A MEETING organised by the ESCAP Secretariat for representatives of Asia and Pacific countries was held recently to discuss opportunities and challenges faced by the region in the light of current global trade and investment developments which have thrust the region to the forefront as a global leader in trade and investment.
The recommendations made by the forum for the region to continue growing, ranged from simplification of trade procedures through single window and paperless trade, compliance with agriculture product standards, ensuring a greater role for SMEs and promoting the Asia Pacific Trade Agreement (APTA), of which Sri Lanka is also a signatory. It was noted that APTA is the largest RTA in the region by population. The forum agreed that APTA could be instrumental in deeper regional integration with membership expansion and deepening of the agreement.
A report prepared by ESCAP which was discussed at the forum – Asia Pacific Trade and Investment – while noting that the region’s developments was a stabilising factor in the post-crisis global economic development, indicates that not all countries in the region have benefited from this growth. Even for those which have shown growth, it would not be easy to maintain the momentum because the region’s main trading partners such as US, Japan and the EU will be going through economic slowdown as a result of which the Asia Pacific region will face an economic slowdown and the report estimates the growth in exports from the region to reduce from 17.3% in 2010 to 9% in 2011.
The report identifies the opportunities and challenges facing the region. It is noted that the region’s recovery from the global economic crisis was mainly driven by intra regional trade with China at the centre. The expected growth particularly in India and China are expected to reduce the negative effects from the slowdown of the developed country trading partners.
The growth of intra regional trade has outpaced the region’s trade with rest of the world which means that opportunities for export expansion lie in the growth of intra regional trade and the ability of the countries within the region to restructure and diversify their exports to cater to that demand. This would also allow the countries in the region to increase their purchasing power to meet the higher costs of fuel and imported food.
If the region is to capitalise on the positive developments of the region as drivers of the global economy, the report suggests various measures such as:
(a) Adjustments in production and export structures
(b) Moving forward in the production of climate smart goods and technologies
(c) Regulatory reform and investment to improve efficient supply of services including the elimination of bottlenecks in the infrastructure services sector
(d) Improving the physical infrastructure needed to facilitate intra regional trade
(e) Greater integration of small and medium enterprises in the regional and global value chain
(f) Mutual reinforcing of multilateral and regional cooperation
The emergence of the importance of the services sector is highlighted and it is stated that certain countries in the region are leading the recovery of the commercial services with the region recording an average growth rate over 20% in 2010 and observes this trend to continue as there is scope for expansion. For the services sector to be a key area for development, governments need to put in place proper regulatory measures including liberalisation of trade and investment in services.
A very important growth area highlighted in the report is the climate smart goods and services. Climate smart goods and services help to mitigate the green house gas emissions and some of the countries in the region are said to be already world leaders in such trade. The report estimates the untapped export potential of climate smart goods and services within the region to have been around $ 30-35 billion in 2008. The development of such goods and services is imperative in the present world where the entire world will be impacted by climate change and an increase in intra regional trade in climate smart goods will benefit not only the region, but the world as well.
The report also notes the challenges faced by protectionism. Although at-the-border protectionist measures remained limited, behind-the-border measures continued to exist till to date. Due to the unfinished Doha Round of talks, preferential trade agreements have continued to be the tool for preventing and reducing protectionism.
The report notes, however, that even though such agreements are very comprehensive covering more than tariffs, the utilisation of such preferences and trade creation which should arise from such agreements has been rather limited. Therefore, the report recommends that a fresh look be taken at negotiating the rules under such agreements in order to make them more effective and useful to business. The report concludes that with right policies and strengthened regional cooperation, the entire region could prosper in trade and investment. The importance of this forum and the report for Sri Lankan policy makers is that they give indications as to where we should focus in our efforts to promote trade and investment.
(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)