The leaders of the Asia-Pacific region are meeting in Hawaii. Might sound insignificant but together the member nations account for over 40% of the worlds trade and population.
Unlike the EU trade agreements in the area are fairly rudementary. They consist of a series of bilateral agreements and a few small Free Trade Areas - FTA's (although NAFTA is an obvious exception). Now nine members of APEC are talking about extending the TPP - a small free trade association set up in 2006 - to include the USA and Japan among others.
Economists like free trade. They don't see trade as a 'zero-sum' game, where losers and winners cancel each other out. Rather everyone gains from trade, the buyer and the seller both think they are better off as a result of an exchange, otherwise they wouldn't do it. And so it follows that the more trades that take place the more people that are better off.
At the most fundamental level trade allows specialisation and exchange. As everyone already knows that is the basis on which the economy of the world has been able to improve the standard of living of everyone since before the industrial revolution.
But free trade meets significant opposition. In the recession there were fears that 'economic nationalism' would lead to a new round of protectionism in the misguided belief that it would help keep jobs in countries experiencing difficulties. Despite the lessons of history some countries continue to have strong protectionist lobbies that value short-term protection over long-term prosperity and a political system that rewards such views (such as Australia).
The move to a nine-member Pacific FTA is therefore to be welcomed. In theory FTA's are the lowest rung on a ladder towards full economic integration. The next rung up is a customs union and then a common market and above that the EU style 'monetary union'. The aim is to increase the well being of all members by allowing more trade and so more specialistion. FTA's tend to be about trade in goods only, but represent a significant advance and the new TPP will include some non-goods trade provisions.
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