International trade has been growing rapidly, faster than global production. Globally since 1990, the volume of merchandise trade has more than tripled, while in Asia and the Pacific it has almost quadrupled, and the speed of growth is increasing all the time.

Trade in goods

During the period 2000-2006, merchandise exports from Asia and the Pacific grew annually by 12.9 per cent, two percentage points faster than the world average. Annual growth was highest in the Asian-Pacific middle-income economies, 18.4 per cent, while the high-income economies it was only 8.2 per cent. It should be noted, that commodity and services statistics in this Yearbook are in current US dollars, and are therefore affected by inflation and by fluctuations in exchange rates.

The leading exporters in Asia and the Pacific are China and Japan. However, while during the period 2000-2006 exports from Japan grew only 5.1 per cent annually, those from China grew by 25.4 per cent. China is rapidly catching up with Germany and the United States as the world’s largest exporter. In 2007, a year for which data are not yet consistently available and therefore not included in the Yearbook tables, Chinese exports reached $1.2 trillion. Nevertheless, given the size of its economy, Chinese exports as a proportion of GDP, 35 per cent in 2006, were still relatively low, compared with smaller economies such as Singapore; Hong Kong, China; and Malaysia which had ratios topping 100 per cent.

India despite its economic size is a relatively small exporter. But it has started fulfilling its potential. Since 2000, annual growth has been more than 20 per cent, though slightly slower in 2007. Despite this, its exports in 2007of $146 billion were less than one-eighth those of China.

Figure 21.1 - Merchandise exports, selected countries/areas, 2005 and 2006

Among the subregions, the highest annual growth rates in merchandise exports during 2000- 2006 were in North and Central Asia, 20.0 per cent, and in South and South-West Asia, 16.8 per cent. The highest growth rates were in Azerbaijan and Kazakhstan in 2006, largely based on increasing oil and gas exports.

At the same time there has also been a growth in imports. For the region’s middle-income economies during 2000-2006 imports grew at an average annual rate of 18.9 per cent – placing the region second in the world for growth after Africa.

The largest importers are clustered in East and North-East Asia. Top of the list are: China; Japan; Hong Kong, China; and Republic of Korea. However, during 2000-2006 imports grew fastest in North and Central Asia, followed by South and South-West Asia (19.2 per cent), East and North- East Asia (12.8 per cent) and the Pacific (10.9 per cent).

Merchandise imports have risen steadily in relation to GDP – reaching 26.1 per cent in 2006. Some economies also have strikingly high ratios – 175-177 per cent in 2006 in Singapore, and Hong Kong, China, for example. Since 1995, China and India have increased their ratios of imports to GDP by nearly 10 percentage points. The developed economies in the region, on the other hand, have seen much slower growth in imports.

Figure 21.2 - Merchandise imports, selected Asia-Pacific countries/areas, 2005 and 2006

Trade in services and current account balances

There are now more data on trade in services. During the period 2000-2005 world total services exports increased from $1,540 billion to $2,540 billion in current US dollars, representing an average annual growth rate of 10.5 per cent. The Asia- Pacific region, with $580 billion, ranked second after Europe. More than half of the regional trade in services is taking place in East and North-East Asia: of the five largest exporters of services, only India comes from outside that subregion. Growth was fastest, however, in North and Central Asia, averaging 20.5 per cent annually, and in South and South-West Asia, averaging 17.8 per cent annually.

There has also been significant growth in service imports. During 2000-2005, among the subregions, East and North-East Asia followed by South-East Asia were the largest total importers of services. China with a growth rate of over 20 per cent in recent years is rapidly catching up with Japan. During 2000-2005, the trade in services also grew fast in North and Central Asia, especially in Tajikistan (43.3 per cent annually), Azerbaijan (40.5 per cent) and Kazakhstan (32.3 per cent). Much of this growth has been in transportation and travel services: since the data are in nominal values the totals have therefore been boosted by high transport prices.

Each country’s balance of trade is a major contributor to its current account balance. In 2007, China’s current account balance was positive at 11.1 per cent of GDP, which contributed further to its massive build-up of foreign reserves. India, on the other hand, recorded another small deficit, of 1.8 per cent of GDP. By far the highest current account surplus, however, was in Timor-Leste at 253.3 per cent, followed by Brunei Darussalam with 57.3 per cent, Azerbaijan with 28.8 per cent, Singapore with 24.3 per cent, and Uzbekistan with 23.8 per cent. Other economies, however, had high current account deficits, in the 23-45 per cent range – as in Maldives, Solomon Islands, Kiribati, and the Lao People’s Democratic Republic.

Export market orientation

Many of the region’s economies, particularly the poorest ones, depend on very few export markets. A large number of the least developed, landlocked developing countries and Pacific island developing countries thus have high export concentration indices. However, the indices are also high in some richer countries, such as Brunei Darussalam and the Islamic Republic of Iran.

Within ASEAN, nearly one fourth of total merchandise trade is between ASEAN members. Lao People’s Democratic Republic and Myanmar in particular have a very high proportion of their trade, both imports and exports, with ASEAN partners. Trade is also concentrated in the ASEAN+3 group which includes China, Japan and the Republic of Korea. Within the ASEAN+3 group, the share of intraregional imports reaches 47-94 per cent for ASEAN members and about 40 per cent for the other three countries. The share of total exports going to ASEAN+3 is lower, but reaches more than half for the Lao People’s Democratic Republic, Myanmar and Indonesia. The intraregional trade dependency within ASEAN+3 has generally increased over time, which is consistent with the increasing number of agreements that have lowered trade barriers.

Another important trade agreement is the Asia-Pacific Trade Agreement (APTA), previously known as the Bangkok Agreement. Signed in 1975, APTA is the oldest preferential trade agreement between Asia-Pacific developing countries and is the only truly region-wide arrangement spanning East, South-East and South Asia. APTA is also the only operational trade agreement linking China and India, two of the world’s fastest-growing markets with a consumer base of 2.4 billion people, as well as other major markets such as the Republic of Korea. Members of the agreement have been expanding trade to each other, especially imports, more rapidly than to non-agreement partners.

A more recent agreement is the South Asian Free Trade Area (SAFTA) which was reached in 2004 among Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan joined in 2007, so the group now includes five least developed countries. Afghanistan, Bhutan and Nepal have large shares of their merchandise trade with other members of SAFTA.

Figure 21.3 - Shares of intra-APTA imports, by country, 1990-2006