Benefits of Asia Pacific Economic front to the economy of member states.
Asia Pacific Economic front is an economic forum composed of 21 countries from Asia and Pacific region. Established back in the year 1989, it has actively helped the member countries in creating new markets for their agricultural produce and other raw materials. Currently, the entire front has a combined gross Domestic product of over $16 trillion and carries out 41.8% of global trade. It is worth noting that the main reason for its establishment was to diffuse the domineering effect of rapidly industrializing Japan on the market.
The members of the front include Australia, Brunei, Canada, Chile, China, Japan, United States, Korea, Mexico, Russia, New Zealand, Peru, Philippines, Indonesia, New Guinea, Singapore, Thailand, Malaysia, and Vietnam. The economic front has brought numerous benefits to the member countries, some of the most notable advantages are:
It has facilitated the establishment of a free trade zone for the member countries. The elimination of tariffs and quotas for the member countries has enabled them to have access to high-quality goods and services at a lower cost. In addition to that, there has been new trade creation. Trade occurs only when consumption switches from high-cost to low-cost producers. According to separate studies documented in 2015th edition of Economic and Social Survey of Asia and Pacific region, it is evident that by saving on tariffs alone, member countries such as Viet Nam could easily raise their GDP of $33,219 by up to 20%
With the trading organization, the countries have emphasized on comparative advantage in goods production and service provision. The theory of comparative advantage comes into play when different countries work as a trading unit. That is because the countries specialize in producing goods where they have the lowest opportunity costs. Consequently, there is mutual economic welfare, with each country producing specific products and bringing to the market at lower prices. For example, by focusing on specialization, Brazil has grown to become the 2nd largest exporter of beef and coffee globally. That alone has increased the country’s gross export by 4.32% in the past three years. Moreover, each country has focused on economies of scale, a move which has ultimately led to lower consumer prices, greater efficiency, and profit for the exporting countries.
Additionally, the trading front has enabled the member countries to get maximum benefits from foreign investments. Foreign investments are usually part of National Expenditure Accounting Model. For example, China’s net direct investments for 2014 in Vietnam was well over $18billion, while in the Philippines was $41.38 million. According to the Central Bank records, the member countries of Asia Pacific Economic front received well over 65% of total Chinese foreign investments. These investments have created numerous job opportunities in these countries, and the transfer of funds has promoted infrastructural development.
Finally, the member states, through their regional tax forums, have set competitive tax rates which apply to other non-member countries. This was a key recommendation under auspices of ESCAP, which had set out to monitor tax regulation mechanisms in the member countries. The statistics of the survey showed that by closing the existing tax gaps, some Asia-Pacific economies could raise their tax revenues by more than 26.5%. So far this move has worked in favour of countries such as Singapore. By fully implementing these policies, it is a guarantee that they will work their way to achieving their mission of Regional connectivity for shared prosperity.