance officers are utilising global trade management software to access and manage FTA qualifications. 

In the past decades, there has been a spontaneous surge in the number of FTAs, ranging from 2 or 3 to 5o to 80, with the emerging requirement of eliminating overlapping rules and encouraging small- and medium-sized enterprises (SMEs). Trade liberalisation has deep historical roots, and the wave of agreements helps Asian countries to expand their GDPs. The positive impacts of FTAs on the business leverage the condition of resolving trade disputes and lead to the chance to explore policy implications. According to the World Trade Organization (WTO), a study conducted by the Asian Development Bank (ADB) on the firm level reveals that around 28% of firms use FTA preferences for their goods exports, and nearly 53% plan to execute the same.

Overall, this highlights the key possibilities that the market unlocks for firms, such as cost benefits, preferential market accessibility, and tariff relaxation on imports, and aims to build a better trading ecosystem. 

The pace of globalisation redefines the trade market and makes it more competitive with better accessibility and technologies.

Compliance officers and tax officials are using monitoring software and tools to ensure smooth navigation and no illegal transactions underlying the use of FTAs. Also, it unlocks the potential for technology transfers among firms to level up the international market standard of technological upgradation by replacing tariffs, quotas, subsidies, and prohibitions. However, the constraints affecting Asia’s FTAs are geopolitical risks that might challenge countries’ trade and international movement of goods and services. With the changing economic gravity, top giants will focus more on reducing behind-the-border barriers, which will lead to more domestic reforms.

Source:Tradeflock