Opening Speech at Committee on Trade and Investment, Fifth Session
Delivered at Committee on Trade and Investment, Fifth Session in Bangkok, Thailand
Your Excellency, Mr. Winichai Chaemchaeng, Vice Minister of Commerce, Government of Thailand,
Your Excellency Mr. Arjuna Sujeewa Senasinghe, State Minister of International Trade, Ministry of Development Strategy and International Trade, Sri Lanka,
Your Excellency Mr. Swarnim Wagle, Vice Chairman, National Planning Commission, Nepal
ladies and gentlemen,
Welcome to the fifth session of the Committee on Trade and Investment and the Fifth Asia-Pacific Trade and Investment Week.
Let me begin this statement with good news. Trade is bouncing back, both at the global and regional level. According to ESCAP’s Asia-Pacific Trade and Investment Report 2017, launched yesterday, the 2016 contraction of trade in the region was much less than the year before and growth is expected in 2017. Exports by the Asia-Pacific region in 2017 will grow by 4.5 per cent in volume and 9 per cent in value helped by a recovery of commodity prices, and modest expansion of economic activity in China, the European Union, the United States. At the same time, intraregional trade continues to assume greater importance, mainly driven by China, and accounts for well over 50 per cent of the total region’s trade.
There are signs of a recovery in foreign direct investment too. The Asia-Pacific region continues to be the leading global destination for inward FDI and the world’s largest source of FDI outflows. Despite a decline of FDI by 3 per cent to $541 billion in 2016, the region still accounted for 31 per cent of global FDI inflows. Outflows increased by 10 per cent to $495 billion in 2016 and accounted for 34 per cent of global outflows. Intraregional investment flows are also increasing and mirror the figure for intraregional trade: just over 50 per cent of all FDI inflows in the region are intraregional, with South-South investment assuming increased importance. Continued economic integration efforts and the relocation of investment are expected to provide further impetus to intraregional FDI.
Now, a word of caution. To date, the recovery is modest and fragile. Nationalism and populism in some leading world economies has heightened economic uncertainty and threaten the recovery and growth in the trade of goods and services. A tendency to question multilateral trade rules and unravel trade agreements may have serious repercussions on global trade. The report indicates that uncertainties relating to trade-related topics soared rapidly in 2016. Thankfully, the rhetoric is worse than the actions taken. Over the past 2 years, more trade liberalizing measures were introduced than trade restrictive measures - both globally and in Asia and the Pacific. Asian and Pacific economies introduced more measures aimed at liberalizing, promoting and facilitating investment than measures to restrict or control it.
Why are we so concerned about trade and investment and the policies regulating them? It’s a well-known fact that trade and investment are drivers of economic growth. There is no doubt the success story of economic development in Asia and the Pacific owes a lot to trade and investment which helped millions of people escape poverty. Trade and investment are a principal source of employment and make goods and services available to consumers at competitive prices. They have benefited millions of women in the textile and garment industries in least developed countries such as Bangladesh and Cambodia. Trade and investment have been recognized as principal sources of financing for development in the Addis Ababa Action Agenda. Most importantly, they are prominent among the means of implementation of the sustainable development goals. ESCAP estimates indicate it could cost the region from $2.1 trillion to $2.5 trillion per year to close infrastructure gaps, expand basic social protection and address climate mitigation and adaptation.” Trade and investment – in many countries in the region- will be the main means of closing that gap.
In this context, I wish to emphasize the following observations and messages conveyed by the Asia-Pacific Trade and Investment Report 2017 and other documents for this session of the Committee.
First, we all need to recognize the increase in economic activity associated with international trade and investment, with all other things being equal, tends to put pressure on the environment. There is also evidence trade and investment-led globalization has marginalized some people and vulnerable groups and increased inequalities - both within and among countries - creating a backlash against globalization in some countries. In order to reverse this trend, we need targeted trade and investment policies. Policies that are more inclusive and mindful of the social and environmental dimensions of sustainable development rather than protectionist policies that restrict trade and investment.
Secondly, complementary policies will be required to ensure trade and investment contribute to sustainable development along its three dimensions. These policies do not specifically apply to trade or FDI, but more generally to products, services, firms and people in the country regardless of origin. Appropriate social, labour and environmental laws and regulations need to be adopted to ensure that investors make a net contribution to sustainable development in their host country and not only to their own profits. Fiscal policy should also be mindful of wasteful investment incentives and use tax revenue to improve infrastructure, as well as address relevant social and environmental side effects of trade and investment.
Thirdly, there is a need for improving governance to ensure targeted trade and investment policies and complementary policies are not only formulated following due consultation with all stakeholders, but also implemented and enforced based on the rule of law.
Finally, improving regional connectivity and reducing trade costs, including by cutting red tape at the borders and moving to paperless trade practices, will be key to enabling more inclusive participation in trade and investment and ensuring that the benefits of globalization can be shared by all.
As a regional body of the United Nations, ESCAP promotes regional cooperation and integration among its member States to enhance their development and resilience. As trade and investment are by definition cross-border phenomena, and intraregional trade and investment are steadily increasing, both global and regional cooperation in these areas are a must and the secretariat has put in place various mechanism for that purpose. To formulate appropriate and meaningful policy recommendations, it is first essential to understand the factors that drive trade and investment. Through the Asia-Pacific Research and Training Network on Trade (ARTNeT) and United Nations Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) we conduct evidence-based trade and investment research. The findings are published in various analytical papers and handbooks and of course our flagship publication, the annual Asia-Pacific Trade and Investment Report.
One specific area of research which I want to highlight focuses on measuring and monitoring trade costs, which significantly impair the expansion of trade by developing countries and their integration into global and regional supply chains. The secretariat has developed a tool to monitor aggregate trade costs for most member States and other countries – the ESCAP-World Bank Trade Cost Database – and is currently undertaking research to improve assessment and monitoring of the extent and impacts of non-tariff measures and regulatory burdens, including through the UN Global Survey on Trade Facilitation and Paperless Trade Implementation. We have also published a comprehensive handbook on policies, promotion and facilitation of FDI for sustainable development which will be presented at the current session of the Committee.
Capacity building and policy advice has taken place in many areas and in various countries, including WTO agreements, regional trade agreements, export diversification, development of small and medium sized enterprises, and the promotion of FDI. With regards to regional cooperation, the secretariat has been successful in two key areas: the adoption of the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific in May 2016, and the conclusion of the fourth round of tariff liberalization under the Asia-Pacific Trade Agreement, where members expanded a range of exchanged tariff concessions and agreed to implement frameworks on trade facilitation, investment and services liberalization. The annual Asia-Pacific FDI Network has emerged as an important regional platform for policymakers and investment promotion officials to engage, deepen cooperation and share knowledge.
Finally, we need to recognize business as the lead actor in trade and investment. Achieving the SDGs will only be done by working with business. Currently, our principal mechanism is the ESCAP Sustainable Business Network (ESBN) which concluded its meeting yesterday and will report on their current reform efforts to the Committee at its current session. On a larger scale, we are looking forward to the next meeting of the Asia-Pacific Business Forum in Hong Kong, China in April next year which will discuss issues related to the digital economy and connectivity in the context of sustainable development.
These are only some of the issues you will deliberate on and which are explored in more detail in the background papers for this session. Issues related to trade and investment are diverse and complex. We therefore seek your guidance on identifying priorities and provide focus to the work of the secretariat in this area. I look forward to hearing the outcomes of your discussion.
Let me conclude by thanking the Ministry of Commerce of Thailand for their generous support to the Committee and you, Excellency, for being with us to deliver an inaugural address.