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Trade liberalisation

Emerging trade issues for policymakers in developing countries in Asia and the Pacific

Competitive challenges for Asia from liberalisation in developing countries?

Authors:
Publisher: United Nations Economic and Social Commission for Asia and the Pacific , 2009

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One of the most striking features of global economic development over the past few decades has been the rise to prominence of Asia in international trade. This report takes a closer look at the extent to which recent developments in both international and East Asian trade amount to a new paradigm.

The paper indicates that trade and investment liberalisation has created immense competitive challenges for most developing countries. However, it finds that these challenges can be met by two sets of initiatives:

  • strengthening domestic productive forces by designing an appropriate policy framework that reflects the needs of all sectors
  • protecting activities, and especially agriculture, to prevent market distortions affecting their economies
On the other hand, regarding the production network in East Asia, the paper recommends increasing efficiency within the existing national component of value chains. It also encourages a strategy to build up new value chains. Furthermore, the paper figures that the development of public policies concerning international production networks requires a balancing strategy. This strategy should link the requirements of small and medium enterprises (SMEs) and multinational corporations (MNCs).

In addition, the report analyses the impact of inward foreign direct investment (FDI) on trade flow among East Asian nations, examining the extent of intraregional trade by stages of production. Accordingly, the paper concludes that measures aimed at trade liberalisation are not going to be sufficient. Indeed, policymakers who wish to participate further in the network will also need to enact policies that will facilitate FDI.

In summary, the paper says that improving the institutions of East Asian economies will be important policies to expanding the trade network in East Asia. This, in turn, will strengthen economic integration among the East Asian economies.