THE numerous free-trade agreements (FTAs) forged by countries in Asia Pacific could hinder the full participation of small and medium enterprises (SMEs) to global and regional trade, economic and industry leaders of the Asia-Pacific Economic Cooperation (Apec) said on Wednesday.
While Apec economic and industry leaders pushed for an open trade and investment regime in the region, they said these FTAs should truly benefit SMEs.
“We believe in the further expansion of the economy in the Apec region. Both Hong Kong and New Zealand, and many economies have proven the virtues of free trade,” Leung Chun-Ying, chief executive of Hong Kong, said in a panel discussion at the Apec CEO Summit in Manila.
“From our point of view, we want to see much greater capacity to trade on a level playing field in open markets, hopefully with the opening of Trans-Pacific Partnership [TPP] we’ll see more countries joining,” New Zealand Prime Minister John Key added.
Asian Development Bank (ADB) President Takehiko Nakao said Southeast Asian countries and economic powerhouse China are growing faster due to free trade.
“An open trade and investment regime is the most important reason China started growing fast, and the same for Myanmar and Vietnam. How we can maintain this momentum in that regard, is where TPP and other initiatives like Regional Comprehensive Economic Partnership [Rcep] are so important,” Nakao said. Leung said, however, that these “expansive” trade deals such as the Rcep and bilateral FTAs could complicate matters for SMEs and pose a hindrance to their participation to global trade.
Including SMEs into the discussions of every trade agreement is vital, said Hong Kong’s chief executive, as they form the backbone of every developing country, and is seen as an important engine for economic growth. “We want to be careful that the RCEP, and all these bilateral, and plurilateral agreements not end in this spaghetti bowl of trade agreements. If you’re an SME and you want to participate in this environment of free trade, all of these agreements might be counterproductive,” he said.
The “spaghetti bowl effect” creates overlapping trade procedures that can confuse and discourage SMEs from availing of the purported benefits of FTAs.
David Cunningham, COO of FedEx, warned that only a handful SMEs are taking advantage of these high-level FTAs that countries have been pursuing.
“The reality is it’s SMEs that do trade internationally that grow, but it’s a fairly small percentage. When we think of TPP what we’re really trying to do is make these benefits available to them, the benefits that are open to global multinational corporations,” said Cunningham.
But, the ADB said that even with these multilayered free FTAs, the economic benefit of tariff elimination and diminishing of nontariff barriers through these agreements is the “way to move forward.”
To benefit from the aggressive move of economies to pursue trade agreements, ADB said financial inclusion must be a top priority of their governments.
Image credits: Alysa Salen, Kevin de la Cruz and Nonie Reyes