Free Trade Agreements Key to Asia’s Prosperity

Picture: East Asia Forum

In an article by East Asia Forum, Mohdd Faiz Abdullah highlights the challenges facing the ASEAN nations on rising domestic protectionism, and suggests ways to foster economic integration in the region.

The ASEAN region’s economy grew by 5.7 per cent in 2022, maintaining an average annual growth rate of 4.4 per cent between 2010 and 2022. ASEAN’s nominal GDP per capita stood at US$5,395 in 2022, a notable increase of 37.6 per cent from 2015. With such strong economic fundamentals, the region has also become a focal point for global supply chains, with Vietnam, Thailand and Malaysia emerging as key manufacturing hubs. The ASEAN Economic Community has promoted the free flow of goods, services and capital, enhancing the competitiveness of its member states. In addition, the ASEAN Agreement on Movement of Natural Persons has also facilitated the mobility of talent within the region. 

RCEP underscores Asia’s central role in global trade. By harmonising trade rules and reducing tariffs across 15 countries, RCEP has solidified Asia’s position as a critical node in the global economic network. The CPTPP, despite the withdrawal of the United States, remains a significant agreement that binds its members to high standards of trade and investment rules, further integrating Asian economies with the rest of the world. These FTAs are both economic tools and strategic instruments that reinforce ASEAN centrality in the regional architecture.

Despite the benefits brought by FTAs, Asia now faces significant challenges as globalisation encounters harsh headwinds. The rise of protectionism, trade wars and the potential decoupling of major economies like the United States and China pose a threat to the very foundation of Asia’s economic success. Any move towards decoupling could have profound implications on Asian economies, particularly for countries heavily reliant on trade with China.