An eye on rival trade pacts

The barometer of this is the activity in the region’s terminals and the larger vessel sizes now progressively being deployed.

The cascading of vessels into these trades by lines as they become surplus to requirements on other routes where new, larger, tonnage is being deployed is a factor in the latter, but nevertheless the underlying trade dynamics are the main reason behind the system developments taking place – the introduction of new vessel and port capacity.

And there is the prospect of further major trade growth stemming from the proposed Regional Comprehensive Economic Partnership between China and 15 other Asia-Pacific countries – a rival pact to the US-led Trans Pacific Partnership, a free trade arrangement involving a dozen countries but excluding China. The goal is to have the negotiations involving the Comprehensive Partnership completed by 2015.

The Comprehensive Partnership covers Thailand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Vietnam plus as well as the grouping’s six key trading partners — China, Japan, South Korea, Australia, New Zealand and India. The Southeast Asian grouping of countries already has separate free trade pacts with the six nations.

Seven of the comprehensive partnership members — Brunei, Malaysia, Singapore, Vietnam, Australia, New Zealand and Japan — are also involved in the Trans-Pacific Partnership talks. Chile, Canada, Mexico, Peru and the US are the other members in the Trans-Pacific Partnership, which accounts for nearly 40% of global GDP and about a third of world trade.

Negotiations on the Trans-Pacific accord began in 2005 and President Barack Obama’s administration has said it hopes to conclude discussions by the end of this year.

The Comprehensive Partnership will not be a ‘platinum card’ free trade agreement – it makes compromises in terms of scope and technical aspects such as intellectual property rights in favour of getting up and running fast. It nevertheless promises to be a major accelerator to the already strong inter-Asia trade growth.

On the one hand, it will facilitate the economic production of certain goods on a component by component basis with assembly in a location such as China. On the other it will see more goods introduced to the container system as the free trade system makes it economically viable to achieve this even, for example, with bulk commodities.