MANILA, Philippines -- East Asia's web of free-trade agreements boosts businesses in the region and could help counter falling trade and protectionism, said a study released by the Asian Development Bank.
Critics of the agreements say the explosion of deals, with complex rules and variable tariffs, has increased transaction costs for small- and medium-size enterprises that can least afford them, and has hindered the broader push toward a global free-trade agreement.
But the ADB Institute's study -- drawing on survey data collected in 2007 and 2008 from 609 exporters in Japan, Singapore, Korea, Thailand and the Philippines -- found the deals benefit rather than burden companies.
The study, written by the institute's dean, Masahiro Kawai, and by Ganeshan Wignaraja, an ADB principal economist, is the first comprehensive survey of the impact on business of East Asia's numerous trade pacts, the Manila-based ADB said Tuesday.
In 2000, only three free trade deals in East Asia were in effect. In March 2009, the ADB estimates there were 37 such pacts, with an additional 72 in the pipeline.
Benefits include wider market access and preferential tariffs that make it easier to import intermediate materials needed for finished goods. Added costs as a result of multiple-country rules of origin -- which determine the origin of goods for purposes such as quotas and labeling -- weren't a significant hindrance, the study found.
Bilateral and multilateral free-trade agreements can also counter protectionism and provide a valuable stepping stone toward broader trade liberalization, the ADB said.
Mr. Wignaraja said signs of protectionism in the form of nontariff barriers, subsidy packages and "buy local" conditions among trading partners are aggravating the current trade slowdown.
"Free trade agreements, if designed in line with World Trade Organization principles and in the spirit of openness, may be critical in curbing economic isolationism and falling trade activity," he said.
The study found a higher-than-expected 22% of the East Asian companies surveyed were taking advantage of the trade pacts. The figure will likely nearly double when future pacts are included, it added.
Some 27% of respondents said multiple rules of origin significantly added to business costs, but the bulk of the companies didn't think they were a problem.
