Global free trade should result in commodity price
equalization across countries over the long term. Any price differences can
largely be explained only by the costs of shipping, insurance, and trade
administration.
Since full global free trade is not taking place yet and
it is the regional free trade agreements (FTAs) that are predominant,
countries’ exports and imports are diverted more to their neighbors or nearby
economies in the FTAs. The gravity model of trade captures this preferential
shift in trade.
The emergence of the ASEAN FTA (AFTA) with a generally
zero tariff regime, ASEAN + 6 trade partners, and soon the Regional
Comprehensive Economic Partnership (RCEP), resulted in Asian economies trading
more with each other. The same for Europe with their European Union (EU) and
the US and neighbors with their North American FTA (NAFTA).
Some notable points from these numbers (see table).
One, China is the only Asian country with a declining
percentage share of trade going to Asia, Europe, and Americas. This is because
it expanded its exports to and imports from the Middle East, Africa, South
America, Oceania, and the rest of the world. China is reaching out to all
continents of the planet, which partly explains its huge growth in exports.
Two, Vietnam also experienced a decline in percentage share
of exports going to Asia and Europe as it exported more to North and Central
America, and there was a slight increase in percentage share going to Middle
East and South America.
Three, Australia and New Zealand have become
Asia-oriented in their trade performance as well, resulting in a drop in
percentage share of their exports that went to Europe and North and Central
America.
Four, the Philippines continued to pivot its trade from
the US to Asia. The hangover of US colonialism and preferential market access
has naturally waned through time.
Five, in terms of international reserves, everyone on the
list showed significant increases ranging from one and a half times to more
than four times expansion in just one decade -- except Australia which showed only
marginal increase. It is the Philippines which experienced the biggest
expansion of 4.4 times in just one decade.
The experience of the Philippines and other Asian
economies in trade and business expansion will be discussed in the “Pilipinas
Conference 2016” organized by Stratbase-Albert del Rosario Institute (ADRi) on
Dec. 8.
Panel 4 will discuss “The Philippine footprint in
Southeast Asia and Beyond” and the speakers will be Chairmen and CEOs of some
of the Philippines’ biggest firms like Manny V. Pangilinan of Metro Pacific
Investments Corp., Jaime Augusto Zobel de Ayala of Ayala Corp., Enrique Razon,
Jr. of International Container Terminal Services, Inc., and Joey Concepcion of
RFM Corp. and Go Negosyo.
Political and military tensions in the region and other
parts of the world mainly due to territorial disputes can be resolved
peacefully as people and private enterprises do more trade and investments with
each other. After all, countries and governments do not really engage in trade;
people do.
Governments should continue to liberalize trade, both
tariff and non-tariff measures. They should continue to liberalize investments
by abolishing or drastically cutting restrictions due to nationality and racial
preferences.
People only want more trade, more tourism, business and
cultural exchanges, not war preparations and huge military spending that are
financed via high and rising taxes.
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See also:
BWorld 94, Economic freedom, taxes and tariffs in Asia, December 17, 2016
BWorld 95, Manufacturing and electricity costs in Asia, December 17, 2016
BWorld 96, Free trade means more investments and people mobility, December 19, 2016
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