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Commentary (December 9, 2005)

WTO and East Asia - Breaking Down the Barriers to Growth

Kim Hak-su (United Nations Under-Secretary-General and Executive Secretary of UNESCAP)

As we look back on how this year has treated the Asia-Pacific region, was it an annus horribilis of disasters? The tsunami tragedy marred the year's outset, followed by ravaging floods and an appalling Himalayan earthquake.

As it ends, terrorist attacks continue with their wilful destruction of human life. Will a gigantic political failure at the World Trade Organisation Ministerial Conference in Hong Kong next week crown a horrible year?

That need not be. It could be a period when the people of this region continued on their path to prosperity, making clear inroads in the fight against poverty, injustice and corruption. Major changes, however, will not occur if we only wish them to happen.

Trade negotiations are characterised by much wishful thinking - which only occasionally leads to concrete action. The Doha Round is no different: few concrete results have been achieved. Action is needed. Nobody suggests trade liberalisation as the cure for all ills. If a country is struggling with macroeconomic imbalances, if economic and political markets are controlled by a few, if bribery is a normal way of doing business, then liberalising trade policy will not help.

Openness will allow governments to deal with other barriers to growth: weak institutions, weak financial markets, administrative inefficiencies, non-performing labour-market reforms. Continued liberalisation will help to change mindsets and improve economic planning and policy-making.

Free or freer trade will also allow ordinary people in poor countries to have access to goods and services that otherwise would not be available to them. It provides producers with a choice of inputs that improve productivity.

It is not difficult to see the benefits for national economies in the Asia-Pacific region when they become part of the global economy, aligning their trading regimes with multilateral trading rules. But more needs to be done.

It is clear that the Hong Kong conference will not deliver what we had hoped for a year ago. There will be much work left for the meetings to follow, as negotiators catch up and finish the job by the end of next year.

The World Bank estimates that almost two-thirds of the economic gains that would come from dismantling all merchandise trade barriers and farm subsidies globally would come from agriculture. Developing countries are right to focus on agriculture in the Doha talks. The WTO has proved to be the only forum where any sensible reform of agricultural trade policy can be tackled. The costs of a possible collapse in talks could be US$300 billion per year. At the end of the day, those who are doing the trade talk are not hearing those who need trade to work: large global companies need open markets to establish efficient supply chains.

Small and medium-sized enterprises need open markets to get better access to networks of similar companies overseas. And workers need open markets to continue working in industries that can flourish only if the countries they live in are allowed to specialise by taking advantage of comparative and competitive advantages.

The choice, ultimately, is with governments. They are mandated by their people to deliver prosperity to all, and not to a chosen few. This may be an excellent New Year resolution for all.

(Originally appeared in the December 9, 2005 issue of South China Morning Post in Hong Kong and is reproduced here with permission from the publisher)

Copyright © Japanese Institute of Global Communications