Asian exports and intra-Asia air and ocean trades are forecast to receive a major boost from the ground-breaking World Trade Organization deal agreed to in Bali earlier this month.
“The Asian region will be a key beneficiary of the new WTO Bali Package trade liberalization measures, as IHS forecasts that emerging Asia will the fastest growing region of the world economy over the next two decades,” said Rajiv Biswas, Asia-Pacific Chief Economist at IHS.
The multilateral agreement reached in the first week of December resuscitated the Doha Round of global trade talks that began in 2001. Although it will take some time before the reforms are acted upon by the 160 member states that signed the deal, by cutting red tape they are eventually expected to cut the costs of global trade by 10 to 15 percent, generating an estimated $400 billion to $1 trillion of extra output.
Biswas said Asia’s ever-expanding role in global trade will mean much of the benefits generated will be concentrated in the continent’s emerging economies, which have the most to gain from reformed customs and border procedures.
“Asian economies, many of which are export-driven, presently account for 33 percent of world trade,” he said. “The trade liberalization measures in the Bali Package will therefore have a particularly significant impact in boosting intra-Asian trade as well as trade between Asia and other regions.”
“Asia’s least developed countries will also benefit from the development deal struck in Bali,” Biswas said.
Analysis by the Organization for Economic Cooperation and Development found that the trade facilitation measures in the Bali package would reduce total trade costs by 10 percent in advanced economies, but by 13 to 15.5 percent in developing countries, a definition that covers large swathes of Asia.
The OECD found that harmonizing and simplifying documents would reduce trade costs by 3 percent for low-income countries and by 2.7 percent for lower middle-income countries. Streamlining procedures, meanwhile, would bring further trade cost reductions of 2.8 percent for upper middle-income countries, 2.2 percent for lower middle-income countries and 1 percent for advanced economies. Further benefits would be accrued by automating processing and ensuring the availability of trade-related information.
Africa’s poorest countries are also set to benefit from the new deal. The OECD found that in some African countries, revenue losses from inefficient border procedures exceeded 5 percent of GDP.
Frederic Neumann, an economist at HSBC, said the global trading system was in dire need of the sort of shot in the arm the Bali Package has the potential to deliver. After growing at twice the pace of global GDP for decades, trade has stalled of late, a trend of particular concern in Asia, where exports have been a key foundation for prosperity.
“Globally, trade has rebounded from the dark days of 2009, but it is still below its all-time peak reached the year before,” he said. “In Asia, exports as a share of GDP have fallen even more sharply, with a more muted recovery to boot.”
But, he said, with liberalization moving back onto the agenda, trade should continue to prosper over the coming years. “And that is, quite rightly, a reason to cheer.”
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