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In order to maximize the advantages and minimize the negative effects of globalization and growing interdependence, it is imperative for developing countries and economies in transition in the Asian and Pacific region to integrate into the world trading system without being further marginalized. The benefits of globalization and the world trading system can be reaped only if policy reform in these countries is complemented by supportive policies in developed nations and international institutions. The purpose of the study of the current session of the Commission is to develop a regional perspective on globalization by examining policy challenges faced by developing countries and economies in transition in the Asian and Pacific region with respect to their integration into the multilateral trading system on a fair and equitable basis. The study demonstrates that a major policy challenge for developing countries today is how to manage globalization by designing and adopting a set of policies which will ensure that a country can seize new opportunities created by globalization while minimizing the inevitable costs. The World Trade Organization (WTO) with its improved and strengthened rule-based system can play a pivotal role in the effective integration of developing countries into the world trading system by promoting an international trade regime that takes adequate care of the special needs of developing countries, least developed countries and economies in transition. However, to date, such countries have not been able to integrate successfully owing to a number of imbalances and asymmetries in the negotiations and in the implementation of WTO agreements. Regional trading arrangements can act as building blocks in a broader multilateral trade liberalization strategy and contribute to the integration of developing countries into the world trading system. Trade facilitation and electronic commerce can be major catalysts for integration, as they can enhance the efficiency of trade and investment. The maritime sector has been the principal facilitator of trade flows in the Asian and Pacific region. There is an urgent need to develop adequate road, rail and inland water transport infrastructure and to build up intermodal transport in order to extend the integration process into the hinterlands.I. GLOBALIZATION AND DEVELOPING COUNTRIES A. Basic issues B. Trends and patterns of globalization C. Globalization in the Asian and Pacific region II. INTEGRATION OF DEVELOPING COUNTRIES AND ECONOMIES IN TRANSITION INTO THE INTERNATIONAL TRADING SYSTEM ON A FAIR AND EQUITABLE BASIS A. Role of the World Trade Organization B. Role of regional trading arrangements C. Role of trade facilitation and electronic commerce D. Role of transport III. CONCLUSIONS AND POLICY RECOMMENDATIONS A. World Trade Organization B.Regional trading arrangements C. Trade facilitation and electronic commerce D. Transport
A. Basic issues
1. Globalization has opened up vast new opportunities for economic and social progress in developing countries through greater integration into the world economy. The ability to import ideas, technology, investment, intermediate inputs and goods and services from more advanced countries can boost economic growth. Increased trade and capital flows have generated gains in productivity and efficiency that have spurred growth and created jobs. Access to foreign capital markets has helped developing countries mitigate the serious obstacle to rapid growth caused by meagre domestic savings. 2. However, integration into the world economy comes with potential costs. For instance, increased reliance on volatile international capital flows can be a source of instability, as witnessed in Asia in recent years. There can be social costs in the form of marginalization of individuals or social groups that are not equipped to take advantage of new opportunities and challenges created by global integration. Economic competition on a global scale implies that even a minor shift in domestic costs can lead to shifting comparative advantage, resulting in painful volatility in production and employment. 3. The policy challenge in today's world therefore is how to manage globalization by designing and adopting a set of policies and institutions which will ensure that a country can seize new opportunities created by globalization while minimizing costs. 4. The purpose of the theme study is to develop a regional perspective on globalization by examining policy challenges faced by developing countries and economies in transition with respect to their integration into the multilateral trading system on a fair and equitable basis. The following is a summary of the findings and recommendations of the study, the full text of which is available as an ESCAP publication.(1)
"deepening" of integration, resulting in an accelerated drive towards globalization in many formerly centrally planned economies.
II. INTEGRATION OF DEVELOPING COUNTRIES AND ECONOMIES IN TRANSITION INTO THE INTERNATIONAL TRADING SYSTEM ON A FAIR AND EQUITABLE BASIS
16. Some of the developing countries in Asia and the Pacific adjusted their domestic policies and institutions earlier towards more market-oriented economic regimes and have been able to benefit enormously from the integrated world economy. Many other countries, however, find it extremely difficult to integrate into the world trading system. In order to make the global trading system truly global, it is imperative for these countries to become an integral part of this system without being further marginalized. Some selected mechanisms by which developing countries and the economies in transition can be integrated effectively into the world trading system on a fair and equitable basis are described below.
1. Achievements
18. Some of the important contributions of the World Trade Organization to the integration of developing economies into the multilateral trading system are as follows: (a) There is now a rules-based framework that enables all members to participate in world trade in a more predictable and credible environment. Under the GATT system, an offending government was capable of stalling any decision that went against its self-interest. By contrast, WTO rules apply equally to every country, rich or poor so that, in principle, the world's economically powerful countries cannot impose their will unilaterally on their smaller trading partners. (b) Traditional barriers to trade have been reduced all around so that the average world tariff is currently around 4 per cent. Traditional non-tariff barriers, such as quotas, have been prohibited and apart from permissible exceptions indeed appear to be on their way out. (c) Trade in textiles/clothing and agriculture, which are two of the biggest avenues for integration of the Asian and Pacific developing countries, has been put on the negotiating table for the first time in 50 years of international trade negotiations. (d) By extending the coverage of WTO rules to services, conditions have been created to facilitate the flow of foreign investment to this sector of growing importance for developing countries. There are indications that the pattern of FDI in the Asian and Pacific region has, of late, been characterized by an increasing share being received by the services sector. (e) Finally, from a longer-term perspective, the multilateral disciplines imposed by WTO can be an important catalyst for good governance on both domestic and global policy fronts.
2. Unfinished agenda
19. A number of implementation problems and inherent weaknesses are becoming apparent within the multilateral trading system and a lot more needs to be done in WTO before the integration of developing countries can be said to be fair and equitable. Some areas of concern are outlined below: (a) The outcome of WTO trade negotiations appears to have favoured developed countries much more than developing countries. Thus, for example, while negotiations have been successfully completed in the areas of telecommunications services, information technology products and intellectual property rights, developing countries are still waiting to receive the benefits of free trade in labour services, primary products and textiles/clothing in which they have comparative advantage. (b) While the GATT/WTO rounds have largely curbed the use of traditional trade barriers like tariffs and quotas, they have not prevented the emergence of new forms of trade barriers such as anti-dumping measures, technical and hygiene standards and subsidy investigations that thwart developing countries' access to developed country markets. (c) Participating effectively in WTO negotiations, bringing cases to the Dispute Settlement Body and implementing trade agreements in new areas can be very costly activities and rich countries have been better placed to exploit the WTO system to their advantage. Insufficient financial, human and institutional resources have prevented developing
countries, especially the less developed among them, from participating more actively, complying strictly with the many obligations and notification requirements, and deriving more benefits from the multilateral trading system. (d) The implementation of disciplinary/regulatory provisions under various WTO agreements, in particular intellectual property rights, anti-dumping, sanitary and phytosanitary requirements, has in practice placed developing countries at a disadvantage. This tendency has coalesced towards a "culture of litigation" entailing costly and time-consuming negotiations, an unexpected burden on many developing countries. (e) The poorer of the acceding countries in particular have been frustrated by the discriminatory standards that WTO has been using for new applicants. As a result, none of the region's least developed countries outside WTO has been able to take this important first step for entering the global mainstream. (f) There has been a gap between prescription and practice with regard to non-binding special and differential provisions. There is also a strong case for extending transition periods in areas where developing countries face real difficulties in meeting the deadline for trade policy reform. (g) The Plan of Action and the Integrated Framework for least developed countries adopted at the first WTO Ministerial Conference held in Singapore in December 1996 with a view to improving trade opportunities for least developed countries has not so far yielded any tangible results.
25. The Bangkok Agreement, the only regionwide trade agreement, is a preferential tariff arrangement that aims at promoting intraregional trade through exchange of mutually agreed concessions by member countries. This has not been an effective regional agreement due to limited coverage of product categories, low margins of preference and limited membership. However, the recent accession of China to the Agreement is expected to have a significant impact on regional trade relations in Asia and the Pacific. Several other countries have indicated their desire to join. 26. Finally, Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Cooperation (BIMST-EC) is a fairly recent agreement involving two ASEAN countries and three South Asian Association for Regional Cooperation (SAARC) countries. A cooperative work programme has been established which includes developing trade among the member countries through liberalization and facilitation measures. 27. Asia-Pacific Economic Cooperation (APEC), on the other hand, has a unique approach to liberalization. Contrary to RTAs, it is based on the principle of "open regionalism". Furthermore, commitments are voluntary and each member is free to determine its own liberalization path. The term "concerted unilateralism" perhaps best describes this process.
of natural persons, e-commerce provides new opportunities for firms in developing countries to integrate into the global market. (d) By making available an enormous amount of information about business opportunities, the Internet offers an almost costless way for firms in developing countries to integrate their products and services into the world market.
D. Role of transport
31. The ability of a country, and particularly of the more isolated communities within a country, to integrate into the international economy depends crucially on the quality of the transport and communication infrastructure that allows them to access the world trading system. 32. To date, the maritime sector has been the principal facilitator of trade flows in the Asian and Pacific region. The region has already achieved a lot in this area. A network of ports has enhanced natural sea routes, with 12 of the world's 25 busiest container ports located in Asia. Regional member countries own more than 40 per cent of the world fleet. In addition, 80 per cent of the world's new shipping tonnage and 83 per cent of all maritime shipping containers are manufactured in Asia. 33. International sea routes and ports alone, however, cannot facilitate the development of the hinterlands, which, for most developing countries, provide great potential for future growth. This will be achieved only when adequate road, rail and inland water transport infrastructure is developed and the process of intermodal (sea-land) transport is fully integrated and institutional bottlenecks removed. 34. Until recently, conditions were not conducive to the development of intraregional and interregional land transport linkages. Civil wars in a number of countries, subregional conflicts and the cold war constrained the development of international land transport systems in many countries. These events made it impossible to gear transport networks towards commercial and trade interests. 35. Since about the early 1990s there have been some notable moves towards increased cooperation between countries in this area. In addition to the activities of ESCAP, there are a number of initiatives being taken at the subregional level in ASEAN, ECO and SAARC to extend maritime links and facilitate the movement of vehicles and goods across borders. The proposed Asian Highway and the Trans-Asian Railway networks demonstrate the commitment of member countries to work towards an integrated surface transport system linking countries in the ESCAP region with each other and providing transport corridors to Europe. But progress has been slow considering the magnitude of the challenge posed by rapid globalization.
(c) Reducing tariff peaks and tariff escalation on exports from developing countries. All countries may also need to review the need to use anti-dumping measures as well as the methods adopted for tarrification of agricultural quotas. (d) Making meaningful the liberalization of trade in agriculture and textiles/clothing. (e) Expediting the harmonization of rules of origin and providing for flexibility in the application of technical and sanitary and phytosanitary (SPS) standards for developing country exports. (f) Expanding developed countries' commitments on the movement of natural persons under the General Agreement on Trade in Services (GATS). At the same time developing countries may also need to liberalize their commitments especially in infrastructure related services sectors. (g) Restoring the balance between private profit and public good in trade-related aspects of intellectual property rights (TRIPs) by bringing down the period of exclusivity of ownership and creating an institutional mechanism that oversees the actual transfer of technology from developed to developing countries. (h) Doing away with "WTO plus" conditions for accession and automatically extending the provisions for special and differential treatment to developing countries in the accession process. (i) Incorporating free market access for exports of least developed countries as a binding commitment in WTO (2) schedules and incorporating debt relief into the Integrated Framework for least developed countries. (j) Increasing the quantum and speed of technical assistance to developing countries. 37. The next round of trade talks should aim at improving the quality of integration of least developed, developing countries and economies in transition. But if negotiations follow past patterns (hard bargaining motivated by special interests within developed countries, with too little attention paid to the interests of the developing countries) the round could strengthen the hands of those in the developing world who resist outward orientation and marketoriented reforms.
D. Transport
42. A number of issues related to the transport sector need to be addressed urgently in order to facilitate the integration of developing countries into the multilateral trading system. These include: (a) Integrating land and sea transport to provide the potential to open hinterlands further; (b) Establishing a favourable investment climate to encourage private sector participation in transport financing and operation through the provision of appropriate legal frameworks, implementation of trade facilitation measures, defining equitable risk-sharing strategies and strengthening independent regulatory bodies; (c) Undertaking corridor studies at both the domestic and international level to identify physical and non-physical barriers and suggest remedies to smoothen the flow of transport and goods; (d) Formalizing the Asian Highway and Trans-Asian Railway to ensure unhindered access and operationalization of major land bridges; (e) Enacting facilitating legislation, that recognizes and encourages freight forwarders, multimodal transport operators and the use of e-commerce; (f) Encouraging the development of logistics services and supply chain management for the benefit of the trade; (g) Optimizing the opportunities that will come from liberalization by involving government policy makers and industry participants in establishing negotiating positions.
43. The Commission is requested to consider these issues, give policy guidance and make recommendations for further action. Development through globalization and partnership in the twenty-first century: an Asia-Pacific perspective for integrating developing countries and economies in transition into the international trading system on a fair and equitable basis (ST/ESCAP/2054).
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