Whatever action is taken in Europe the impact on Asian economies will be negative. First, Europe is a major market for China and China’s demand for imports from the region will fall as demand for its export to Europe flag. If the EU botch its strategy, the drop in growth will be significant. Even if they muddle through, it will still be negative.
Two other factors will have impacts as well. Growth will not slump as much in the lower income economies because a key driver of growth is the activation of hitherto inactive resources. In this respect an analyst in the Financial Times forecast Indonesia’s growth would probably continue largely unimpeded because domestic demand in its large population was strong.
A second factor is the steady increase of competitiveness of US manufacturers. Most currencies in Asia have been strengthening against the US dollar. This is a long term trend which to a degree has been masked by the uncertainties created by the European crisis. Nevertheless it should serve as a reminder to economies in Asia that this implies a slow but steady fall in competitiveness compared to US companies.
This is all the more reason regional governments should accelerate strategies to reduce barriers to foreign investment and further reduce trade barriers.
Regional concern about environmental trade barriers
At the Durban climate change conference, India tabled a resolution committing UN parties to oppose unilateral environmental trade barriers. The target was the EU, in particular its imposition of higher charges on airlines flying into the EU from economies which did not have measures to reduce emissions of greenhouse gases comparable to the EU’s. India’s action was political – resolutions such as this are not usually tabled in these meetings.
But this served to focus attention on rising use of environmental trade barriers. The EU has already been criticized for restricting imports of biofuel based on Palm Oil from Indonesia, and Malaysia – Indonesia has already raised this in the WTO. It has imposed similar controls on imports of biofuels from sugar in Brazil and Soybean in the US.
As well, the EU, the US and now Australia, have implemented or are planning to implement laws that restrict imports of illegal timber. This is principally a tool to pressure other countries to restrict forestry. The incidence of illegal product in exports is quite low. The bans have little impact on logging practices in exporting economies and usually simply increase the cost of timber in the importing countries.
Nevertheless, activist NGOs are pressing authorities in Europe and the US to press such measures on trading partners. The US for example has fostered establishment of an illegal logging expert group in APEC and is reportedly pressing for inclusion of restrictions on supposedly illegal timber in the Trans Pacific Partnership Trade Agreement which is under negotiation.
Expect a steady rise of complaints in the WTO about environmental trade barriers.
Alan Oxley, Managing Director
How will the Eurozone crisis affect Asian growth?
Whatever action is taken in Europe the impact on Asian economies will be negative. First, Europe is a major market for China and China’s demand for imports from the region will fall as demand for its export to Europe flag. If the EU botch its strategy, the drop in growth will be significant. Even if they muddle through, it will still be negative.
Two other factors will have impacts as well. Growth will not slump as much in the lower income economies because a key driver of growth is the activation of hitherto inactive resources. In this respect an analyst in the Financial Times forecast Indonesia’s growth would probably continue largely unimpeded because domestic demand in its large population was strong.
A second factor is the steady increase of competitiveness of US manufacturers. Most currencies in Asia have been strengthening against the US dollar. This is a long term trend which to a degree has been masked by the uncertainties created by the European crisis. Nevertheless it should serve as a reminder to economies in Asia that this implies a slow but steady fall in competitiveness compared to US companies.
This is all the more reason regional governments should accelerate strategies to reduce barriers to foreign investment and further reduce trade barriers.
Regional concern about environmental trade barriers
At the Durban climate change conference, India tabled a resolution committing UN parties to oppose unilateral environmental trade barriers. The target was the EU, in particular its imposition of higher charges on airlines flying into the EU from economies which did not have measures to reduce emissions of greenhouse gases comparable to the EU’s. India’s action was political – resolutions such as this are not usually tabled in these meetings.
But this served to focus attention on rising use of environmental trade barriers. The EU has already been criticized for restricting imports of biofuel based on Palm Oil from Indonesia, and Malaysia – Indonesia has already raised this in the WTO. It has imposed similar controls on imports of biofuels from sugar in Brazil and Soybean in the US.
As well, the EU, the US and now Australia, have implemented or are planning to implement laws that restrict imports of illegal timber. This is principally a tool to pressure other countries to restrict forestry. The incidence of illegal product in exports is quite low. The bans have little impact on logging practices in exporting economies and usually simply increase the cost of timber in the importing countries.
Nevertheless, activist NGOs are pressing authorities in Europe and the US to press such measures on trading partners. The US for example has fostered establishment of an illegal logging expert group in APEC and is reportedly pressing for inclusion of restrictions on supposedly illegal timber in the Trans Pacific Partnership Trade Agreement which is under negotiation.
Expect a steady rise of complaints in the WTO about environmental trade barriers.
Read the latest issue of ASEAN+3 Trade Reporter for more trade developments.