Trade and regional integration in Asia and the Pacific and the Arab States

This brief provides a short analysis of trends, potential employment and economic impacts of RCEP, TPP and trade integration, as well as recommendations with regards to trade and integration in Asia and the Pacific and the Arab States.

Supported by a “noodle bowl” of trade agreements and regional integration initiatives such as the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC), the share of intra-regional trade and foreign direct investment (FDI) in Asia and the Pacific (excluding Arab States) has risen in past decades to account for more than half of total trade and FDI in the region. The Regional Economic Partnership (RCEP) if concluded, and the Trans-Pacific Partnership (TPP) when it comes into force, are likely to further influence trade flows and the global and regional value chains operating in the region, with consequent effects on labour markets. Simulations using a computable general equilibrium (CGE) model suggest that implementation of trade liberalization and facilitation among RCEP and TPP countries, and among Asia-Pacific countries, should bring benefits in terms of aggregate output and total employment, but the gains will not be evenly distributed across gender, sectors or occupations. Furthermore, as a result of trade diversion, nonparticipating countries in regional integration initiatives are forecast to experience losses in real GDP and total employment.
Ensuring that regional integration leads to more inclusive outcomes will require appropriate industrial and employment policies. These should be coordinated with skills development policies, thereby: (a) enabling workers and enterprises to participate and benefit from international trade; (b) integrating labour provisions, including fundamental principles and rights at work, in trade agreements and closing the governance gap in countries; and (c) continuing efforts to build nationally defined social protection floors and extend the coverage and quality of social security, helping workers and their families adjust to structural change while ensuring that the benefits of trade are more widely shared.