Freedom to trade in South and East Asia

* This is my article in Business 360, published in Kathmandu, October 2015 issue.

b 0ctFreedom to trade in South and East Asia

The freedom to sell one’s extra output and services, and the freedom to buy other people’s goods and services, is part of human nature. Humanity’s economic, social and cultural advancement from the primitive to modern times was made possible only with their freedom to trade and freedom of entrepreneurship and innovation.

There are various measurements of freedom to trade of countries today. One of which is Fraser Institute’s Economic Freedom of the World (EFW) annual reports.

The EFW is composed of five areas: (1) Size of government, (2) Legal system and property rights, (3) Sound money, (4) Freedom to trade internationally, and (5) Regulation.  And area 4 is composed of four sub-areas, shown in the tables below.

The EFW employs a scoring system of 0 to 10, where zero is totally unfree and 10 means there is full economic freedom.  Thus, high revenues from trade taxes, high tariff, wide variations and deviation of tariff rates mean low score. And more regulatory barriers, more NTBs also mean low score, low degrees of economic freedom for entrepreneurs.

In South Asia, Nepal and Bangladesh have scored better than India, Sri Lanka and Pakistan. Nepal in particular scored 122nd out of 157 countries. It ranked high in sub-areas (a), and average or mean tariff rate with just 12.2 percent, but it scored low in sub-areas (b) regulatory trade barriers and in (d) controls  of  movement of capital and people.

India ranked high in revenues from trade taxes and mean tariff rate, but was pulled down by big standard deviation of tariff rates, and controls of movement of goods and people.

b 0ctSource: Fraser Institute, EFW 2015 Report,
http://www.freetheworld.com/2015/economic-freedom-of-the-world-2015.pdf

To serve as comparison, four ASEAN countries are also studied. The 10 countries in the ASEAN generally have low tariff rates, with scores of 8 to almost 10 (Singapore and Brunei). This is a reflection of the accelerated trade liberalization in goods in the region.

There are problems of course, like having wide variations and high standard deviations in tariff rates, like Singapore, Malaysia, Thailand and Vietnam; they scored below 6.

The 9 countries above except Singapore and Malaysia scored below 6, rather low, in NTBs. EFW used data from the WEF’s Global Competitiveness Report, survey on NTBs.

ASEAN countries generally have low tariff rates, with scores of 8 to almost 10 (Singapore and Brunei). This is a reflection of the accelerated trade liberalization in goods in the region.

But there are problems too, like having wide variations and high standard deviations in tariff rates, like Singapore, Malaysia, Thailand and Vietnam; they scored below 6. EFW used data from the WEF’s Global Competitiveness Report, survey on NTBs.

b 0ct2Possible lesson for Asian economies, continue reducing import tariff rates….

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