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> Asian
Development Outlook 2010
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Opening statement at the Asian Development Bank's presentation
I am very happy to welcome the Asian Development
Bank to the WTO for the Launch of the Asian Development Outlook 2010 in
Geneva. A warm welcome to the ADB team, and to the other experts and
participants of this event. This event is another example of the
collaboration between our two institutions, which has increased
significantly at all levels in recent times. We work towards similar
objectives of sustainable development and increasing opportunities available
to our Members.
The ADB team is presenting their annual flagship
report in our House for the first time, and they bring good economic news
with them. According to their report: “with global recovery now under way,
the outlook for developing Asia looks brighter. GDP growth is forecasted to
rebound to 7.5% in 2010, with every sub-region expected to perform better
than last year.”
This is very important because today many count
upon Asia to help the world economy recover from the recession. This
interest in the Asian region is from both countries within and outside the
region. The interest arise on account of the trade and investment links
among countries, and the importance of international trade in the recovery
period ahead. As the Outlook 2010 Report says that “the gradual recovery of
international trade is as much a consequence as it is a driving force of the
economic bounceback”.
A significant feature of this bounceback or
recovery which has taken place after a historic decline in economic activity
is the relatively short period within which the global economy achieved a
turn-around in comparison to previous economic crises. A crucial ingredient
for this exceptional positive development is the co-ordination and
co-operation amongst nations to deal with the crisis. These efforts were
facilitated immensely by the presence of co-operative multilateral
institutions, including the WTO and the ADB. As WTO Director-General Pascal
Lamy pointed out yesterday in his speech in Santiago, Chile, one main
difference between the world economic crisis today and the one in the 1930s
is that we now have the discipline of the trade rules within which WTO
members operate. Thus, despite the crisis, trade routes have remained
largely open for the past two years, contributing importantly to the
recovery process.
The ADB Report being launched now is on
“Macroeconomic Management Beyond the Crisis” (my emphasis). Almost by
definition when we consider macroeconomic issues, we are looking at the
broader or systemic level. Sometimes, lessons learnt in dealing with a
systemic concern, for example macroeconomic management, has implications for
other systemic issues, such as the system of trade rules and opportunities
provided by the international trade regime. A number of statements in the
Report struck me as being significant in this context, and I want to share
some of them with you. “A long-standing tradition of fiscal and monetary
prudence served the region well during the crisis. ... In fiscal policy,
while it is of paramount importance to safeguard sustainability with strong
medium-term fiscal policy frameworks, a wide range of measures can
contribute to more balanced growth by removing structural impediments to
domestic demand. ... Multilateral cooperation is equally important to avoid
bilateral conflicts over exchange rate and trade issues.”
As with these points made in the Report, the WTO
system also focuses on the emphasis on prudence or discipline, on removing
impediments to demand, and on avoiding conflicts over trade issues. Further,
it is multilateral cooperation based on mutual interests that has made the
WTO rules being especially important during the past two years of economic
crisis when there were strong domestic pressures for more trade
restrictions. The major significance of these disciplines arises inter alia
on account of the potentially large scale systemic effects of individual
trade actions. In fact, while trade economics per se is not a macro-level
subject, the international links between markets and possibility of
retaliatory action quickly makes the effects much larger than any initial
starting point. If we consider these interlinkages, we can see that like
macroeconomic policies, the WTO regime of multilateral disciplines also
provides the larger, macro framework to achieve wide ranging positive
results covering multiple nations. In fact, the effects of trade policies
and the disciplines encompassed in a multilateral trading system such as the
WTO are mega-macro, as they go well beyond any single country.
Similary, the ADB Report has a number of other
interesting information and insights. For example, it shows that the trade
links for developing Asia have over time extended far beyond the main
developed markets such as the US, European Union or Japan, as well as beyond
Developing Asia itself. Consider for example the region other than US, EU,
Japan and developing Asia. The Report shows that the share of exports from
Developing Asia to this “other region” increased substantially over the
period 2000 to 2008. This indicates the likely increase in the importance of
several growing markets outside Asia, the US or EU, and again indicates the
continued and even increased importance of the multilateral trading system.
There is a considerable variation in the growth
rates for the 45 countries of Developing Asia covered by the Report.
Countries which are today relatively better off have reached their present
levels through concerted policy initiatives, relying on the opportunities
provided by the international markets, and using capacity augmentation
support. These countries reflect their own further potential as well as the
possibilities open to the relatively less economically well-off nations.
Especially for the latter group of countries, including the low income and
small island members of the Asia-Pacific, there is a strong need to boost
capacity to better achieve their economic potential. The Aid For Trade
initiative at the WTO plays a crucial role for achieving such objectives.
Together with a number of other agencies and donors, the ADB programmes also
make an important contribution to Aid For Trade. Aid for Trade leads to
increased trade capacity and economic growth, supports regional trade and
transport corridors, and can be an effective vehicle for development and
poverty reduction. The resulting capacity improvement facilitates more trade
both within and outside the region. The Mekong Delta Sub-regional project is
an example of how Aid For Trade can stimulate investment, leverage private
capital flows, increase the flow of goods and services and enhance trade
facilitation procedures.
Another point made in the Report is that partly
due to lack of progress in the Doha Round, Free Trade Agreements are growing
rapidly. The Report notes that while Free Trade Agreements can be building
blocks for multilateral trade agreements, they can also be stumbling blocks
for third countries. Over time, there will be a need to harmonise the
various different conditions and rules of origin to improve operations. The
need for such a process of harmonisation shows that facilitation of trade
will require effectively multilateralising these agreements. In addition, an
important point worth noting is that some of the major distortions and
concerns affecting developing nations, such as agriculture subsidies by
developed nations and growing use of contingent protection measures, cannot
be adequately dealt with by Free Trade Agreements. For effectively
addressing such concerns, we need a multilateral trade agreement such as
that being negotiated under the Doha Round.
The Report also shows that services sector is very
significant for enhancing growth and providing employment opportunities, and
discusses the importance of removing policy barriers so as to develop
services trade. The relevance of the services negotiations in the Doha Round
is immediately obvious in this context.
Factors that we must be careful about in order to
get sustained recovery are also discussed in the Report. An important aspect
of this is that analysis and data have both shown us that employment
generation takes more time than achieving economic growth. Thus even with
economic recovery taking place in 2010, Governments will require a
considerable time to deal with unemployment and other social concerns. They
will therefore continue to be subject to domestic protectionist pressure and
it is crucial that countries should not succumb to such pressures. They need
to keep their strong focus on dealing with the factors which introduce a
downside risk to sustained recovery and employment generation. Of major
importance among these efforts is inter alia keeping markets open. The benefit and
paramount importance of the WTO system is evident in such a situation.
The essence of the appropriate approach is to
continue to adopt sound and responsible policies. Regarding macroeconomic
policies, the Report states that: “As the global crisis recedes and normalcy
returns, developing Asia should revert to the sound and responsible fiscal
and monetary policies that fostered macroeconomic stability and sustained
growth. ... The potentially more challenging postcrisis global environment
strengthens the case for setting up strong and credible medium-term fiscal
frameworks that can withstand even large negative shocks.”
Similarly, for the multilateral trading system too
we need to set up improved and more equitable frameworks which can better
withstand shocks to the system and provide a more level playing field. The
Doha Development Agenda reflects these aspirations. It is multilateral
cooperation through the successful completion of the Doha Round that would
provide the strong foundation for continued growth and progress well into
the future for both Asia and world as a whole. As the WTO Director General
Pascal Lamy said yesterday in Santiago, “the trade rules have stood to the
protectionist pressures but we now need to ensure that this culture of
cooperation brings the Doha Round to its completion”.
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