Asia is the largest and most populated continent on Earth. It currently holds 60% of the world’s population. Today, there are 525 million middle class consumers; by 2030 that number is expected to rise to 3.2 billion, more than 8 times the expected size of the U.S. market at that time. By 2030, some estimate, five of the world’s twenty largest economies will be in Asia. It is time to discover your market in Asia.
The countries of Asia are often included within the broader “Asia-Pacific” region. China is its largest economy, followed by India, Japan, Russia, and South Korea.
This post examines key regional trade agreements (RTAs) that have removed or minimized barriers to trade within the Asia-Pacific region and with various external partners. It is helpful to think of the Asia-Pacific region in the following sub-regions or groupings of trade partners:
Asia-Pacific Economic Cooperation (APEC)
(Australia, Brunei Darussalam, Canada, Chile, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Peru, Philippines, Singapore, Thailand, United States, Republic of China [Taiwan], Hong Kong, People’s Republic of China, Papua New Guinea, Russian Federation, and Vietnam)
APEC is a group of 21 countries that border the Pacific Ocean and which collaborate on improving economic and political ties. The initial goal of creating a free trade area has evolved into a focus on reducing trade barriers and harmonizing domestic regulations. Average tariffs fell from 17% in 1989 to 5.2% in 2012. These efforts are aimed at making it easier for APEC members to do business amongst themselves. The Trans Pacific Partnership (TPP) Agreement is being negotiated by twelve APEC members (identified in bold above). TPP will create the largest free trade area in the Asia-Pacific region.
Asia-Pacific Trade Agreement (APTA)
(Bangladesh, China, India, Republic of Korea, Lao People’s Democratic Republic, Sri Lanka and Mongolia)
The Asia-Pacific Trade Agreement (APTA), formerly called the Bangkok Agreement, is the only trade agreement bringing together China and India. APTA is the first agreement among the region’s developing countries to adopt common procedures for certification and verification of the origin of goods.
Association of Southeast Asian Nations (ASEAN)
(Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar [Burma], and Vietnam)
ASEAN was founded in 1967 to promote active collaboration and mutual assistance on matters of common interest in the economic and other fields. Members have established the ASEAN Free Trade Area (AFTA) and, as a bloc, signed trade agreements with China, India, and other countries in the region.
Commonwealth of Independent States (CIS)
(Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Uzbekistan, Ukraine, Turkmenistan and Georgia)
CIS consists of 12 of the 15 states of the former Soviet Union, both Asian and European. The CIS members have created a customs union and are working to establish an economic union.
South Asian Association for Regional Cooperation (SAARC)
(Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan)
SAARC members have signed an agreement to establish a SAARC Preferential Trading Arrangement (SAPTA). Ongoing negotiations have already removed or reduced tariffs on over 5,000 commodities.
South Asia Free Trade Agreement (SAFTA)
(India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives)
SAFTA comprises the members of SAARC minus Afghanistan. SAFTA creates a framework for the creation of a free trade zone covering 1.6 billion people.
Pacific Islands Forum (PIF)
(Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Republic of the Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu)
PIF provides members with the opportunity to cooperate in areas of political and economic concern. The Framework for Pacific Regionalism lays out a master strategy for strengthening cooperation and integration among the members.
EAST ASIA & WESTERN ASIA
The countries of East Asia are China, Hong Kong, Japan, Macau, Mongolia, North Korea, and South Korea. The Closer Economic Partnership Arrangement (CEPA) (members in bold above) is an economic agreement to promote trade and investment facilitation by eliminating tariffs and other trade barriers on substantially all the trade in goods between the three parties.
(Western or Southwestern Asia is commonly understood to comprise the Middle East, minus Egypt and is not discussed in this post.)
To learn more about how to take advantage of these agreements and discover your market in Asia contact us.
Update: Since this post was written, two major trade agreements have been signed encompassing Asian countries and their major trading partners. Both agreements exclude the United States while one incorporates China:
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): Entering into force in December, 2018, CPTPP comprises the signatories to the Trans-Pacific Partnership (TPP) Agreement minus the United States, which under the Trump Administration withdrew from the Agreement. Its eleven members went on to negotiate an updated agreement.
Regional Comprehensive Economic Partnership (RCEP): In November, 2020, fifteen countries, comprising the ten members of the Association of Southeast Asian Nations (ASEAN) and Australia, China, Japan, New Zealand, and South Korea signed the agreement, committing to build what is being dubbed the world’s largest trade bloc. Among other goals, parts from any member nation would be treated equally, creating an incentive for companies in RCEP countries to source supplies within the trade trade bloc.
This post was co-authored with Nara Alvares.