International Trade- Asian Countries

Asian Pacific Rim

Now, after decades of dependence on the United States and Europe for technology and markets, countries in the Asian Pacific Rim are preparing for the next economic leap driven by trade, investment, and technology aided by others in the region. Though few in number, trade agreements among some of the Asian newly industrialized countries (NICs) are seen as movement towards a region wide intra- Asian trade areas, with Japan and China at the centre of this activity.

While the United States is Japan’s single largest trading partner, markets in China and Southeast Asia are increasingly more important in Japanese corporate strategy for trade and direct investment. Once a source of inexpensive labour for products shipped to Japan or to third markets, these countries are now seen as viable markets. Further, Japanese investment across a number of manufacturing industries is geared towards serving local customers and building sophisticated local production and supplier networks.

Present trade agreements include one multinational trade group, the Association of Southeast Asian Nations (ASEAN) which is evolving into the ASEAN Free Trade Area (AFTA); ASEAN +3 a forum for ASEAN ministers plus ministers from China, Japan and South Korea, and the Asia-Pacific Economic Cooperation (APEC), a forum that meets annually to discuss regional economic development and cooperation.

Association of South-east Asian Nations

The primary multinational trade group in Asia is ASEAN. The goals of the groups are economic integration and cooperation through complementary industry programs; preferential trading, including reduced tariff and non-tariff barriers, guaranteed member access to markets throughout the region; and harmonized investment incentives. Like all multinational market groups, ASEAN has experienced problems and false starts in attempting to unify the combined economies of its member nations. Most of the early economic growth came from trade outside the ASEAN group. Similarities in the kinds of products they had to export, in their natural resources, and other national assets hampered earlier attempts at intra-ASEAN trade. The steps countries took to expand and diversify their industrial base in order to foster intraregional trade when ASEAN was first created has resulted  in the fastest growing economies in the region with an increase in trade among members.

Four major events account for the vigorous economic growth of the ASEAN countries and their transformation from cheap labour havens to industrialized nations: 1) the ASEAN governments’ commitment to deregulation, liberalization and privatization of their economies 2) the decision to shift their economies from commodity based to manufacture based; 3) the decision to specialize in manufacturing components in which they have a comparative advantage (this created more diversity in their industrial output and increased opportunities for trade); and 4) Japan’s emergence as a major provider of technology and capital necessary to upgrade manufacturing capability and develop new industries.

Just as was the case in the EU, businesses are drafting plans for operation within a free trade area. The ability to sell in an entire region without differing tariff and nontariff barriers is one of the important changes that will affect many parts of the marketing mix. Distribution can be centralized at the most cost-effective point rather than having distribution points dictated by tariffs restrictions. Some standardization of branding will be necessary because large customers will buy at the regional level rather than bit by bit at the country level. Pricing can be more consistent, which will help reduce the smuggling and parallel importing that occur when different tariff schedules create major price differentials among countries. In essence, marketing can become more regionally and centrally managed.

One result of the Asia financial crisis of 1997 to 1998 was the creation of ASEAN+3 ASEAN plus China, Japan, and South Korea to deal with trade and monetary issues facing Asia. Most of East Asia felt that they were both let down and put upon by the west, who they felt created much of the problem by pulling out in the midst of the crisis. It was felt that the leading financial powers either declined to take part in the rescue operations, as the United States did in Thailand or that they proposed unattainable solutions. The result was the creation of ASEAN + 3, consisting of the foreign and finance ministers of each country, which meets annually after ASEAN meetings. The first meeting was devoted to devising a system whereby the member countries share foreign exchange reserves to defend their currencies against future attack. Although they were only tentative, the members of ASEAN +3 also discussed creating a common market and even a single currency, or perhaps a new Asian entity encompassing both Northeast and Southeast Asia. Closer links between Southeast Asia and Northeast Asia are seen as a step towards strengthening Asia’s role in the global economy and creating a global three bloc configuration.