- Preferential Trade Agreements in Asia and the Pacific 2021/2022
The Asia-Pacific region is a major contributor of PTAs, accounting for about half of PTAs worldwide. As of November 2021, there are 195 PTAs in force, 19 signed and pending ratification, and 97 under negotiation, that have at least one Party from the Asia-Pacific region.
Negotiations on many ongoing PTAs were suspended or delayed because of the COVID-19 pandemic, as countries shifted their attention to health emergencies and economic contractions. Notably, fewer PTAs have been signed since the outbreak of COVID-19. Only four new agreements were signed in 2021 (as of November), a decline from 13 in 2019 and 11 in 2020.
In 2021, however, there have been important developments with regard to mega-trade agreements. The Regional Comprehensive Economic Partnership (RCEP) has been ratified by six ASEAN countries ？ Brunei Darussalam, Cambodia, the Lao People’s Democratic Republic, Singapore, Thailand and Viet Nam ？ and four non-ASEAN members ？ Australia, China, Japan and New Zealand. With ratification by 10 out of 15 member States, the RCEP will take effect on 1 January 2022. For the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), China’s application to join sends a good signal regarding the future expansion of this golden-standard mega trade agreement.
More noteworthy than the number of new PTAs is the growing array of domestic policy domains that PTAs have come to regulate. Most agreements that have been signed since 2020 onward go beyond trade in goods to cover additional areas such as services, e-commerce, and climate action which lie at the top of the new agenda items for PTA negotiations.
Recently, liberalization of the digital trade environment and digital trade-related regulations have been embraced by trade negotiations. Following the growing intertwining of digital technology and trade, Digital Trade Agreements (DTAs) have increasingly become a part of new generation trade agreements since 2019. As of 2021, there are five DTAs, all of which involve Asia-Pacific countries, particularly Singapore. In recognition of the centrality of digital trade integration for developing countries, bilateral discussions for potential North-South DTAs have begun, particularly in ASEAN. However, there is a risk that such bilateral discussions could lead to divergent rules, resulting in a ‘digital noodle-bowl’.
On average, about half of trade in the region is with PTA partners. However, the shares vary greatly at the country level, reflecting diverse policy interest and negotiating capacity across countries. In general, reciprocal trade negotiations rarely involve least developed countries (LDCs) and Pacific developing economies (PIDEs). Selected graduating LDCs could face important challenges to maintaining competitiveness in major export markets after graduation. For example, Bangladesh and the Solomon Islands as well as Kiribati and Tuvalu may face significant challenges to competing in major export destinations after graduation and may lose trade preference. These countries currently have not had PTAs with major trade partners. Their exports to current PTA partners are negligible, ranging between 3% and 11%.
Looking ahead, the downside economic pressures and the temptation to build back better could raise public expectations for trade agreements. As a result, social and environmental provisions in PTAs may emerge among the top items on the negotiation agenda, to ensure public support for a new PTA. Also, lessons learnt from supply-chain disruptions during the COVID-19 pandemic may call for deeper and more tailored trade agreements that could help to enhance supply-chain and trade resilience on many aspects during crises. To name a few, PTA provisions regarding NTMs, trade facilitation and intellectual properties rights (IPRs) could play a particularly important role in ensuring essential supplies.