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OPENING STATEMENT
 BY
MR. KIM HAK-SU
EXECUTIVE SECRETARY
UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA
AND THE PACIFIC

Distinguished delegates, ladies and gentlemen,

It is my pleasure to welcome you to this inaugural session of the Subcommittee on International Trade and Investment. The Subcommittee is newly established, as a result of the restructuring of ESCAP's conference structure.  It follows the meeting of the Committee on Managing Globalization convened in Bangkok from 19 to 21 November 2003.

The theme for the first session of the Subcommittee is "Addressing border and behind-the-border policies:  deepening and widening trade and investment integration".  The theme was selected in recognition of the fact that although multilateral and regional trade liberalization initiatives have brought about new market access opportunities, there is an ever expanding range of trade barriers that still need to be tackled. This unfinished business encompasses trade policies imposed at the "border", as well as those "behind the border" policies such as domestic regulatory policies having an impact on trade and investments.

Distinguished participants,

There is a strong consensus among all countries, supported by theoretical and empirical evidence, that a universal, rule-based, non-discriminatory, transparent and predictable multilateral trading system offers the best means of boosting trade and investment flows both to and from countries. However, there is also widespread concern that the multilateral trading system is moving forward too slowly to reap significant benefits for developing countries any time soon. While development issues and concerns are considered the most important priority in the current negotiations under the Doha Development Agenda, and the 1 August WTO Decision has put the negotiations back on track, the conclusion of a new set of multilateral trade agreements at the level of ambition that will meet everybody's satisfaction may be some time off. Developing countries, meanwhile, are exploring alternative avenues through the conclusion of regional and bilateral trade agreements to further their trade and investment agendas. While these efforts certainly have their merits, the proliferation of these agreements, which differ greatly in terms of scope, depth, and membership, risks diverting attention and resources away from the DDA negotiations. More seriously, these myriad initiatives raise concerns about their mutual consistency in terms of contradictory provisions, the regulatory costs they impose and the policy opaqueness this gives rise to.  The Asian and Pacific region is the only region of the world that lacks a comprehensive overarching framework of common principles, guidelines and procedures. Such a framework would provide an anchor to bilateral and regional agreements so that they evolve in a systematic and coherent manner.  ESCAP, as the only organization with a truly region-wide coverage would seem to be the organization best suited to lay the groundwork for such an initiative. The first session of the Subcommittee therefore provides an important and timely opportunity to guide the Secretariat in this work.

Distinguished participants,

Trade and investment flows have been recognized as the single most important sources of external finance for development purposes by the Monterrey Consensus on Financing for Development, adopted at Monterrey, Mexico, on 22 March 2002. However, the mechanisms through which trade and investment contribute to finance for development and in turn their interlinkages with other private capital flows mobilized from international financial markets, ODA, debt relief, are complex. Let me highlight one such aspect. The make or break issue in the Doha Round has hinged around agricultural subsidies – and rightly so, because the Uruguay Round Agreement on Agriculture did not bring about a systematic decrease in agricultural subsidies. In fact, in certain instances subsidies actually increased.  Subsidies distort competition in global markets and suppress world prices for agricultural products.  They decrease export earnings from agriculture, and thus represent a major distortion in financing for development. More insidiously, they work at cross-purposes with ODA, another major component of external financing for development, and exacerbate the negative effects of declining ODA.  It is thus with a collective sigh of relief that the WTO 1 August Decision was welcomed, as it outlines the roadmap for, inter alia, the elimination of export subsidies, and reduction of production subsidies. Although the text lacks details, it is to date the most incisive multilaterally negotiated document on subsidy reform. It thus offers the best hope to see legally binding commitments to reform agriculture and rectify one of the major global distortions in financing for development. 

Having said this, it is also recognized that without the necessary supply side capacities, anticipated export growth may not materialize. In other words, a country's ability to make effective use of improved market access will depend on a country's ability to supply the markets in a cost competitive manner.  For instance, while trade liberalization may eliminate quotas in textiles and clothing at the end of the year, there is no guarantee that all countries currently depending on textiles and clothing as their main export earner will be able to effectively utilize gains in market access as they may find themselves unable to compete with more efficient producers in other countries. Such constraints cut across a wide spectrum of policy issues, including institutional setups, the rule of law, the enforcements of regulations, the provision of hard and soft infrastructure, and so on.  Such constraints are of particular concern for least developed countries and other disadvantaged economies that are unable to attract private capital flows.  ODA therefore has a crucial role to play in this regard.  The resource gaps however continue to remain huge.  The Subcommittee is invited to deliberate further on these issues and identify concrete actions in the trade and investment area that will further the development goals of the region. I urge developed countries and rapidly advancing developing countries of the region to pay special attention to these issues.  I am also pleased to announce that a new regional network of trade research institutions called ARTNET will be launched at this Subcommittee.  I have no doubt that with the cooperation of IDRC, Government of Canada, this network will strengthen institutional research capacities and make an important and tangible contribution to more effective trade and investment policy formulation in the ESCAP region.

Distinguished delegates, ladies and gentlemen,

The challenges before you are many and complex. In this inaugural session of the Subcommittee, work should focus on identifying priorities for the region and in providing further guidance to the Secretariat on its future direction. To facilitate the discussions, we have requested selected countries to provide indepth commentary on some of the issues before you. The Subcommittee will also benefit from a wider range of independent views provided by a panel of experts.  As you are aware, just prior to this meeting, an Expert Group Meeting on the regional implementation of the Monterrey Consensus on Financing for Development met. We look forward to hearing on the outcome of their deliberations through the first panel.

Finally, the private sector deserves special mention, because it is their initiatives that drive trade and investments. At the same time, policies can profoundly affect, positively or negatively, the decisions entrepreneurs take.  The views of the private sector are thus a key input into more effective policy formulation.  As part of the United Nations Global Compact, I have established a Business Advisory Council to advise me on their perspectives so as to allow us to formulate impact-oriented technical assistance activities which would benefit the private sector and also promote public-private sector dialogue. I am particularly pleased that the Subcommittee will be able to also hear their views through the second panel which, I am sure, will greatly contribute to the debate on the issues before you.

In conclusion, I look forward to an interactive debate which would result in guidance to the secretariat and identification of priorities in its future work in the areas of trade and investment within the context of managing globalization. I wish the meeting all success.

Thank you.