UN concerned about weak trade in Asia and Pacific

UN report underscores concern for weak trade performance in Asia and the Pacific


The United Nations Economic and Social Commission
for Asia and the Pacific’s (ESCAP) recently released Asia-Pacific Trade and
Investment Report 2016 highlights that the region’s trade flows are
wavering amid sluggish global economic and trade growth, downward movement
of world commodity prices and an uncertain policy environment. This
situation comes at a time when the need for trade growth to support the
2030 Agenda for Sustainable Development could not be more critical.

Although the volume of exports of goods grew at 3 per cent in 2015, the
nominal value of exports and imports by the Asia-Pacific region experienced
a major slump in 2015, of 9.7 per cent and 15 per cent, respectively.
Sluggish growth in trade is expected to continue through to the end of
2016. Rebounding somewhat, exports are expected to increase by 4.5 per
cent and imports by 6.5 per cent in developing countries of Asia and the
Pacific in 2017, but the Report forecasts more modest growth in exports and
imports in volume terms, at 2.2 per cent and 3.8 per cent, respectively.

“Trade is the key driver of economic activity in Asia and the Pacific,”
stated Dr. Shamshad Akhtar, Under-Secretary-General of the United Nations
and Executive Secretary of ESCAP.

“The region’s economic and trade dynamism is confirmed by the steady rise
in region’s share to 40 per cent in global exports. Even if the regional
significance in global trade scene is maintained, the fall in share of
exports as a proportion of GDP from the 67.5 per cent pre-global crisis
level to 52.9 per cent in 2015 is a cause of concern. To their credit,
most Asian exporter economies have decoupled from economic cycles in
traditional exports markets, i.e. the United States and the European Union,
not only diversifying their export markets but also boosting domestic
consumption and the services sector. Notwithstanding, the region has the
potential to regain the trade momentum so critical for sustainable
development and lead by example, especially if we are to ensure that our
future is sustainable and that our societies are more equal”.

On the positive side, the Report reveals that the region has improved its
market share in the commercial services trade, with the services trade more
than doubling between 2005 and 2015, from just under $US 600 billion to
nearly $US1400 billion. These aggregates however conceal the fall in the
region’s export and import of services by 4.5 per cent and 4.9 per cent in
2015, respectively, compared with the previous year, mainly due to
persisting economic uncertainty resulting in the global decline in
merchandise trade and a depressed demand for the services sector including

Turning to investment, the Report indicates that while foreign direct
investment (FDI) has modestly increased, its share in global FDI inflows
has shrunk from 42 per cent in 2014 to 32 per cent in 2015, in spite of
growth of 26 per cent in greenfield FDI inflows. FDI outflows from Asia
and the Pacific also dropped by 22 per cent in 2015 to $US 435 billion.
East and North East Asia emerged as a major recipient once again as FDI
inflows jumped to 53 per cent with Hong Kong benefiting and accounting for
three-fourths of Asia-Pacific FDI inflows. South Asia and South West Asia
recorded a modest increase, with FDI growth in India standing out. FDI
inflows continued to contract in 2015 in the Pacific and North and Central

Furthermore, the region is leading a movement toward liberalization,
promotion and facilitation of investment. In 2015, countries adopted 46
investment policies, accounting for almost half of the global total, and
contributed to 13 international investment agreements (IIAs), out of 19
IIAs entering into force globally. In addition, in order for FDI to
transform into sustainable development outcomes, international investment
regimes must increasingly pay attention to preserving the regulatory space
of host countries, in addition to recognizing the original focus on
provisions for investment protection and promotion.

Prospects for the trade sector could change over the medium term, should
Asia and the Pacific manage to expeditiously launch programs to reduce
trade costs through electronic trading and other reduced trade and transit
barriers and direct investments in diversified sectors, and by nurturing
regional value chains to improve the region’s productive and trade
competitiveness. To this end, the Report finds that some positive gains
have been achieved in trade facilitation, with over two-thirds of the
Asia-Pacific members of the World Trade Organization (WTO) ratifying the
WTO Trade Facilitation Agreement. Complementing these efforts, the
“Framework Agreement on Facilitation of Cross-border Paperless Trade in
Asia and the Pacific” was adopted by ESCAP member States in May of this
year at the 72nd Commission Session and is expected to help maintain
regional trade competitiveness.

A worrying trend on another front is the increased usage of restrictive
trade policies—especially non-tariff measures—within the Asia-Pacific
region, which is partly driven by past distortive trade measures and
current excess capacity in several key sectors. Additionally, the region is
seeing a proliferation of preferential trade agreements (PTA), with Asia
and the Pacific, contributing to almost 63 per cent of world PTAs, curbing
a momentum towards region-wide free trade. In this context, the Report
underscores that more efforts must be made to consolidate pre-existing
bilateral agreements among members who are also part of free trade
agreements. On this issue, ASEAN and its partners can lead the change.

Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia
and the Pacific “Trade is the key tool that governments should utilize to
ignite growth. Efforts must be increased in implementing trade
liberalization policies and deepening regional integration if we are to
ensure that the region’s growth maintains an upward trajectory, and that
the development gains we have worked so hard to achieve continue unimpeded”
said Dr. Akhtar.

Source: ESCAP News

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