Asia-Pacific trade slowing as economies adjust to lower global growth

The Asia-Pacific Trade and Investment Report (APTIR) is a recurrent publication prepared by the Trade and Investment Division of the United Nations, Economic and Social Commission for Asia and the Pacific. It provides information on and independent analyses of trends and developments in: (a) intra- and inter-regional trade in goods and services; (b) foreign direct investment; (c) trade facilitation measures; (d) trade policy measures; and (e) preferential trade policies and agreements. It provides insights into the impacts of these recent and emerging developments on countries’ abilities to meet the challenges of achieving inclusive and sustainable development.

This edition of ESCAP’s Asia-Pacific Trade and Investment Report (APTIR) highlights the challenges posed by slowing regional trade growth and outlines how changing dynamics in the global economy call for a renewed effort to enhance the prospects of export-led growth, both of merchandise trade and in commercial services. The 2015 report also provides analysis on the spread of Global Value Chains in the Asia-Pacific region and evaluates policies that contribute to developing countries participation in GVCs.

The Report is aimed at policymakers as well as practitioners and experts, academia, business, international agencies and non-governmental organizations working or interested in these issues in the Asia-Pacific region.

Source

Australia
Merchandise trade: Australia is the largest mineral exporter in the Asia-Pacific. In 2014, merchandise exports contracted by -4.6% from an average annual growth of 3.2% between 2010 and 2014. China and Japan collectively accounted for over half (59.2%) of all Australian exports and the economic slowdown of China; continued economic stagnation in Japan; and the sharp fall in global commodity prices contributed to Australia’s declining export performance. Although exports are highly diversified, across 4431 products and 125 markets – compared to the AsiaPacific averages of 2107 products and 95 partners – the top export products are dominated by primary commodities – particularly minerals. Iron and coal account for 28.1% and 15.2% of all exports respectively. In 2014, merchandise imports contracted -2.2% – a worse performance than the Asia-Pacific total of -1.0%. Australia’s main sources of imports are China and the United States, and the top import products are petroleum and motor vehicles.

Services trade: Australia’s services exports grew by 1.5% in 2014 – lower than the Asia-Pacific total growth of 4.8%. However, services imports contracted sharply, by -7.0%. The Australian dollar depreciated substantially in 2014, stimulating demand for Australian travel and financial services exports, while simultaneously reducing purchasing power – and import demand – for services overall, particularly for travel imports. Travel accounts for over half of services exports.

Global value chains (GVCs): The share of intermediate goods in trade – a proxy for participation in GVCs – is much lower in Australia (16%) than the Asia-Pacific (22%) for imports, and slightly lower in Australia (16%) than the Asia-Pacific (18%) for exports. Australia’s exports largely consist of raw material exports while imports are dominated by final goods. Geographical distance from markets, and associated higher costs of trade, also diminish participation in GVCs.

Foreign direct investment (FDI): Australia’s FDI inflows contracted modestly, by 4.4% in 2014. As mining is the main investment sector, the downturn in FDI may have been prompted by the fall in global commodity prices. Although this is worse performance than the Asia-Pacific region (1.5% contraction), Australia was nevertheless the 8th largest recipient of FDI in the world. Australia remains an attractive destination for investment because of: the highly dynamic, diversified economy; strong longer-term growth prospects; less corrupt and more transparent government institutions; as well as more liberal and stable economic policies.

Tariffs:  Average MFN applied and effective tariffs at 2.8% and 2.8% are substantially lower than Asia-Pacific averages of 7.4% and 7.4%. Average WTO bound duty, at 10.0%, is much lower than the Asia-Pacific average of 21.7%.

Trade costs: Intraregional trade costs in Australia have fallen markedly since 2009. It is costlier for Asia-Pacific economies to trade with Australia than with East Asia-3 (China, Japan and Republic of Korea) – the intraregional benchmark – and with EU-3 (France, Germany and United Kingdom) – the extraregional benchmark. Based on the UNRC Survey 2015*, Australia’s trade facilitation and paperless trade implementation score is at 34.4%, compared to 46.5% for the Asia-Pacific.

Trade Agreements: Australia has 11 trade agreements in force, which is higher than the Asia-Pacific average of 7.1 agreements. Twenty three per cent of total exports are to PTA partners, compared to 35% for the Asia-Pacific. Forty three per cent of total imports are from PTA partners, compared to 45% for the Asia-Pacific.