Bold Agenda for Trade on Human Terms in Asia - Pacific

Jun 29, 2006

PHNOM PENH, Cambodia, 29 June 2006 – Developing countries of Asia and the Pacific need bold new domestic policies in order to benefit from free trade, and the industrialized economies should back fairer trade rules giving poorer nations the chance to compete in the global marketplace, says a report on regional trade challenges released by the United Nations Development Programme.

Bold Agenda for Trade on Human Terms in Asia-Pacific
New UNDP Report Shows That Asia’s Embrace of Free Trade Is Not Creating Enough Jobs for Region’s Poor

PHNOM PENH, Cambodia, 29 June 2006 – Developing countries of Asia and the Pacific need bold new domestic policies in order to benefit from free trade, and the industrialized economies should back fairer trade rules giving poorer nations the chance to compete in the global marketplace, contends a comprehensive report on regional trade challenges released today by the United Nations Development Programme.

UNDP’s 2006 Asia-Pacific Human Development Report, “Trade on Human Terms: Transforming Trade for Human Development in Asia and the Pacific,” puts forward an ambitious eight-point agenda for national governments to make trade work more for the poor. The Report’s recommendations include prioritised public investments for competitiveness, the adoption of strategic trade policies, a renewed focus on agriculture and rural development, and strategies for combating “jobless growth.”
Trade on Human Terms comes at a critical time,” said UNDP Administrator Kemal Dervis, “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.”
The Report, first in a new annual series focusing on critical development issues in the region, strongly urges the introduction of new tax regimes, the maintenance of stable and realistic foreign-exchange rates, and strengthened regional cooperation.
Asia-Pacific’s massive build-up of foreign-exchange reserves – now totalling nearly US$1.9 trillion -- represents an untapped resource that could be used to buffer the oil-price shock affecting poorer countries, as well as to finance necessary investments in essential public services and regional infrastructure, the Report asserts.
“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, United Nations Assistant Secretary-General and Director of UNDP’s Regional Bureau for Asia and the Pacific, who launched the Report in a ceremony here today with Prime Minister Hun Sen.
Trade on Human Terms” notes 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.Regional growth performance

  GDP growth (average annual %)
GDP per capita annual growth rate (%)
  1980-1990 1990-2003 1990-2002
East Asia & Pacific 7.90 7.60 5.4
South Asia 5.50 5.40 3.2
Europe & Central Asia   0.60 -0.9
Latin America & Caribbean 1.50 2.70 1.3
Middle East & North Africa 1.30 3.20 -
Sub-Saharan Africa 1.70 2.80 -

Sources: World Bank, 2005, IMF, 2004
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. The benefits of free trade have accrued more to highly-paid skilled workers than unskilled workers, the Report shows, 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.
Other key findings
Among other key findings of the Report:
What was previously non-tradable has become tradable, especially in services, with great potential for short-term labour migration, business outsourcing and tourism to give people opportunities to rise out of poverty
The region has gained overall in the new quota-free era for textiles and clothing exports, but most of the gains have gone to China
In the face of trade barriers, subsidies, price distortions, and official neglect, agriculture has stagnated and the Asia-Pacific region has become a net agricultural importer, imperiling food security and deepening rural poverty
Selective and sequenced opening to trade is crucial to successfully managing globalization
“Trade and human development have a two-way relationship,” noted Minh H. Pham, Regional Manager of the UNDP Regional Centre in Colombo. “Overall, trade ‘winners’ and ‘losers’ are dependent on factors such as the pre-existing health, education and infrastructure development of a country, which then stimulates more balanced growth.” In the “miracle” economies, for example, past human development achievements had positively influenced their ability to take advantage of trade opportunities.
Asia-Pacific region's share in world trade, 1973-2000 (%)

Source: WTO, 2005
Challenges for many countries to compete
Some parts of Asia-Pacific, especially the 14 Least Developed Countries[1], or LDCs, and the Pacific Island countries, have been severely challenged by the lack of tangible human-development benefits from trade. These countries have been eager globalizers, but face tough conditions for membership of the World Trade Organization. “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.
At the same time, they are being out-competed and overwhelmed by imports from China, while having little success selling their own goods in the region’s largest market.
The Report, described by UNDP Regional Bureau Director Pasha as “by and for the people of Asia-Pacific,” was the product of an extensive consultation process with hundreds of experts from very different walks of life: scholars, government officials, representatives of non-government organizations, civil society and the private sector.
Key Recommendations
The Asia-Pacific Human Development Report 2006 makes eight key recommendations:
1. Invest for competitiveness, including in technical or tertiary education as well as in research and development, especially for agriculture and trade-related infrastructure
2. Adopt strategic trade and industrial policies, by not opening up too early strategic industries and by introducing properly sequenced tariff barriers with a clear timeframe
3. Refocus on agriculture, emphasising investment in rural development, maintaining tariffs on food imports, and ensuring that global trade negotiations agree on special safeguard mechanisms
4. Combat “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
5. 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 liberalization
6. Maintain stable exchange rates, providing realistic exchange-rate managementthatvalues a currency neither too high nor too low and maintains real stability
7. Persist 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
8. Promote regional cooperation, strengthening regional trade agreements, pooling of foreign-exchange reserves and development of an Asian bond market.

The United Nations Development Programme (UNDP) is the UN’s global development network, advocating for change and connecting countries to knowledge, experience and resources to help people build better live. The UNDP Regional Centre in Colombo was established in January 2005 as a regional hub for development knowledge and expertise, providing advisory and capacity development services in Poverty Reduction and HIV and Development, with Gender Equality as a crosscutting concern. The annual Asia-Pacific Human Development Report Series is intended to provide the region a forum for furthering development dialogue and debate in support of a pro-poor agenda.

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