Countries of East Asia face a substantial challenge to sustain
income growth and poverty reduction in today's competitive global
economy, as they continue to recover from the 1997 financial crisis
and to adapt to China's emergence as a major world and regional
trader. But even as they make decisions about the pace and extent
of change needed to compete in the new East Asia, governments also
face fundamental challenges to ensure that the benefits of regional
and global trade are shared more evenly, among and within countries
and social groups.
These challenges can be met if action is taken to promote formal
economic cooperation through trade and investment liberalization,
consistent with a strong development orientation, according to the
World Bank's latest research on trade in East Asia. East Asia
Integrates: A Trade Policy for Shared Growth, released today in
Singapore, urges that this emerging, complex agenda, be addressed
through an integrated regional trade strategy for East Asia one
that is more open and equitable than in the past.
"Increasingly the development agenda in the region with its focus
on growth, jobs, and social stability and the trade policy agenda
with its focus on market access and competitiveness have become
intertwined," commented Jemal-ud-din Kassum, Vice President for
East Asia and the Pacific Region at the World Bank. "Economic
integration is a growing force, and we want to make sure it is
managed carefully so that its benefits can be broadly shared by
poorer countries and the poor within countries."
With negotiating positions being developed for the Doha development
agenda and an array of regional and bilateral arrangements, Mr.
Kassum emphasized the importance for countries to act now. "The
stakes involved are high. By some estimates, if the policies
discussed in this volume of research especially on agriculture,
services, logistics, and trade facilitation were implemented by the
countries in the region, annual benefits amounting to roughly
US$300 billion or 10 percent of GDP could be realized within a
decade, and benefits could be even higher if a global trade
agreement is reached. If properly shared, this would mean over 50
million fewer poor (at $2/day). But to get there, we must move from
debate and academic discussions to the real world of negotiations
and concrete policies."
East Asia Integrates urges policymakers to broaden their approach
beyond the technical perspective of trade policy to emphasize
development outcomes and links to social stability, in their
national development strategies, in their regional and bilateral
agreements and in their global negotiating positions.
Countries must operate on three levels, the research suggests:
internationally, they can influence multilateral negotiations, and
should pay particular attention to standards and to liberalization
in agro-industries and services. Regionally, they can achieve
deeper integration to promote regional production networks, and
broader integration with scope for gains in agriculture and other
sensitive sectors. Nationally, they need to take a more
comprehensive approach to policy by adopting a consistent
development strategy addressing logistics, environment and labor
standards and poverty reduction as well as trade
liberalization.
Homi Kharas, Chief Economist of East Asia and co-editor of the
report, said, "Pursuit of a trade for development' strategy in East
Asia is a must, but it will not be easy. Trade for development
means moving beyond narrow business interests focused on protecting
specific subsectors. It involves economic change, at a time when
policymakers are trying to manage major financial and corporate
restructuring, repair overstretched social safety nets, respond to
the challenges posed by China, listen to the greater plurality of
voices and interest groups competing for political power, and adapt
to sometimes vicious global economic cycles. And because stability
is seen as a key to investor confidence and a return to high
growth, it is not surprising that there is resistance to still
further change."
Change, however, is essential, he said. While East Asia's growing
share of world exports now about 19% has corresponded with improved
welfare and poverty reduction, the link between trade and
development outcomes has varied sharply over time and across the
region. "Mildly rising inequality within countries including China,
Vietnam, and the Philippines, and also a widening income gap
between richer economies such as Singapore and Hong Kong (China)
and the poorest, Laos and Cambodia, is a growing concern to
policymakers interested in a stable, prosperous region."
These concerns can be addressed by suitable regional agreements and
complementary national policies that build upon poverty reduction
strategies. Empirical evidence on how trade policies affect
different groups in society must be brought more squarely into the
policy debate in East Asia. For example, while the overall impact
of China's accession to WTO is hugely positive, a few households in
some rural counties could actually be made worse off.
Dr. Kharas commented, "Poor producers are not only economically
disadvantaged but often politically powerless and when their
interests are pitted against those of more powerful actors, they
usually lose. Policymakers need to design a set of measures that
enable the poor to take advantage of greater trade opportunities.
For example, our analysis suggests that if cashmere quality could
be raised along with more open trade, Mongolian goat herders, who
are among the poorest people in East Asia, could see their incomes
raised by twenty percent. But without these measures, more open
trade could just lead to destructive overgrazing."
Countries in East Asia can capture many of the gains through
regional action. Kathie Krumm, Senior Adviser at the Bank and
co-editor of the report, commented, "The research suggests that
real gains can come from the new regionalism in Asia if the new
arrangements tackle the right issues. Policy action that reduces
business costs, such as through competitive producer services like
logistics and accounting, and that lowers the costs of cross-border
business operations and trade such as efficient customs, paper-less
clearance, electronic processing, safety measures can generate more
dynamic regional trade and investment flows. But the key principle
must be one of simplification: without a common approach, too many
international agreements can add cumbersome administrative costs to
firms."
Moving forward, Ms. Krumm concluded, will require East Asian
countries to consider the seven point agenda that has been
developed from the research as guidance for countries.
(China.org.cn June 10, 2003)