Generally,free trade is a situation where a government does not interfere to influencethrough quotas or duties what its citizens can buy from another country or whatthey can produce and sell to another country. Nowadays, Asia has become the”global factory”. The region with the largest economies such as Peoples’ Republicof China, India and Japan and the Association of Southeast Asian Nations'(ASEAN) economies have become key players in Free Trade Agreement activity.
Theimportance of FTAs to trade at the economy level has also increase asreflecting the growth of FTAs.Inaddition, with Free Trade Agreements (FTAs) ASEAN companies have greatopportunities. Agreeing FTAs will give a company advantage to pay lower dutyfees. This is because of management in the supply chain and transactioncomplexity. In fact, using FTAs will give more opportunities to businesses butat the same time it also gives pressure. At the same time, all trade agreementsshare one similarity which is they expose a company to potential tradecompliance issues. If companies cannot pay for penalties, they will face thedelays or reputational damages. These are just a few effects of violations oftrade regulations.
Companiesare turning into automation of FTA Rule of Origin analysis as one way to ensurecompliance of trade regulation and maintain fully auditable records of everytransaction. These business processes are also proactive and gives “right firsttime” information. Compliance professionals focus on looking for new FTAbenefit opportunities in new trade lanes, rather than addressing issues with currentproduct or trade lane shipments.Besides,Asia Pacific region led by the ten members of the Association of SoutheastAsian Nations (ASEAN) is one part of the world looking to take a leadershiprole. In 2014, its total GDP reached US$2.6tr and that positioning it theseventh largest economy in the word, while its total trade was US$2.
5tr and themajority of it was intra-ASEAN trade. In the near future, Asia has a few numberof new and existing trade deals in the works to increase imports and exports. Allof the trade deals are created to increase further growth and cooperationacross the region. As example, China’s One Belt, One Road (OBOR), is aneconomic and diplomatic initiative that could improve trade. China’s OBORinitiative objective is to improve trade relationship with ASEAN, Middle Eastern,and European countries.
By building high-speed trains and highways through internationalgeographic corridors, it can connect China to the world.Accordingto Reuters, when talking about trade deals, China, Japan and South Korea arealready discussing a trilateral trade agreed to refuse all forms ofprotectionism, and they are taking a stronger stand than G20 major economiesagainst any US protectionist policies. Although TPP (excluded China) wasnegotiated, one more extensive trade agreement has been under discussion.
Since2012, the Regional Comprehensive Economic Partnership (RCEP) agreement has beennegotiated by China and 15 other Asia Pacific Rim countries. RCEP consist often members of ASEAN. They are Vietnam, Thailand, Singapore, Philippines,Myanmar, Malaysia, Laos, Indonesia, Cambodia and Brunei. It’s also includes China,India, Japan, South Korea, Australia and New Zealand, who are their tradingpartner.
Total trade with China amounted to US$345billion in 2015, showing 15.2per cent share of total ASEAN trade in that year, according to data provided bythe ASEAN website. RCEP could transform the region into a market representingUS$22tr in economic activities and of the world’s population if it is implemented.Asia’strade will continue to expand and grow if they are in the right trends. Topromote international trade and create a region that is a true global tradeleader, this region has a number of new and existing trade agreements in right place.By getting the basics right in an easy and timely manner to maximize the costbenefits of FTA usage, companies will get advantages from modernization oftheir own trade processes.