CommentaryFree-trade agreements are becoming so common in Southeast Asia that it’s tempting to call for the last country without one to turn out the lights.Â

But FTAs may not be the panacea they are touted to be.Â

While the U.S. has spent years trying to push through a 34-nation FTA that Brazil so far adamantly opposes, Japan and China quietly are cultivating individual trade agreements with vehicle-producing countries that include Thailand, Malaysia, Indonesia and Australia.Â

Even New Zealand has entered the picture in a 4-way FTA with such disparate partners as Brunei, Chili and Singapore, known as the Trans-Pacific Strategic Economic Partnership Agreement.

The region’s first large-scale FTA, which inspired this growing movement, was the formation of the 10-member Association of Southeast Asian Nations. ASEAN has brought particular success to Thailand, transforming it into an export launch pad for global auto makers, including General Motors, Ford and Toyota

Yet, while the lowering of trade barriers theoretically is beneficial to the parties involved, that is not necessarily the case. A study published in May by New York consulting firm KPMG concludes the many FTAs being put into place across Asia may spark a major shift in the makeup of the region’s automotive and components markets.Â

Smaller parts makers and domestic car companies may struggle in the reshaped market, with many companies forced to re-think their strategies, the study suggests.Â

Australia’s component sector already is feeling the pinch from cheaper imports and offshore labor, a report in the country’s national newspaper, The Australian, says. Once the backbone of domestic auto makers and export earnings of $2 billion annually, auto suppliers are shifting their operations to low-cost China and Thailand.

U.S.-based seatbelt and airbag maker Autoliv announced in June plans to shed 200 workers and begin outsourcing from China. Trico, which makes windshield wipers, is sacking 160 staff at its Melbourne plants and also shifting production to China.Â

Brake maker Pacifica is relocating some plants to China and Thailand, while BMW’s Australian leather supplier Schaffer has lost its contract to a South African firm. And Aussie auto maker GM Holden recently dumped windshield supplier Pilkington after 70 years for a Thai glass maker.Â

Analysts suggest this is the tip of the iceberg, as Australia’s four domestic auto makers struggle to compete against a coming onslaught of cheaper imports. Many more suppliers unable to slash prices enough to meet OEM demands are either moving to low-cost countries or outsourcing from them.Â

All of this is uncomfortably familiar to the U.S. market, where the Big Three and their suppliers are struggling to stay afloat in a sea of Asian competitors. And there’s more to come. According to KPMG’s study, by 2009, light-vehicle production in Asia will hit 17 million units, putting it on a par with the U.S. and Europe.Â