Developing countries of Asia and the Pacific need bold new domestic policies in order to benefit from free trade, and industrialized economies should back fairer trade rules giving poorer nations the chance to compete in the global marketplace, according to a new United Nations report that lays out an eight-point strategy for development.
The UN Development Programme’s (UNDP) 2006 Asia-Pacific Human Development Report, “Trade on Human Terms: Transforming Trade for Human Development in Asia and the Pacific,” was released today in the Cambodian capital Phnom Penh and is the first in a new annual series, the agency said in a press release.
“Trade on Human Terms comes at a critical time with only a few months left before the end-of-year deadline for the completion of the Doha Development Round. We are at the midpoint of the 10-year Brussels Programme of Action for Least Developed Countries and have less than a decade to achieve the targets of the Millennium Development Goals,” said UNDP Administrator Kemal Dervis, referring to targets to slash a host of ills, such as extreme hunger and poverty, by 2015.
Among the findings included in the report is that Asia’s opening to the global market has propelled record economic growth and reduced income poverty in much of the region. Its cheap, labour-intensive manufacturing and high-tech goods have made it the “factory of the world.” East Asia’s “miracle” economies, in particular, have used trade to boost exports and accelerate progress in other areas including education, health and gender equality.
Yet at the same time, trade has exacerbated inequalities, not only between countries but also within national borders. And some of the region’s most open economies – particularly the East Asian success stories – are grappling with the challenge of “jobless growth,” with job creation lagging far behind workforce expansion.
Further, the benefits of free trade have accrued more to highly-paid skilled workers than unskilled workers, while job opportunities and working conditions for women in textiles and clothing in the poorer countries are threatened by competition from China and the demise of global quotas.
“Asia and the Pacific have embraced globalization, but globalization cannot embrace the region’s poor without determined action on the part of governments,” said Hafiz A. Pasha, the Director of UNDP’s Regional Bureau for Asia and the Pacific, who launched the report at a ceremony with Cambodian Prime Minister Hun Sen.
The report also highlights that some parts of Asia-Pacific – especially the 14 Least Developed Countries that include Cambodia – and the Pacific Island countries, have seen few tangible human-development benefits from trade and also face tough conditions for membership of the World Trade Organization (WTO).
“Due to the tyranny of averages, the relatively poor performance of Asia’s Least Developed Countries gets little attention,” said Anuradha K. Rajivan, who led the Colombo-based multinational team that prepared the Report for UNDP.
Key recommendations in the report call for investing in for national governments to make trade work for the poor are:
Invest for competitiveness, including in education as well as in research and development, especially for agriculture and trade-related infrastructureAdopt strategic trade and industrial policies, by not opening up too early strategic industries and by introducing properly sequenced tariff barriers with a clear timeframe Refocus on agriculture, emphasizing investment in rural development, maintaining tariffs on food imports, and ensuring that global trade negotiations agree on special safeguard mechanismsCombat “jobless growth,” by recalibrating interest rates; phasing out fiscal incentives that artificially raise the return on capital and result in moves away from labour; and adopting labour-market policies to encourage flexibility and retraining Prepare a new tax regime, ensuring that new taxes are equitable and protect the poor; develop income taxes and curb evasion, while exploring promising new areas such as real estate, capital gains and value-added tax to compensate for revenue losses from trade liberalizationMaintain stable exchange rates, providing realistic exchange-rate management that values a currency neither too high nor too low and maintains real stabilityPersist with multilateralism, for more durable human-development outcomes, building up slower but ultimately more productive relationships under the multilateral global trade regime rather than seeking highly imbalanced bilateral agreements with rich nations andPromote regional cooperation, strengthening regional trade agreements, pooling of foreign-exchange reserves and development of an Asian bond market.