As 2020 comes to a close, it is worth discussing the great potential in the next decade for intra-regional trade within the Asia-Pacific region. In particular, the Regional Comprehensive Economic Partnership (RCEP), Association of Southeast Asian Nations (Asean) and the South Asian Association for Regional Cooperation (Saarc) have provided the foundation for greater economic integration and interconnectivity between Asian economies.
Integration into the world economy has proven a powerful means for countries to develop and prosper. Thus, the development of an Asia-Pacific Economic Union can be envisioned for the next decade.
For the short to medium term future, international trade will be largely driven by a few regional economic giants. These nations will provide greater economic activity for other countries, located in Asia, which are part of the global supply chain. Specifically, greater linkage of major players in the region will see a beneficial increase in trade of smaller nations.
Relatively smaller economy in this region, will gain immensely through a greater economic union within Asia and can develop into a regional centre for trade and investment. Its strategic location within the Asia-Pacific region provides great access to over 40 percent of global trade and over 2.5 billion consumers.
With US elections symbolising a greater societal and political amalgamation of national powers, greater trade through global and regional policy reforms are becoming more prevalent. The recent signing of RCEP gives greater access to the largest economies in Asia.
Along with India's strong presence with Asean, greater integration of Asian nations will benefit from small nations which is well-placed on global shipping lines linking the world. In addition, India's Act East Asian foreign policy along with its Neighbourhood First policy will strengthen the trade policies with Asean and RCEP member nations.
Similarly, members of Asean will see Sri Lanka as a launching pad into South Asia and make use of increasing Saarc cooperation.
The greater connectivity through trade and investment, as a result of these multilateral agreements, may pave the way for a grouping of Asian countries similar to that of the European Union. In this respect, greater interdependence between the larger and smaller nations within and outside these regional blocs will provide the impetus for policy reforms.
However, mutual gains are required for there to be a sustainable and enduring merger. It is important to ensure that increasing trade among all member nations does not come at the expense of national sovereignty.
One of the drivers for increased trade and interconnectivity in the Asia-Pacific economic zone will be the increased numbers of people moving among the regional blocs. Although there are currently visa-free agreements within Asean and Saarc, future challenges will come about from providing more unrestricted movement within the broader Asia-Pacific zone.
Moreover, future effective regional migration policy needs to avoid the amplification of stark differences in purchasing power as well as real wages between countries at various development stages. In a nutshell, movement of labour ought to be based on medium to high skill labour rather than low skilled labour to mitigate a large number of issues.
Furthermore, economic integration that incorporates visa-free work and travel rights requires greater homogenisation of national policies to create synergies between member nations of a future Asia-Pacific Economic Union. This may well allow for relatively open border-protection policies whilst safeguarding national sovereignty.
Thus, a visa-free policy in Asia without adequate planning and policy reforms will fail to address growing concerns. Therefore, policy makers are required to consider developing equitable outcomes both at home and abroad.
The propagation of Free Trade Agreements in the 21st century has necessitated a fundamental reconciliation between economic liberalisation and protectionism, in order to develop a sustainable framework for an Asia-Pacific regional order.
In the realm of trade, the combined effort by the three regional blocs Asean, Saarc and RCEP has imposed the removal in full or in part of tariffs and other trade barriers. Whilst this has provided countries with opportunities to become logistic hubs, individual nations within an envisaged Asia-Pacific Economic Union have to work out suitable policies to protect valuable import and export interests.
But the challenge is bringing the different sub-regions under one regional umbrella agreement with vastly different interests. In this respect, safeguarding national interests in certain industries requires policy makers to undertake problem-solving with a strong focus on collaboration.
Developing nations have a lot to gain from increased trade and connectivity throughout the region. Greater speed of development and access to capital will elevate the livelihood and economic opportunities available to its populace.
In the monetary realm, the veneration of free trade and privatisation of trade and investment will be unjustifiable if it fails to benefit participating countries. In this respect, monetary and fiscal policy with a focus on Asia-Pacific intra-regional support is more likely to provide genuine long-term gains and greater diversity in terms for borrowing nations.
For, greater monetary support from regional partners will not displace post-WWII foundational monetary frameworks, but significantly reinforce the global rules-based order.
In practical terms, greater regional integration in the form of an Asia-Pacific Economic Union will not be beneficial if it weakens capabilities of member nations to control their monetary supply. Nevertheless, greater regional cooperation may well serve to protect the value of national currencies from extra-regional forces.
Therefore, this conflict between regional and global monetary powers may well lead to the Asia-Pacific becoming another European Union, albeit in a more loosely defined form.
A more collective and integrated world order is coming into being. This will benefit small nations in the next decade. Greater economic integration and interconnectivity has seen greater free trade within the whole region, albeit without a formalisation of a Free Trade Agreement for the whole of Asia.
Still, recent moves by the regional blocs has made an Asia-Pacific Economic Union an achievable goal.
Dr Srimal Fernando is a recipient of the prestigious OP Jindal Doctoral Fellowship and the SAU Scholarship under the Saarc umbrella.
Justin Chua is an Australian lawyer with a particular focus on commercial and immigration law.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.