EU-ASEAN FTA Campaign Network and the Committee for Asian Women (CAW)

Free Trade and the Global Economic Crisis

Examining the linkages and implications on jobs and livelihoods and defining policy proposals and alternatives

October 2, 2009 (1:30-5:30 pm)
October 14 Memorial
Bangkok, Thailand

The global economic crisis has re-opened the debate on free trade and development. Multilateral institutions and forums like the World Bank, the World Trade Organization, and the G20 have used the crisis as an opportunity to push for more liberalization of trade and investment. Invoking the protectionism bogey, these institutions have led calls for the conclusion of the stalled Doha round of multilateral trade talks in the WTO and for countries to sustain efforts towards the creation of more open economic regimes. Their logic is simple, the crisis has led to a serious contraction of world trade-according to UNCTAD by as much as 6-8 percent in 2009- and the best response is to "contain protectionism and extend open markets to facilitate recovery and lay the foundations for future prosperity".^[1]

There have been on the other hand serious calls for an overhaul of the economic system in the wake of what some quarters are calling the 'death of neoliberalism". Many have argued that it is precisely the pursuit of free trade policies that have reduced protection and relaxed regulations that has made economies of poor countries more vulnerable to financial and economic contagions. Free trade is part of the problem and not the solution. The proposals therefore are for more effective regulation of markets, renewed emphasis on domestic production, and support for the most vulnerable sectors by way of increased subsidies and protection.

The United Nations Commission on Trade and Development (UNCTAD) released last May 2009 its report "Global economic Crisis: Implications for trade and development ". The main conclusions of the report are:

1. The world economy is currently facing a severe global crisis that spilled from financial sector to the real economy in the last quarter of 2008, leading to steep falls in industrial production and a rapid decrease in international trade, and to a slowdown in foreign direct investments and potentially in development assistance. The current global crisis – preceded by the food crisis, volatile energy prices and climate change challenge – is a major blow to attaining the MDGs for developing countries

2. Most developing countries are now closely linked with the global economy by trade and foreign direct investment flows, and their economies are more sensitive to falling international demand (and conversely to expanding demand)

3. The ongoing reduction of trade and investment flows is starting to restrain the development prospects of developing countries. Potentially, all these effects could bring millions of people back into poverty.

4. UNCTAD currently estimates world merchandise trade to fall between 6 and 8 per cent in 2009. The decrease in merchandise trade appears to be affecting all developing regions and most types of goods. Moreover, South–South trade, which has been the most dynamic component of world trade for over a decade, is declining too, especially intra-Asian trade.

5. Multilateral policy responses are required to achieve a sustained global economic recovery At the international level, restoring trade finance and mitigating the risk of increased protectionism are immediate challenges. Concluding the World Trade Organization (WTO) Doha Round on balanced and pro-development terms will help, as well as harvesting some of the key development deliverables such duty-free and quota-free treatment for least developed countries (LDCs). At the interregional and regional levels, expanding and diversifying South–South cooperation is a viable solution to support and to increase developing countries' trade and investment performance should be consolidated and enhanced.

   At the national level, the crisis has made it timely to review development strategies so as to make them more sustainable against future external shocks, focused on delivering broad-based and inclusive development, and responsive to the imperatives of preserving the environment, while also providing new economic opportunities.

While the UNCTAD report echoed the calls against protectionism, which it considered still a threat, it qualified that there exists today certain restraints to excessive protectionist impulses. These include, the transnational and multinational nature of businesses, elaborate multilateral trade rules under the WTO including dispute settlement, and also the enhanced integration of economies. Furthermore, the report espouses the use of certain policy instruments including increasing tariff rates up to bound rates under the WTO, as part of a menu of options for developing countries

Forum on Trade and Crisis

As part of its continuing campaign on the EU-ASEAN FTA and similar bilateral trade agreements in Southeast Asia, the EU-ASEAN FTA Campaign Network is organizing a forum on trade and the global economic crisis on 2 October 2009 in Bangkok, Thailand.

Objectives:

The forum seeks to deepen the analysis on the relationship between free trade and the global economic crisis.

Specifically, it aims to provide the platform for trade campaigners and activists from the region to collectively examine and analyse trade policies in the context of the global crisis; to share and discuss how government's have responded to the crisis and their implication on trade; and to strategize how to push trade campaigns forward in the context of renewed calls for the conclusion of the Doha Round in the WTO and the relentless pursuit of bilateral and regional free trade agreements.

Target Participants: The forum will be open to the public. It hopes to draw the participation of both trade and climate activists who will be in Bangkok around this time for the intersessional meetings of the UNFCCC climate negotiations.

Moderators: Jacques-Chai Chomthongdi and Frances Lo

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^[1] Fighting the Urge For Protectionism by Fredrik Erixon and Razeen Sally Far Eastern Economic Review. January-February 2009