APEC study: Free trade agreements increase exports

Average annual exports in the Asia Pacific region grew from $4.1 billion for the five years before free trade agreements to $6 billion for the five years following their introduction, according to a new study by the APEC Policy Support Unit.    According to a new study by the APEC Policy Support Unit, regional free trade agreements in the Asia Pacific region have had a significant positive impact on export volumes from the Asia-Pacific region.
   The initial findings of the new study, “Key Trends and Developments Relating to Trade and Investment Measures and their Impact on the APEC region: Do FTAs Matter for Trade?,” were submitted to Asia Pacific Economic Cooperation (APEC) Trade Ministers in Boracay, Philippines over the weekend.
   Preliminary analysis of the data indicates average annual exports in the Asia Pacific region grew from $4.1 billion for the five years before FTAs to $6 billion for the five years following their introduction.
   The study also found the quality of an FTA to be important in terms of export growth. Some FTAs, for example, cover only goods, as opposed to both goods and services, while others are more comprehensive, including regulations affecting labor, environmental, and competition policies. The APEC Policy Support Unit examined the quality of FTAs by comparing those enforced before 2005 with those after 2005 under the assumption that more recent FTAs are more comprehensive and, therefore, of higher quality.
   The number of regional and bilateral FTAs in the Asia Pacific region has increased steadily since the 1990s, and APEC members currently have 144 enforced FTAs, approximately 53 percent of the global total.
   “However, despite this growth, more than 50 percent of trade in the region takes place without the benefit of any preferential trade agreement. This begs the question whether free trade agreements actually matter,” said Dr Alan Bollard, executive director of the APEC Secretariat.
   “In order to answer this question, the APEC Policy Support Unit study took a preliminary look at the effects of free trade agreements on exports,” he explained. “The statistical analysis showed that the number of FTA participants and the quality of the agreement do in fact correlate with higher exports.”
   APEC Policy Support Unit Senior Analyst Gloria Pasadilla said of the study, “Our results show that free trade agreements do in fact have a compelling impact on trade. The effect of FTAs, however, depends on the size — essentially, the more partners involved, the better.
   “These initial findings suggest that free trade agreements between economies do make a difference and have a significant impact on exports, despite the cost and time required to negotiate such agreements,” she added. “This should help inform APEC Minsters and policy makers moving forward.”