Free-trade zone plan must bridge disparities

An Asean plan to create a new free-trade zone consisting of 16 countries in the region was mooted over the weekend during the Asean Summit. The proposed East Asia Free Trade Area would cover half of the world's population and account for one-third of global gross domestic product.

The proposed plan would cover Asean, three countries in East Asia, along with Australia, New Zealand and India. If the plan is realised, economic ties among countries in East Asia and the Pacific should be strengthened.

"What we are seeing now is a couple of ideas on having a more integrated market in terms of trade and investment in the region," Japanese Foreign Ministry spokesman Kazuo Kadama was quoted as saying after the East Asia Summit in Cha-am over the weekend.

The East Asian Free Trade Area is designed to boost regional trade, especially with the US and the European Union - the traditional markets of many countries in the region - being so severely affected by the global economic recession.

The East Asian Free Trade Area is also a step further on the road to a regional trade agreement as the Asean single market is set to be effective from next year. Under this plan, Asean will fully implement a free-trade agreement among the original members Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.

The Asean Free Trade Area has so far proved to be an effective agreement to bring more trade and foreign investment into the region. Thanks to the agreement, Asean has become more dependent on regional trade, thus cushioning the effects of the drop in consumption in the US and European markets.

However, the plan to further expand regional economic ties should come with infrastructure and logistics support to enable goods to move around the region faster, more efficiently and more cost-effectively. Asean governments must follow up on promises to realise the plan and to create regional infrastructure and transport networks to support businesses that wish to trade and invest in the region.

Asean and its dialogue partners have already stated: "On the East Asia FTA, leaders have noted the potential for greater intra-regional trade, which reached US$480 billion in 2008."

The proposed free-trade area will have a market of 3.1 billion people - more than half the world's population, and a combined gross domestic product of US$19 trillion, or one-third of global GDP.

The figures sound tempting, indeed. However, Asean and East Asian governments need to realise the disparity in economic development among countries in the region. To make the plan fully effective, governments must cooperate to improve human resources in the region, and to bridge the economic and social differences between peoples. Regional economic cooperation in the future must also focus on education, and on helping people to connect with each other through knowledge and skills development. Without all of these requirements in place, the wider economic benefits will not be realised by all the peoples of the region.