Report from the UNCTAD XII pre-event
“Lessons learned from South-South trade
and the role of regional trade agreements in Asia”
Wednesday, 2 April 2008

The meeting served as an opportunity to present and discuss the joint UNCTAD/JETRO (Japan External Trade Organization) publication “South-South trade and regional trade agreements in Asia” that also will be presented at the UNCTAD XII in Accra, Ghana. During the meeting, several experts, some of them contributing to the report, made presentations. The discussion focused on two issues:

• dynamic trends in South-South trade, including rapidly evolving Regional Trade Agreements (RTAs) in Asia and their impacts on global production strategy, and
• the design and implementation of South-South RTAs in Asia and policy lessons and implications for developing countries in other regions

The first presentation was on Expansion of South-South Trade in Asia. The presenter underlined that the South-South export has increased in a much quicker pace than the growth of world export, and that the total merchandise export from the South reached 37 % of world exports in 2006. It was also emphasized that within the South, the distribution between goods in the major sectors of exports varies. The major sector of exports in developing Asia are manufactured goods, in the Americas, manufacture, metals and agriculture sectors are the major sectors, and in Africa the major sector of exports are fuels. Some of the conclusions drawn by the presenter were that the South-South trade expansion has mainly been an Asian phenomenon driven by three factors: their economic growth; success in production sharing schemes; and a rising demand for natural resources from other developing regions.

The next presentation focused on the East Asia Free Trade Area (EAFTA), the Comprehensive Economic Partnership in East Asia (CEPEA), the Economic Research Institute for ASEAN (ERIA), and the Free Trade Agreement of Asia-Pacific (FTAAP), all of them developments that were not highlighted in the report. The presenter concluded, among other things, that geographically comprehensive agreements are desirable as long as they are more trade liberalizing than existing bilateral and sub-regional agreements.

The third presentation was on Comparative Analysis of Scope and Coverage of South-South Regional Trade Agreements in Asia. The conclusion reached by the presenter was that trade in goods was the most dominant issue while trade in services was covered by only around half of the agreements in Asia. Furthermore, the scope and coverage as well as comprehensiveness of Asian RTAs vary substantially and reflect the level of economic development of participating countries, and the scope and coverage of North-South is wider than that of South-South according to the presenter.

The Impact of Regional Trade Agreements on Trade Components was presented next. It was said that the development of export performance vary considerably from region to region. For example, Asian exports increased by 800 % in less than 30 years while the same figure for African countries were 70 %. The presenter concluded that the main driver for export performance for developing Asian countries has been their external market access increase, rather than their increased internal supply capacity, as well as that the largest source of increased market access in Asia and the Pacific is the region itself.
 
The next presentation was on ASEAN-related RTAs and their economic impacts. According to the presenter, firms do not utilize RTAs intensively, much due to unawareness, and because firms are more familiar with the existing exemption of import tariff systems. The presenter suggested a number of changes in order to make it easier for the exporters and to facilitate the utilization of RTAs for firms.

There was also a presentation on India and South-South Regional Trade Agreements which highlighted India’s growing trade potential with South-South RTAs. The presenter concluded that India provides great opportunities in South-South trade and that India gains through South-South trade and RTAs liberalizations. Future negotiations on RTAs should be seen as a vehicle for multilateralism and expansion of trade and development according to the presenter.

In the following presentation the presenter highlighted the question on how the dominance of intra-Asian trade, which accounted for 90 % of total South-South trade in 2006, can be explained and what role RTAs could have played. The presenter compared the development in Asia with that in Latin America, and concluded that in Latin America the existing agreements are comprehensive in scope but the de facto integration of trade agreements is poor. In Asia, on the other hand, the trade agreements are not that comprehensive but they are well integrated. Furthermore the presenter meant that FTAs in Asia tend to be sequential, starting with goods before expanding in scope, while the Latin American agreements tend to be single undertakings.