Upside of COVID is increased Intra- Regional Trade
An unexpected upside of the global COVID pandemic has been that Asia Pacific nations have strengthened regional integration, insulating them from the impact of supply-chain bottlenecks and restrictions that constricted trade elsewhere.
Intra-Asian trade increased 31 per cent in the first three quarters of 2021, after contracting three per cent in the same period the year before, according to a report by the Asian Development Bank. Trade within Asia was 58.5 per cent of the region’s total trade in 2020, its highest share in three decades.
Virus containment in Asia’s major economies allowed them to become hubs for medical and consumer goods, boosting exports as other countries reopened and demand recovered, the ADB said.
The new Regional Comprehensive Economic Partnership trade agreement is expected to boost trade prospects further although the benefits of such FTA’s are seldom as effective as touted by the governments that negotiate them.
“Asia supply chains have been more resilient compared to those in advanced countries,” said ADB economist Jong Woo Kang. This has helped keep any widespread inflation pressures at bay in the region, save for sporadic spikes in food prices, he said.
Foreign direct investment into the region also remained resilient, slipping only 1.3 per cent in 2020 compared to a decline of nearly 35 per cent globally. Digital services – driven recently by fintech, payments, data processing, and cloud computing – are emerging as a key sector, accounting for nearly one-quarter of the region’s FDI on average since 2003.
“The strengthening trade and value-chain linkages among economies in Asia and the Pacific are an encouraging sign for a resilient recovery from Covid-19,” said ADB chief economist Albert Park, but added Covid reversed gains made in reducing poverty.