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By Marc Proksch Trade and Investment Division UNESCAP

Key Trade and Development Issues and the New Realities in the Geography of the World Economy: An Asian-Pacific Perspective. By Marc Proksch Trade and Investment Division UNESCAP. Evidence of contribution of trade to development is overwhelming.

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By Marc Proksch Trade and Investment Division UNESCAP

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  1. Key Trade and Development Issues and the New Realities in the Geography of the World Economy: An Asian-Pacific Perspective By Marc Proksch Trade and Investment Division UNESCAP Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  2. Evidence of contribution of trade to development is overwhelming • Trade provides the means for countries to pursue development in a self-determined and sustainable manner thus reducing dependence on aid and debt relief • No country has witnessed rapid economic growth without trade • Asian “miracle”: from import substitution to export and import-led growth • Current experiences of India, China, Viet Nam, among others, speak for themselves • However, experiences are not all positive: pockets of poverty remain, and some liberalization has resulted in increased poverty Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  3. Some observations • Lesson: trade is essential but not sufficient for development: enabling policy and institutional environment is also required • Trade-development linkages are complex and often indirect • There is a direct link between trade and economic growth; however economic growth is not enough to ensure income growth and distribution and poverty reduction • For trade to grow, trade liberalization and facilitation are required in an enabling policy environment; private sector as principal agent • Trade growth has two dimensions: export and import growth; both are required for development Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  4. Role of exports in development • Generates financial resources/foreign exchange for investment, import of essential capital goods and technology • Contributes to growth of enterprises and hence, employment (e.g. garment industry in Cambodia and Bangladesh); important role of SMEs! • Attracts FDI in the export sector, bringing technology, capital, management expertise, access to markets • Hence, exports lead to economic growth, which leads to increased consumption and investment, which leads to further economic growth (multiplier effect) • Economic growth leads to higher tax income which can be used by governments for development purposes • Contribution of exports to income distribution and poverty reduction is not automatic but depends on government policies Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  5. Role of imports and import liberalization in development • No country is self-sufficient in all required goods and services • Imports of capital goods, parts and components, raw materials, technology etc. required for export sector and development • Import liberalization ensures cheaper access to essential goods for consumers, including food; wider choice of products • Selective import protectionism may be warranted in early stages of development. However… • …import competition ensures better quality at market prices of goods and services but may phase out uncompetitive enterprises and industries and lead to short-term employment loss • Tariff reductions may lead to decreased government revenue; need for tax reform; in the long run income growth offsets losses Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  6. Two issues in promotion of trade • Market access: being able to export your product/service on the basis of fair competition and in a level playing field • Supply-side capacity building: building productive capacities for international competitiveness Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  7. Promoting market accessDifferent modalities • Multilateral (WTO, DDA) • Regional (RTAs)/GSP schemes • Bilateral (BTAs) • Unilateral (non-reciprocal but still beneficial) Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  8. Multilateral trade liberalization • Most efficient form of trade liberalization: universal, rule-based, non-discriminatory (MFN, national treatment) and predictable; access to dispute settlement • Special provisions for LDCs: many exemptions/S&D/duty and quota-free access for most products to major export markets • However, progress is very slow, positions and countries national interests vary widely though breakthrough may be imminent • Main areas of concern seems to move away from agriculture towards NAMA (special products) and services • 20 out of 49 regional ESCAP members still not member of WTO Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  9. Regional and bilateral trade agreements:Boon or bane? • Less efficient than multilateral trade agreements • Can lead to trade and economic growth if they are comprehensive with far-reaching commitments – usually they are not • Potential trade diversion; undermines WTO rules on discrimination • Rules of origin, red tape and lack of trade facilitation may undermine benefits • Asymmetrical bargaining power may work against weaker party’s interest • Overlapping RTAs are not in business’s interest: costs exceed benefits Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  10. SACU MERCOSUR GULF Hong Kong, China Afghanistan Macao, China BIMSTEC Japan SAFTA Niger Maldives APTA Bhutan India Ukraine China Pakistan Sri Lanka Belarus Rep. of Korea Georgia Nepal Bangladesh Lao PDR Azerbaijan Armenia AFTA Kazakhstan Thailand SPARTECA Tajikistan Philippines Australia Myanmar Russian Fed. Marshall Is. Micronesia PalauTuvalu Cook Is.Fiji Kiribati Nauru Niue Samoa Tonga Malaysia Singapore New Zealand Uzbekistan Kyrgyzstan Brunei Darussalam Cambodia Chile Turkmenistan Indonesia Papua New Guinea CISFTA Bahrain Moldova Viet Nam Qatar PICTA Solomon Is. Jordan Vanuatu Turkey MSG USA Mexico EFTA Peru Canada Panama EU APTIAD, Feb 2007, some PTA s not shown

  11. Supply-side capacity building: developing an enabling business environment through public-private partnerships • Building national competitiveness: no longer solely on basis of comparative advantages in resources but rather on basis of brand name, uniqueness, marketing • Principal agent of trade: commercial (private) enterprises. Policy environment for enterprises matters: emphasis on private enterprise and fair competition; promoting CSR • Enhance enterprise capacity to deliver quality products in time • Legal and institutional framework: rule of law (conducive laws and their enforcement): stability vs. efficiency • Infrastructure: financial, physical (transportation and communications, energy and water etc.) • Human resources development/R & D/technological capacities/IPR • Trade facilitation/ reduce red tape and corruption in business transactions/trade finance Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  12. Major current challenges and threats to trade and development • Failure of Doha Round: return to protectionism? • Proliferating RTAs: noodle bowl effect may deny the benefits • From sub-prime to prime problems: from US to global recession? • Keeping up with the Joneses: struggle to gain and maintain competitive advantages – the China factor; rising inflation • From market access to supply side capacity building: easier said than done; Will Aid for Trade help? • From trade liberalization to trade facilitation: the new frontier • Environmental concerns: global warming, dwindling (energy) resources, and many others • Social concerns: burgeoning and ageing populations and employment concerns; spreading the welfare equitably Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  13. Need for regional economic cooperation and integration • South-South economic cooperation: the basis could be the RTA “covering substantially all the trade”, including services • Next step: South-South cooperation in investment and enterprise development: RTA expanded to include investment, technology, IPR, etc. • Deepening integration: South-South cooperation in finance but also in energy, transport and communications infrastructure • Consolidating and integrating cooperation mechanisms to ensure policy coherence and consistency • Capacity development: building (sub) regional supply chains through trade facilitation and building enterprise capacity to deliver quality goods in time (sharing resources, joint R & D, technology development, IPR, etc.) • But: need to move from rhetoric to action! Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  14. Conclusions • Trade is essential (but not sufficient) for economic growth and development but conducive policy framework and enabling environment to be effective • Market access: primacy of the multilateral trading system • Moving from market access issues to supply-side capacity development • Working together for development: public-private partnerships • The way forward: deepening and broadening regional cooperation and integration: political will is essential • Organizations like ESCAP can help: www.unescap.org Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

  15. THANK YOU ! ...QUESTIONS ? Pre-UNCTAD XII Civil Society Forum in Asia Hanoi, 6-7 March 2008

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