East Asia takes the lead in enabling global trade growth

The night markets and barges cruising down the Chao Phraya River are vivid testaments to how trade is playing an important role in bringing goods and an improved quality of life to the growing Thai middle class. 

Thailand has also emerged as an important manufacturing hub, playing a key role in the global supply chains of the automotive and technology industries in particular. 

East Asian economies have traditionally recorded strong performance in their ability to enable trade, ranking high in the World Economic Forum’s Global Enabling Trade Report and Index, with Singapore and Hong Kong being front-runners. In the latest 2012 ranking, Asean members Thailand (57th), Indonesia (58th) and the Philippines (72nd) have shown marked improvement in their performance. 

The WEF’s Enabling Trade Index measures institutions, policies and services facilitating the free flow of goods over borders and to destination. It breaks the enablers into four issue areas: market access, border administration, transport and communications infrastructure, and business environment. 

The index will be used this week at the World Economic Forum in East Asia’s one-day Travel, Trade and Tourism Summit. Under the theme “Open Borders: Revitalising Asia’s Growth through Travel, Trade and Tourism”, the event will tackle issues ranging from the region’s competitiveness to mobility hurdles, trade facilitation priorities, sustainability and new consumer trends. 

The summit will stimulate dialogue with business on how governments can adopt policies that enable and facilitate travel and trade, not only to enhance development in their own countries, but also to generate prosperity in the countries with which they have trading or travel agreements. 

The region clearly recognises these prerogatives, with the Asean Trade in Goods Agreement, which has successfully facilitated trade since coming into force in 2010, being an apt example of such an ambition. 

Governments worldwide, but particularly in Europe, are looking for growth. Can trade provide that elusive growth? And to enable it, can austerity be applied to trade barriers and stimulus to trade facilitation? What lessons can the rest of the world learn from East Asia’s trade facilitation and regional integration experiences? 

Asean has set an ambitious goal of establishing a single market and production base by 2015. Can sub-Saharan Africa and Latin America learn from the Asean experience in reaching that goal, or will there be regional players who lean towards restricting market access? 

There is a growing view that traditional trade objectives focused on market access are becoming outdated in a world in which value is added incrementally in numerous locations. Physical, administrative and informational obstructions to trade are a greater deterrent than tariff barriers. 

Business wants policy-makers to address key constraints that obstruct the movement of goods or increase supply-chain costs. However, the analysis is not yet in on the business case for tackling these obstructions. 

What would be the value and cost of removing these barriers? Even the best-informed policy-makers often have little clarity on what specific actions will get the most value. Answers to these questions are beginning to emerge. 

The WEF is working with business, academia, leading trade institutions and the Forum’s Global Agenda Councils on Trade and Logistics to pull these together and give them prominence. We should soon have a better picture of the growth opportunities from trade facilitation through a new Forum initiative that aims to put a price tag on the biggest supply-chain barriers, as well as the cost of mitigating actions for trade facilitation. 

On the way, we need to consider differing economic circumstances and different supply-chain situations. We need to identify the low-hanging fruit and we need to institutionalise targeted supply-chain thinking in trade negotiations. Perhaps then the nations, both large and small, that drop down on the Enabling Trade rankings this year will have clearer incentives and clearer road maps for enabling growth from trade. 

The champions of trade meanwhile should not rest on their laurels. Trade barriers in one nation feed through global value chains to affect output in others, making them everyone’s concern. Plus, world trade is rapidly reshaping, with some surprising stars emerging. The devastating floods in Thailand last year showed how interconnected we all are, and how increased trade cooperation and resilience are even more important to ensure the smooth operation of global value chains. 

 

_ Submitted by Ronald Philip, manager for supplychain and transportation industries, and Tiffany Misrahi, research analyst for global agenda councils, World Economic Forum.