2010-07-19 10:35

Countries told to care for needy while liberalizing import-exports

Guilin - As countries continue to move toward more liberalized trade, governments need to consider the effects that has on the poor, said a Chinese expert.

"States should take the direct and indirect impact of free trade on the poor into consideration when promoting free trade," said Huang Chengwei, deputy director of the International Poverty Reduction Center in China.

Huang was speaking after a two-day forum on the China ASEAN Free Trade Area (CAFTA) which wrapped up on Thursday Guilin, Guangxi Zhuang autonomous region.

According to Dato Misran Karmain, ASEAN deputy secretary general, poverty in ASEAN member states is concentrated in rural areas where agriculture remains the predominant source of income.

"Tariff reductions are expected to widen the markets for commodities from ASEAN member states," said Dato, adding that "this will certainly significant impact the economic opportunities of rural households."

However, there is disagreement over whether free trade will help poverty reduction or whether reducing poverty helps encourage trade.

Kamal Malhotra, the United Nations development program representative for Malaysia, Singapore and Brunei, told the gathering that liberalizing trade does not ensure poverty reduction or human development, nor does it guarantee immediate economic growth.

"Rather, this is largely determined by internal and external institutional and social preconditions," he said in his keynote speech at the forum.

According to Malhotra, Vietnam illustrates the impact of trade, especially the liberalization of imports, which is not a prerequisite for sustained economic growth.

Vietnam has taken a gradual approach to economic reform since the mid-1980s and has achieved an annual growth in gross domestic product of over 6 percent, which sharply reduced its poverty before it joined the WTO in 2007, according to Malhotra.

China's economic growth rose in the late 1970s, yet trade liberalization started only when the growth rate increased substantially in the second half of the 1980s and the 1990s, said Malhotra.

India's growth rate increased substantially in the early 1980s. Trade reform started during 1991-1993, and tariffs were higher during the high-growth period of the 1980s than in the low-growth 1970s, said Malhotra.

"The Indian and Chinese experiences suggest that a gradual, sequenced approach is beneficial, and that import and trade liberalization are not necessarily the highest development priority, at least in the early reform period," Malhotra concluded.

The Asian Tigers - Hong Kong, Singapore, the Republic of Korea and Taiwan - are often hailed as examples that predominantly relied on export-led growth, but Malhotra noted that this was only one and not necessarily the most important of their strategies.

Other strategies included protecting the domestic market, as "most of their import liberalization occurred only after high growth was established in the 1980s," Malhotra said.

However, according to Zhang Kening, director of the Department of International Trade and Economic Affairs of the Ministry of Commerce of China, increased trade in the developing countries has had a positive contribution on poverty reduction.

"Price increases of primary and resource products has brought generous export profits to many developing countries. The income from overseas sales in developing countries has reached $300 billion, almost three times that of international assistance," said Zhang.

"The amount of foreign direct investment in developing countries has reached nearly $600 billion, and the industrial development directly lead to the increase in national income," Zhang said.

The clash of these two opposing views will continue to exist in the future, said Professor Wu Laping of the College of Economics and Management, China Agricultural University and the leading author of the report for the forum.

"According to our study on free trade and poverty reduction, we found the majority of studies believe trade can reduce poverty," Wu told China Daily on the sidelines of the forum.