Talking Points for the Panel on Strengthening the Role of International Cooperation and Opposing Protectionism.
What started in the US as a financial crisis, quickly spread across the world as the global economic crisis and is now threatening to become a crisis of development
and the humanity at large causing immense hardship to millions of poor and vulnerable people in developing countries. 59 million could lose jobs by the end
of the year, while income insecurity will deepen for hundreds of millions more. In view of high export-dependence of a number of the developing economies in
the Asia-Pacific, many of the affected people are in the region. The region’s dynamism that helped in lifting millions of people out of poverty over the past
decade is under threat with the average growth rate for developing Asia-pacific coming down from 8.8 per cent in 2007 to 5.8 per cent in 2008. It is projected to decline to only 3 per cent this year, as per ESCAP’s estimates. Driven by still robust growth rates in region’s emerging economies namely China and India at 6-7 per cent, Asia-Pacific region is now becoming the epicenter of global growth. The revival of Asia-Pacific growth is not only critical for the poor and unemployed millions in Asia but it can also assist in global recovery.
International community has been responding to the challenge of the crisis at different levels. Many governments have come up with fiscal stimulus packages
and bail outs for the troubled banks. However, a global crisis of this magnitude requires a global response. International cooperation therefore is no longer a
choice, but an imperative if we are to mitigate the worst impacts of the crisis.
As Deputy Prime Minister Aleksei Kudrin said “One thing is clear to us: no matter how the current financial crisis ends, it is obvious that the world will be a different place afterwards. There needs to be a complete reassessment… of the approaches to regulation and to international cooperation…”
I see a three pronged approach to deal with the crisis and turn it into an opportunity for strengthening the inclusiveness and sustainability of the growth
process. Firstly, the key imperative is of generation of additional domestic demand as the advanced economies are shrinking in the near term. To stimulate
demand most of the governments are designing fiscal stimulus policies. There is need to ensure that the main targets of such programmes are the poor and
vulnerable sections of population. The additional income in the hands of poor not only enhances the inclusiveness of the recovery process, it also makes good economic sense given the higher marginal propensity to consume of the poor thus producing a higher growth multiplier effect. The programme should also be
gender sensitive as women bear the brunt of social upheavals. Delivery of social services such as health, education, and agricultural extension services that would
open equal opportunities for women will need to be incorporated into responses to the economic crisis. Fiscal stimulus packages should also include measures to
create greener economies- those that are low-carbon and energy-efficient. The “Global Green New Deal” promoted by the Secretary- General of the United
Nations and the ESCAP Green Growth initiative, provide a way forward.
The second pillar of the development compact, I am outlining here, relates to exploiting the potential of regional economic integration especially in the Asia-
Pacific. I have earlier talked about the shrinking economies in the developed world and emergence of Asia-Pacific region as the epicenter of global growth.
Regional economic cooperation and integration can be a strategy to benefit from each other’s dynamism. However, Asia-Pacific has lagged behind other regions
in terms of exploiting the potential of regional economic integration. The time has come to strengthen and deepen regional economic integration in Asia-Pacific.
While strengthening the sub-regional cooperation in Asia within the framework of groupings such as ASEAN, SAARC, ECO, BIMSTEC, APTA of ESCAP, we
need to create a framework for building a seamless pan-Asian market. Some initiatives have begun to be discussed; for instance, the proposed Comprehensive
Economic Partnership of East Asia (CEPEA), a study of which was launched by the leaders of 16 East Asia summit (EAS) member countries. These should be
accompanied by seamless connectivity to exploit the full potential of regional cooperation. ESCAP has been promoting Asian Highway and Asian Railway
besides approaches to trade facilitation and reducing non-tariff barriers. The other avenue is exploiting the potential of financial cooperation in Asia-Pacific
region. ASEAN+3 countries have recently created a multilateral pool of foreign exchange reserves amounting to US$ 120 billion. There is need to build on the
ASEAN+3 initiative in terms of scope and coverage to do more. With over three trillion dollars in foreign exchange reserves, the Asia-Pacific region now has the ability to foster a major programme of regional Keynesianism building regional infrastructure and other regional public goods through catalyzing private public
partnerships. This would assist in expediting the recovery of not only the region by generating additional demand but also the global economy.
The third pillar of my compact comprises international cooperation for guarding against protectionism and for building a more inclusive international financial
architecture. It needs to be recognized that developing countries have undertaken a huge burden of adjustment with an unprecedented external shock.
Any resort to protectionism either by way of raising tariffs or subsidies or including ‘buy local’ (a prime example is ‘Buy American’ clause but need not be
referred to) clauses in the fiscal stimulus packages will go against the spirit of international partnership and will create more hardships for developing
countries. Given the global economic interdependence, such parochial policies do more harm than good. I recognize the presence of Professor Bhagwati, a
leading champion of free trade here and am sure that he would enlighten us on the importance of shunning protectionism in these times.
International cooperation is also needed for policy coordination, and for ensuring the flow of resources to poorer countries to assist them in their
adjustment. The G-20 Summit, the United Nations High-Level Conference on the World Financial and Economic Crisis at the end of this month are but two
examples of the efforts underway. However, this process needs to gain momentum to ensure it is not reversed after this economic crisis has passed.
There is also need for addressing the long pending agenda for reform of international financial architecture including addressing the development deficit
giving voice to Asia-Pacific countries commensurate with their growing economic (and demographic) weight.
In conclusion, a global crisis demands a global response. But action will be much
more effective if it is built on strong domestic and regional foundations. By
taking ownership of their economic revival, developing countries can make a
quantum leap in building a more inclusive and sustainable future for all.
I thank you.