Leveraging trade and investment for sustainable development

The Third ARTNeT Consultative Meeting held in Macao, China on 1-2 November 2006 decided to consolidate the research efforts undertaken during the previous two years and to support follow-up studies on the thematic study on trade facilitation and the regional studies on agriculture and services trade liberalization. In addition, an exploratory regional study on trade and investment was approved, culminating with an expert group meeting on designing better and more coherent trade and investment policies in developing countries.

Previously, an updated ARTNeT research programme was approved during the Second ARTNeT Consultative Meeting held in Macao, China, on 6-7 October 2005. The Meeting decided to continue the thematic study on trade facilitation and to begin a new regional study on trade liberalization in services. Research during this period focused on trade facilitation beyond the negotiations, in particular:

• Trade facilitation and regional integration;
• Customs valuation and implementation of the related WTO agreement;
• Trade facilitation and logistics services liberalization

Following consultations with ARTNeT Steering Committee Members and taking into account the results of the Research Priority Survey conducted in October 2008, two regional studies were initiated in 2009 under the research theme: Trade and Investment Related Policy Coherence for Inclusive and Sustainable Development. In addition, a number of short-term studies were supported to complement the regional studies initiated in 2007 and to explore the impact of behind the border policies on trade and investment. Research on other important issues, including in particular, Aid for Trade and Rules of Origin was encouraged. The multi-stakeholder steering committee endorsed the launch of a new regional study on Improving Import-Export Processes and Procedures in Asia.

Based on the recommendations of the regional consultation held in preparation for ARTNeT Phase II held on 16 July 2007, as well as various consultations and feedback received during the year from policy makers and other stakeholders during the year, ARTNeT Phase II (2008-10) research focused on three priority themes:

• Trade, investment and domestic policy coherence;
• Trade facilitation and development of related services;
• Multilateral trade liberalization and regional integration.

Economic Diversification and Competitiveness

Research focus for Phase III: Drivers of Competitiveness and Strategies for Economic Diversification for Developing Countries Specific topics for studies under this theme include (but are not limited to) the following:

1. Identifying and supporting the development of new and dynamic sectors: Much work remains to be done on determining products and firms with a comparative / competitive advantage, in particular in light of the changed global economic outlook and consumption patterns. a. Where a country already exports a product to the world but does not have a significant share in a particular market, firms may be restricted by the existence of Non-Tariff Measures or the lack of a preferential trading regime to fully reach their export potential. Policymakers can benefit from research to guide their negotiation and regulation strategies. b. Similarly, a high volume of imports of a product by a country suggest that there is strong demand and that economies of scale would exist if the country were able to manufacture the product themselves. One strategy in this connection is for the country to seek to attract FDI inflows for these sectors, in particular relating to innovative production using advanced technology and research & development.
2. Dynamics of firm, especially SMEs’ entry and exit and their impact on job creation: The importance of firm entry and exit as determinants of market performance is well recognized. Despite this wide recognition, the actual patterns of firm entry and exit in the region’s economies are not well understood and warrant further study, including through firm level primary data collection. In addition, recent studies suggest that the vulnerability of employment and high rate of employment in the informal sectors in many countries in Asia and the Pacific contribute to the high savings rate in Asia and the lack of national consumption. Further research is required to assess the quality of jobs created for example in the ready-made-garment sectors to determine the linkages between export, labour and social policies and to optimize policymaking. • Innovation, technology and competitiveness: Some studies suggest that while many Asian economies have increased their overall level of exports over the past decade, this increase is due to a very large extent to the increase in total world trade, whereas their competitiveness in world markets remained stagnant or declined. There is broad consensus over the fact that countries must increase both productivity and skill/technology content to “move up the value chain” and ensure long-term competitiveness and growth. More research is required to determine how policymakers can promote firms’ investment in skill and technology upgrades in their production processes which will ensure higher returns in the future.
3. Economic diversification and low-carbon growth: The increasing global attention and funding invested in climate change mitigation and adaptation provides an opportunity for developing countries to invest away from “dirty” sectors (such as logging and mining of certain raw materials like coal) and into cleaner sectors and thereby simultaneously achieving a broader export diversification. More research is required in particular in LDCs to identify polluting sectors, realistic alternative economic sectors, and sources of financing and funding to achieve a reorientation.
4. The role of developing countries’ SMEs in production networks and how to increase their job-creating potential: It is well understood that the “factory Asia” phenomenon is based to a large extent on regional and global value chains. What is less well examined is the extent to which these value chains are dominated by multinational corporation networks, national corporations and/or SMEs, and on what basis they trade (arm’s length principle or intra-corporate). Furthermore, what is the impact of this composition on both margins and on the quality and quantity of jobs? Case studies of key products’ value chains could provide insights into these questions, as well as explore the differentiated gender impacts of value chains (both those dominated by multinationals and by national companies) on employment opportunities and wages. ILO has pioneered the research in the area of the gender implications of value chains, and much more research in the area is needed. • Balancing sources of growth: The growth of many developing countries over the past few decades, including the Asian Tigers and China, has demonstrated the impressive impact that increased exports can have on overall growth and poverty-reduction. What is less well understood is what policies maximize the trickle-down effect of export-led growth. Should policymakers focus on promoting the creation of decent jobs (including through standard-setting such as minimum wage and labour standards laws), or should they focus on maximizing their market share abroad to increase government revenues and then implement redistributive policies?
5. Development of new theoretical frameworks for empirical study of determinants of economic diversification: While a significant amount of research has been conducted over decades in the area of determinants of diversification, new innovative research is needed in particular to adequately address the circumstances of least developed countries, whose circumstances may not adequately be addressed by “classical” trade theories.

ARTNeT researchers have also been given opportunity to collaborate in implementation of the ESCAP project “Trade Facilitation for Poverty Reduction: Building Capacity for the Implementation of Pro-Poor Trade Facilitation Policies and Measures in Developing Asian Countries” funded by the Government of China. The project aims to increase capacity of officials and other stakeholders in least developed and other developing countries members of ESCAP to implement trade facilitation measures contributing to poverty reduction.

A regional study under topic “Trade Facilitation for Poverty Reduction in Developing Asian Countries” was initiated at a consultative research meeting in March 2012 and seven papers have been selected covering Bangladesh, China, India, Indonesia, Sri Lanka, Thailand, and Viet Nam. The purpose of the regional study is to provide in-depth analysis of experiences in implementation of trade facilitation measures contributing to poverty reduction.

Supporting Equitable Economic development in ASEAN: Impact of regional integration (AEC) on Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV countries)

Phase IV began in 2014 with a focus of expanding the partner-based and the reach of ARTNeT. In 2015 ARTNeT formalized its partnership with AFD, with whom it established a project that will contribute towards narrowing development gaps between CLMV countries and other ASEAN members. The urgency to narrow development gaps within and among ASEAN countries was also recognized by ASEAN leaders who, at the 19th ASEAN Summit held in November 2011 in Bali, Indonesia, endorsed the “ASEAN Framework for Equitable Economic Development” to facilitate the realization of the ASEAN Economic Community (AEC) Blueprint. The project will operate through the implementation of policy-oriented research activities, research capacity development programme and knowledge-sharing initiatives. These will focus on the conduct of policy-oriented research and technical training in CLMV countries to help them follow an inclusive and sustainable development process. The objective is to strengthen the technical and analytical skills of officials and researchers from CLMV countries to manage use and assessment of the impact of 1) non-tariff measures, and 2) geographic indications in the context of trade-related intellectual property rights. The intended impact is the development of effective responses in CLMV countries in these policy areas.

The expected outcome is improved technical and analytical capability of CLMV officials in managing NTMs, including through higher readiness to share information on own NTMs through WTO notifications and AEC Trade Repository. Likewise, better understanding of the GI for promoting subregional employment and trade will be among the expected impacts.

The project utilizes the three-pillar approach of ARTNeT. ARTNeT has been focused on increasing the amount and quality of relevant trade and investment research in the region by harnessing the research capacity already available and developing additional skills through regional team research projects, enhanced research dissemination mechanisms, increased interactions between policymakers and researchers to improve transmission of knowledge and information, and specific capacity building activities catering to researchers / research institutions and policy makers especially from least developed countries.

The project will include these types of activities:

1. Research capacity development workshops.
2. Research (including networking researchers in ARTNeT community of advisers and others).
3. Dissemination of research findings (publication of reports and 4 national policy briefs).
4. Dissemination event at the end of the projectDevelopment of new theoretical frameworks for empirical study of determinants of economic diversification: While a significant amount of research has been conducted over decades in the area of determinants of diversification, new innovative research is needed in particular to adequately address the circumstances of least developed countries, whose circumstances may not adequately be addressed by “classical” trade theories.

ARTNeT researchers have also been given opportunity to collaborate in implementation of the ESCAP project “Trade Facilitation for Poverty Reduction: Building Capacity for the Implementation of Pro-Poor Trade Facilitation Policies and Measures in Developing Asian Countries” funded by the Government of China. The project aims to increase capacity of officials and other stakeholders in least developed and other developing countries members of ESCAP to implement trade facilitation measures contributing to poverty reduction.

A regional study under topic “Trade Facilitation for Poverty Reduction in Developing Asian Countries” was initiated at a consultative research meeting in March 2012 and seven papers have been selected covering Bangladesh, China, India, Indonesia, Sri Lanka, Thailand, and Viet Nam. The purpose of the regional study is to provide in-depth analysis of experiences in implementation of trade facilitation measures contributing to poverty reduction.