How does a bowl of noodles or spaghetti resemble free trade agreements (FTAs)?
According to renowned Columbia University economist Professor Jagdish N. Bhagwati, graphic representations of routes used to ship products and parts through various FTA networks using tariff differentiation look similar to crisscrossing strands of spaghetti tangled in a bowl.
He call this the "spaghetti bowl" phenomenon, which some also refer to as the "noodle-bowl" effect.
The complexity is what it takes to ship finished products to consumers around the world at the lowest prices.
Although properly designed trade agreements keep trade and foreign direct investment flowing, some critics argue that FTAs, which include bilateral trade agreements (BTA) and regional trade agreements (RTA) also increase transaction costs, particularly for small- and medium-sized enterprises (SMEs).
Since the formation of the World Trade Organization (WTO) in 1995, RTAs have grown in number. As of Jan 31 this year, 377 RTAs are in force. This does not include new trade agreements such as the Trans-Pacific Partnership (TPP) that are still being negotiated.
Tan Sri Azman Hashim, one of the Malaysian members of the East Asia Business Council (EABC) says, with such complexity, the creation of a consolidated website covering the Asean+3 FTA and other bilateral FTAs would help greatly in navigating trade rules and regulations.
"Such info, with links to the Customs Department's procedures in different countries and trade data of partner countries, would make access to rules of various FTAs easier," he told Metrobiz.
He said this while explaining the East Asia Business Exchange (EABEX) web portal at the East Asia Business Forum organised by the EABC last month.
First initiated in 2011 by the EABC, EABEX is meant to help businesses gain access to markets and connect with potential investors, two critical ingredients for international business success, Azman said.
"The EABC realised that although the individual countries possess business listing and matching services, there was no centralised site or resource that could provide business matching on a regional scale for East Asia," he said.
To date, EABEX has registered over 5,500 members from 17 trade association across Asean, China, Japan and South Korea and is expected to accelerate the economic integration of the East Asian countries.
Participating trade associations include the Federation of Malaysian Manufacturers; Singapore Business Federation and Singapore Indian Chamber of Commerce and Industry; China Council for the Promotion of International Trade; Japan Chamber of Commerce and Industry; and the Korea International Trade Association.
By the fourth quarter of this year, EABEX will also be able to offer opportunities and information from members of the European Union with the formation of a new community network.
"We are continuously engaging SMEs using both online and offline mediums to secure higher registration levels for EABEX. More marketing efforts are being planned, such as the recently conducted East Asia Business Forum organised by EABC Malaysia recently in Kuala Lumpur," he said.
Linking partners
EABEX enables registered parties to search for products and services from authenticated companies and suppliers that are members of trade associations of Asean member countries Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, as well as China, Japan and South Korea.
Understanding the importance of driving greater business-to-business (B2B) exchange in the region, Asean governments, plus China, Japan and South Korea, are supporting the development of EABEX via funding through the Asean+3 Cooperation Fund (APTCF).
The EABEX platform is intended to be self-sustaining, through the support of the participating trade associations and the efforts of Barterfli Holdings Pte Ltd, a website developer based in Singapore that provides e-services on a subscription basis.
Barterfli will also secure sponsorship and advertising revenue to provide online support to EABEX members, update the website to ensure relevancy and upgrading the e-services, such as the FTA Gateway, business connectivity and e-commerce facilities.
"Barterfli was selected after a comprehensive evaluation process because it had the necessary, expertise and experience to define and design a solution to address the economic needs and concerns across a region," Azman said.
He added that the company’s expertise, coupled with its strong desire to help SMEs level the playing field and be more competitive, resulted in a unanimous decision to award the project to Barterfli.
Regional powerhouse
All members of participating trade associations are provided with a free basic seller account on EABEX.
A seller account allows the member to upload and promote their products as well as utilise a host of e-services.
These services allow SMEs to connect via business matching and receive support throughout the trade cycle.
All information received via registrations are kept confidential and in compliance with data protection regulations. One of the key differentiators of EABEX is that only members of trade associations can upload and promote their products and receive enquiries, which adds a higher level of security and authenticity as they are verified or can be verified by the respective trade associations.
"This ability to be verified by an independent organisation, and in the future when independent credit reports can be made available to the respective participants in the system, makes it safer for buyers and sellers to transact on EABEX," he said.
Azman, who was the first chairman of the EABC, said one of the key services in EABEX is the FTA Gateway.
Currently, it has over 15 FTAs in a database, including the Asean FTA (Afta), Asean-China FTA (ACFTA), Asean-Korea FTA (AKFTA) and Asean-Australia-New Zealand FTA (AANZFTA).
"One of the key challenges faced by businesses is the lack of resources to help them determine their eligibility to benefit from these FTAs," he said.
To help SMEs, he said the platform begins by identifying the Harmonised Standard (HS) codes for their products and then identifying the FTAs under which they qualify to reap potential savings.
The system also promotes FTA-eligible suppliers while providing access to comprehensive tariff rates and Rules of Origin (ROO), and allowing comparisons with alternate destinations and sources so as to plan ahead their market development strategies.
"The FTA Gateway is a one-stop service to have an overall view of all FTAs without the need to visit and read through individual sites managed by the various economies," he concluded.