Catalog

Trade Boom

Increased trade is having an integral - and growing - role in reducing poverty in Asia and the Pacific

By Omana Nair( onair@adb.org)
External Relations Specialist

Background

Enthusiasm to maximize regional trade was high, with regional trade agreements taking center stage in discussions among the 200 key policymakers and trade and development specialists who met in Seoul in November 2002 for the fourth Asia Development Forum (ADF).

“Regional trade agreements are an integral part of the broad economic cooperation initiatives launched by some Asian countries, providing new momentum to move forward on regional economic cooperation,” ADB’s Chief Economist Ifzal Ali said to the delegates.

“If implemented properly, regional trade agreements can help accelerate policy and structural reforms and build an enabling environment for poverty reduction and sustainable development. It will also help Asian economies maximize the benefit of the People’s Republic of China (PRC)’s World Trade Organization (WTO) entry, and effectively participate in the Doha Round of trade negotiations.”

The delegates from 21 countries also discussed ways to ensure that new trade agreements would boost development and poverty reduction in the region; implementation measures in anticipation of new trade agreements between the PRC and other Asian countries; implications of the PRC’s accession to the WTO; new regional trade agreements; behind-the-border competitiveness issues; and an approach to share benefits and minimize risks of globalization and regional integration.

“Regional trade is the most dynamic element of Asian growth right now. Increased trade resulting from recent agreements could play a major role in improving the livelihoods of Asia’s poor if proper policies are designed,” said Homi Kharas, the World Bank’s Chief Economist for the East Asia and Pacific Region.

Top

Boon for Region

He noted that increased integration was already having an impact. “In the first half of 2002, exports of eight East Asian economies to the PRC grew by 50%, while exports to the US and Japan were flat or declining,” he said. “This boost in regional trade, particularly when demand from developed countries is lagging, is a major boon for the region.”

“What really matters is how the details of these agreements are implemented and how countries respond with their own domestic reforms,” Mr. Kharas said. “Some countries, such as Cambodia, may be hurt by the elimination of garment quotas and the PRC’s emergence as a major exporter of garments and textiles. These economies must find strategies to offset these losses.”

The ADF, jointly organized by ADB, World Bank, Korea Institute for international Economic Policy, and Korea Development Institute (KDI), aimed to strengthen links in policy dialogue within the development community of the Asia and Pacific region.

In his keynote address, the Republic of Korea’s Deputy Prime Minister and Minister of Finance and Economy Jeon Yun-Churl, called for “step-by-step” regional integration by strengthening channels for cooperation “under a long-term vision of an ‘Integrated Asia,’ which begins with implementing existing agreements. He said, “From this point of view, we feel the need to replace the current ASEAN+3 Summit with an East Asia Summit and establish an East Asia Free Trade Area.”

Top

Integrated Approach

Stimulating Economies: New trade agreements have the potential to boost development

ADB Vice-President (Operations 1) Myoung-Ho Shin told delegates that economic openness will not deliver rapid and sustained economic development unless it is an integral part of a broad development strategy, which emphasizes macroeconomic stability, labor market flexibility, and good governance.

He stressed the need for better understanding of the impact of major events such as the Doha Round and the PRC’s WTO entry on the international trading environment and the complementary policy measures required for developing countries to successfully exploit trade liberalization in the fight against poverty.

In his recorded opening remarks, World Bank President James Wolfensohn noted the PRC’s preparation for WTO accession is already having an impact.

He said the PRC has become the seventh largest exporter and the eighth largest importer in the world. “But what is important is that the PRC has also become the fastest growing market for developing countries in East Asia,” he said.

KDI President Choongsoo Kim cautioned against rapid trade liberalization without supporting rules and institutions. “This does not mean we should slow down liberalization but that this process should be gradual as well as sequential,” he said.

Increasing market access in agriculture, liberalizing the services sector, and putting in place regulations, domestic reforms, and skills and capacities were high on the agenda to ensure that all participating developing countries benefit. He noted that domestic reforms in the PRC and other Asian countries would be pivotal in determining how the gains from increased trade are shared.

Top

Customized Approaches

Speakers at the forum stressed the need for customized approaches to managing the new trade regime, both for different countries and for various groups within countries or geographic areas. Textile and apparel workers in Indonesia, Philippines, and Thailand, for example, could be hurt by an expansion in PRC exports, while farmers in Philippines, Thailand, and Viet Nam may benefit from increased demand for rice and other agricultural products.

Countries must also develop their own policies to boost innovation. Participants said that off-the-shelf intellectual property rights regimes need to be tailored to each country’s needs and development circumstances.

Foreign investment policies that place fewer constraints on technology transfer and ownership requirements are more conducive to nurturing domestic production and technology capacity. Better investment climates, including liberalizing the services sector, will have a higher payoff.

Progress on services liberalization, which has not kept pace with trade reforms, could give another competitive boost to industries in East Asia.

Policymakers additionally called for increased capacity building and additional support in specialized areas, including trade negotiation, services liberalization, regulatory issues, and poverty reduction projects.

Top

Email this to a friend