Since the early 1990s, international trade growth has persistently eclipsed foreign investment growth in the Asia-Pacific. Over this time Asia-Pacific trade in goods and services expanded on average at 7.1 per cent per annum nearly twice as fast as GDP growth at 3.7 per cent. This trade growth has reflected APEC’s priority in liberalising international trade over foreign investment.

However, in the past decade international trade growth in the region has slowed, corresponding more closely with GDP growth. This presents an opportunity for foreign investment in APEC to make up for the trade slowdown and play at least as important a role in economic development. Greater cross-border investment within APEC and between APEC and the rest of the world can and should play a greater role in regional economic development.

Trade eclipsing investment in the Asia Pacific

Generations of economists have argued that free trade in goods and services improves economic welfare. A corollary of their arguments is that trade restrictions, especially in the form of tariffs and quotas on imports, reduce economic welfare because they impose additional direct costs on consumers and indirect costs on exporters.

Please click here to read the full “Advancing foreign investment in APEC” article published by Hinrich Foundation, written by Griffith Asia Institute member, Professor Tony Makin.