Trade and investment continues to drive Asia-Pacific growth, but benefits not shared by all, says UNESCAP report

Multi-stakeholder launch of the Asia-Pacific Trade and Investment Report (APTIR) 2013

The Asia-Pacific region needs to move beyond the orthodox model of export-led growth, and towards inclusive trade and investment that benefits all, a new United Nations report released here today said.

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, 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."

Regional demand not immune to persisting weakness in major external economies

Amongst 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% 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% and 5.9%, 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% 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 $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.

High trade costs undermine benefits for countries with special needs

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.

Background:

The Asia-Pacific Trade and Investment Report provides independent analysis of regional trends and developments in: trade and investment; trade facilitation; usage of protectionist measures; and preferential trade policies and agreements.

It uses macro-level econometric analysis, as well as regional and sectoral case studies, to explore the complementary policies needed for trade and investment to produce more inclusive outcomes. Among these policies are measures to: increase investment in infrastructure; improve ICT connectivity; widen access to education, especially for women; and promote balanced labour market policies that enhance productivity and recognize international labour standards. Continuing to pursue trade and investment without a greater emphasis on inclusive outcomes risks heightened social instability.

The Reports findings are supported by novel measurements of comprehensive trade costs, international supply connectivity and protectionism severity. For example, a new Index of International Supply Chain Connectivity developed by ESCAP to measure countries performance in a global and regional production network context, finds that the Worlds five most connected economies are all East or South-East Asian countries.

A full copy of the 2013 Asia-Pacific Trade and Investment Report is available at: http://www.unescap.org/tid/ti_report2013/home.asp