Trade and investment continues to drive Asia-Pacific growth, but with uneven benefits: UN ESCAP

 

According to the Asia-Pacific Trade and Investment Report 2013 ‘Turning the Tide: Towards Inclusive Trade and Investment’ published by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the Asia-Pacific region continues to outperform the rest of the world in the pace of overall growth, with trade-led expansion continuing to feed the region’s economic dynamism. Yet strong trade- and investment-led growth in the region has been accompanied by rising inequalities.

"The overarching message of this year’s Report is that securing continuing growth of trade and investments remains among the top economic priorities for the region, but this comes with the realization that the quality and patterns of growth must also be enhanced," said Dr. Noeleen Heyzer, Under-Secretary-General of the United Nations and ESCAP Executive Secretary. "We need trade and investment to generate inclusive growth and shared prosperity, building the productive capacities of our countries." 

Speaking at the report launch today, Dr. Ravi Ratnayake, Director of ESCAPs Trade and Investment Division noted: "It is prime time to charge trade- and investment-led growth with delivering benefits for all and reducing vulnerability amongst the poorest, to turn the tide towards inclusive trade and investment. Focusing primarily on the role of trade and investment in increasing overall growth, and considering distributional issues as secondary, has not produced inclusive societies."

Among the report’s findings, regional demand was shown not to be exempt to enduring weakness in major external economies. The report estimates that

merchandise exports and imports of the regions developing economies will see growth below 6% in real terms in 2013. A modest improvement to 7 per cent is expected in 2014. For commercial services, Asia and the Pacific registered the highest growth rates for exports and imports in the world, at 5.2 per cent and 5.9 per cent, respectively. These rates were, however, less than half of the rates achieved in 2011.

FDI inflows continue to head towards the developing Asia-Pacific economies. Developing Asia-Pacific economies alone account for 33 per cent of global inflows. However, FDI inflows to the East and North-East Asian subregion were down 8% from the previous year to $215 billion in 2012. China, however, continues to attract impressive levels of FDI; investments in 2012 totaled US$121 billion.

Prolonged crisis has not caused a massive recourse to protectionism, according to ESCAP. Many countries have refrained from introducing protectionist measures despite crisis-induced pressures. This has been in large part due to the changed nature of global production and trade, in particular the rise of global production networks.

Additionally, the report finds unacceptably high trade costs undermine benefits for least developed and landlocked developing countries. In most

cases, as shown in the ESCAP-World Bank Trade Cost database, it still costs more for Asian subregions to trade with each other than to trade with developed economies outside the region. 

ESCAP also identifies reforms to preferential trade policies that are needed in order to promote the development of countries with special needs. Governments continue to use preferential trade agreements (PTAs) to secure access to foreign markets and defend domestic markets. While these schemes provide preferential market access, more effort is needed to improve the supply capacity of beneficiary countries. More liberal rules of origin, in particular with regards to the issue of cumulation is also of critical importance for the least developed countries.