Higher savings lead to higher investment in physical capital, that in turn drive productivity of an economy and ultimately bring about growth.
Share of manufacturing in GDP and employment indicates the extent of industrialisation an economy. In growth economy, society evolves from a primary agricultural/fishery (using muscle) to industrial society (using machines) for production as to increase productivity
Human Development Index denotes the upgrading and improvement of labor skill sets to enhance worker productivity. Technically, it consists 3 components: capital income, life expectancy and education attainment level.
Question:
Introduction
The development of the Asian countries is majorly accredited to the regional trade agreements that exist among the developing countries of Asia. The Asian countries constitute half of the production and consumption market of the world and the regional trade agreements play a crucial role in achieving economic growth and stability of the region. The participant countries have majorly benefitted from the regional trade agreements in the field of economic relations, development, trade, services, investment, industry and overall social welfare.
Types of trade agreements
Regional trade agreements are reciprocal formal trade agreements or relationship between two or than two countries. Various types of trade agreements exist in the international economy depending on the level of cooperation among the partners, such as, Free Trade Agreement (FTA), Preferential Trade Agreements (PTA), Regional trade Agreements (RTA), Custom unions, Common markets etc. Under FTA, the member nations agree to eliminate or decrease tariffs and non tariff barriers to increase trade volume. Under PTA, the members agree to reduce the tariffs on the agreed number of the tariff lines or list. RTA is a type of PTA which mainly focuses on a particular region. The biggest example of common market is the single market for EU. This is a single market that offers products to member countries at a lower rate. Custom Union is a trade bloc, composed of free trade area and a common external tariff. Participant nations establish common policy for external trade.
Asia-Pacific Trade Agreement (APTA)
Asia-Pacific Trade Agreement (APTA) is one of the most important regional trade agreements of the region. It was previously known as Bangkok Agreement during its launch in 1975. In 2005, it was renamed to Asia-Pacific Trade Agreement (APTA). This is the oldest regional trade agreement of the Asia-Pacific region. Seven developing countries of Asia, namely, China, India, Bangladesh, Sri Lanka, Lao PDR, the Republic of Korea and Mongolia are the participant members of this agreement. The APTA pact covers the market for around 2921.2 million people of the Asia-Pacific region and in the fiscal year of 2015-16, the market contributed around USD 14615.86 billion of GDP.
Features of APTA
The Asia Pacific Trade Agreement has gone a long way from the time of its inception.In 1975, seven developing countries of the Asia Pacific region met in Bangkok under the Trade Negotiation Group, convened by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) to agree on a list of items for reduction of tariffs. The first agreement was known as the Bangkok agreement and signed by five countries, India, Sri Lanka, Bangladesh, Republic of Korea and Lao PDR. China joined the pact in 2001 and Mongolia became a member in 2013. All these countries listed a total of more than 10,000 products eligible for tariff concessions over the years. In November 2005, the pact adopted its current name. The objective of this agreement was to promote the economic development of the developing countries of ESCAP through a continuous course of expansion of trade, economic cooperation and integration for mutually beneficial measures for trade needs and development.
The major purpose of establishing the Asia-Pacific Trade Agreement (APTA) is to set up a preferential tariff arrangement among the countries for promoting the intra-regional trade by exchanging the reciprocally agreed concessions. The member countries of this agreement attributes to 11% of the total international trade of the world. It is seen that this agreement has encouraged the growth of trade among the participating countries, for example, 30% of the total imports of Bangladesh comes from the other members of this pact. On the other hand, 23% of the total exports of the Republic of Korea go to the other member countries and the total volume of the bilateral trade from the Asia-Pacific Trade Agreement (APTA) countries has increased massively, from 140 million dollars in 1976 to 3.1 trillion dollars in 2009-10. The average annual growth rate of the bilateral trade between India and China has increased by 34% in the past decade. Initially, six developing countries of the Asia Pacific region joined the pact and in 2013, Mongolia joined the pact.
The primary features of this agreement lies in the terms of negotiations, comprising of framework agreement and exchange of tariff concessions. In October 2007, the exchange of the tariff concessions expanded for 11,000 products in the fourth round of council, as compared to only 4,270 products under the third round in 2006. The focus was on broadening the range of preferences for at least 50% of the total tariff lines of each of the participating countries and at least 20-25% of the total value of the bilateral trade happening between the countries. The framework agreement focuses on strengthening the integration and trade cooperation among the developing countries of that region. The other features are as followed:
The agreement is open to all the member countries of United Nations ESCAP (Economic and Social Commission for Asia and the Pacific) and it is a region wide trade agreement covering the East Asia and South Asia along with the potential of expanding in other sub regions, such as, the Pacific and the Central Asia.
It is the single operational agreement between the two major emerging economies of Asia, India and China, involving 2.6 billion of people.
It is the longest effective trade agreement in the Asia-Pacific region.
It is the first multilateral trade agreement to be established among the developing countries of the Asia-Pacific region.
Differential and special treatment for the countries that have special needs, such as, the LDCs.
Offering greater opportunities for South-South trade because of the large size of the emerging economies of this region.
Negotiations started to focus on the services, trade facilitation, investment, products and the non-tariff barriers among the countries from 2017.
Impact of APTA on the participating countries
APTA works as the bridge to other RTAs with direct access to the markets for the APTA members and indirect integration with the other type of trade agreements. The share of total amount of intra-regional APTA exports in the total exports to the world increased from 10.97% in 2005 to 11.2% in 2013. The total volume of intra-APTA exports increased from $127 billion in 2005 to $351 billion in 2013, which is an increase of 175%. This indicates a huge growth of the export market of the developing member nations. All the nations have experienced a major growth in their domestic and international market and that contributed in the growth of their economies. That has led to the generation of money within the economy, which in turn has pushed up the aggregate demand and the production. The producers of these nations have become more competitive over the years. As the level of production and trade of the entire international economy has increased over the past few decades, the share of the APTA members increased too. From 2005 to 2013, Lao PDR has shown the maximum level of improvement in terms of production and export. The intra-APTA export of Lao PDR was only $25.22 million in 2005, 3.47% of the exports to the world, while it increased to $1,043.04 million in 2013, 26.17% of the total exports to the world.
The trade agreement has been majorly beneficial to the developing countries as the exchange of trade concessions has enabled them to engage in bilateral and multilateral trade at a reduced tariff for some of the items. This step has made the products more competitive and cheaper within the member countries, which has helped in more volume of trade, leading to more inflow of foreign cash into the economy. The liberalization policies are mutually beneficial and give a preference to the origin of the products. Based on the origin, the rates of concessions are applied on the products. Along with that, there is non-tariff measures based on the developmental objectives and needs of the member countries. There are also special concessions for the Least Developed Country participating nations, which are applicable while trading with the LDC members of the ESCAP. After the fourth round of council, the outcomes were seen in the widening of the tariff concessions. 10,677 products earned 31% Margin of Preference (MOP) in general, and 1259 items with 86% of OPEC for the LDCs. It aims to cover at least 29% of the total share of the intra-regional trade volume. The council also created access for additional markets after the fourth round. For China, Republic of Korea, India and Sri Lanka, the number of products under concession and the additional market for the imports of APTA have increased considerably. The rate of increase is huge for India at 98%.
The APTA countries want to want to increase the MOP from 31% to 50% in round 5 of the negotiations. The paperless measures, such as, E-CO, that is, electronic certificate of origin are helpful in addressing cross border issues of documentation.
However, there are some criticisms for APTA, which focuses on the other side of the benefits. According to Kelegama (2014), the development of the member countries of the Asia-Pacific Trade Agreement cannot be accredited to only the benefits from the agreement. There are many other factors and trade deals with other nations that have contributed in the development of those countries. The economic growth of the two major emerging economies of the Asia-Pacific region, India and China, are dependent on the GDP and trade with other countries. As highlighted by Reyes, Wooster and Shirrell (2014), the massive amount of domestic production and trade deals with the USA, UK, Australia, New Zealand and other European and Latin American countries have shaped the growth of the economies of India and China. The inflow of foreign capital has increased significantly and as the level of income of the people has increased, the aggregate demand and production have increased too.
Berger (2013) states that there is also Asia-Pacific Economic Cooperation (APEC) which has more countries than APTA, has members such as, USA, Japan, Vietnam, Russia, Philippines, Indonesia, Australia, Thailand, Canada, Malaysia, Hong Kong, New Zealand, Mexico, Chile, Peru, Singapore and Brunei apart from China and South Korea, work together for the development of the Asia Pacific region. They focus not only on trade, but also on over economic and social development, investment, employment opportunities, increasing income for people and increasing production. Thus, there are sources of support for the developing members of ESCAP other than APTA that work towards achieving the economic growth of the developing countries of the Asia Pacific region.
Conclusion
The Asia-Pacific Trade Agreement has contributed considerably in the growth of the member countries. The policies for trade liberalization, trade concessions and increase in the additional markets have led to immense growth in the production and trade level of the member countries of the APTA. Over the years, as there is expansion of bilateral and multilateral trade in the international economy, the development of the developing and emerging markets of the Asia Pacific region has been achieved with a support from the APTA. Although, there are many views that the growth of those economies cannot be accredited only to the policies of the agreement, there are other trade agreements and partnerships that also push the growth of those developing countries.
References
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