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Costs of Trade Liberalisation: UNDP

Updated On: Jul 04, 2006

The United Nations Development Programme has just published its 2006 Asia-Pacific Human Development Report titled “Trade on Human Terms.”

The UNDP report acknowledged that the “stunning growth performance of China… is a source of inspiration for others.” However, it also noted that the poorest Asian countries are “vulnerable to competition from Chinese import, while they are also unable to assess the Chinese markets because they don’t have products thatChinaneeds, like high-tech and capital goods.”

The report highlighted some of the negative impact of trade liberalisation on human development, including rise in income inequality, higher unemployment rate and increase in food insecurity.

Despite the doubling of the Asia-Pacific region’s share of global trade in the past 15 years, the share of employment has not grown as the region has been creating fewer jobs. Many countries in the region are not only experiencing “jobless growth” but some are even experiencing an increase in unemployment rate such as trade-intensive countries, Singaporeand China.

The UNDP also argued that regional countries are not investing sufficiently in the agricultural sector. It noted that the agricultural trade surplus of $7 billion that developing countries enjoyed in the 1960s had become a deficit of $18 billion in 2004. This deficit is likely to balloon to $50 billion in 2030.

The UNDP report concluded with an eight-point agenda for dealing with the challenges. These included investing for competitiveness, adopting strategic trade and industrial policies, refocusing on agriculture, combating “jobless growth”, preparing a new tax regime, maintaining exchange rates, persisting with multilateralism and promoting regional cooperation.

This report comes at a time when talks at the WTO for the Doha Development Round are reaching a critical stage. The EU has signalled willingness to lower its farm tariffs if the USreduces its domestic farm subsidies and the developing countries lower tariffs on industrial goods. However, the Bush administration appears to have little flexibility given the strong political pressure from Congress. Key developing countries such as Indiaand Brazilhave refused to reduce tariffs on industrial goods substantially.  

The UNDP’s recommendations such as maintaining tariffs on food imports to protect the poorer producers and “not opening up too early strategic industries” might be mistaken by some of the NGOs and developing countries as an encouragement not to proceed with the WTO talks. This would be a grave error.

What is needed instead is renewed action by the governments to formulate and implement policies to ensure continued investment on education, trade related infrastructure and other domestic reforms to better engage in the international economy.

Sources:

WTO Talks-SingaporeUrges Leadership; GenevaMeeting Gives Mandate to WTO Chief to Find Convergence (Business Times, 3 July 2006)

Interim DohaDeal Proves Elusive (The Financial Times, 30 June 2006)

Asian Nations Urged to Focus on Agriculture (FT.com, 30 June 2006)

Free Trade Widens Inequality in Asia- UNDP (Manila Times, 30 June 2006)

UNDP Says China’s Growing Economy Threatens Poorer Neighbours- Report (Xinhua Financial Network News, 30 June 2006)

Jobs Fail to Match Economic Growth in South Asia: UNDP (The PakistanNewswire, 30 June 2006)   

China’s Trade Growth Triggering Imbalance in Asia: UNDP (Japan Economic Newswire, 29 June 2006)

Jobs Fail to Match Economic Growth in South Asia: UNDP (The Press Trust of India29 June 2006)

India: A Potential Threat to Chinain T&C: UNDP Report (The Press Trust of India29 June 2006)

Food Pill for Hungry India(HindustanTimes, 29 June 2006)

People Pay High Price for Global Trade Growth: UN; Report Finds Wealth Gap and Food Insecurity among Negatives (South ChinaMorning Post, 29 June 2006)

UN Report Says Asia’s Poorer Countries Losing Out in Trade Boom (The Associated Press, 29 June 2006)

Asia-Pacific Human Development Report 2006: Trade on Human Terms (UNDP, 29 June 2006)