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
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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
2
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
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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
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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
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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
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Promoting market access
Different 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
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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
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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
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SACU
MERCOSUR
GULF
Hong Kong,
China
Macao,
China
Afghanistan
BIMSTEC
SAFTA
Maldives
Bhutan
Pakistan
Ukraine
Belarus
India
Rep. of
KoreaLao
PDR
Azerbaijan
AFTA
Thailand
Kazakhstan
SPARTECA
Tajikistan
Russian
Fed.
Uzbekistan
Japan
China
Sri
Lanka
Nepal Bangladesh
Georgia
Armenia
APTA
Niger
Kyrgyzstan
Australia
Myanmar
Marshall Is.
Micronesia
New
Palau Tuvalu
Philippines
Malaysia
Singapore
Zealand
Chile
Turkmenistan
Papua
CISFTA
New
Cook Is. Fiji
Moldova
Guinea
Kiribati Nauru
PICTA
Niue Samoa Solomon Is.
Tonga
Vanuatu
Brunei
Darussalam
Cambodia
Indonesia
Bahrain
Viet
Nam
Qatar
Jordan
Turkey
MSG
EU
Mexico
APTIAD, Feb 2007, some PTA s not
shown
Canada
EFTA
USA
Panama
Peru
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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
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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
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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
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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
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THANK YOU !
...QUESTIONS ?
Pre-UNCTAD XII Civil Society Forum in Asia
Hanoi, 6-7 March 2008
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