Leveraging trade and digital agreements for sustainable development

This session presented the main findings of the ADB report on Aid for Trade in Asia and the Pacific 2022, which examined how trade and Aid for Trade can support developing Asia in meeting their sustainable development goals through the lens of regional cooperation. The report presents the Aid for Trade landscape in Asia, recent development in trade indicators and discusses the impact of the COVID-19 pandemic and associated trade policy measures. It also explores the potential of trade and digital agreements to support a resilient, inclusive and sustainable development, with a special focus on the most vulnerable economies. It discussed Aid for Trade beyond “hard infrastructure” investments to show that more Aid for Trade focus should be placed on “soft infrastructure” at both, improving the capacity of developing countries to participate in, design and implement of trade and digital agreements. It also highlighted the need for a reform of the Aid-for-Trade Initiative to reflect the new trade challenges and evolving environment, promoting regional assistance and economic spillovers.

The session focused on the need for use of trade and digital agreements for sustainable development. The session saw the release of the Asian Development Bank’s 2022 report on Aid for Trade in Asia and the Pacific—Leveraging Trade and Digital Agreements for Sustainable Development. A presentation was also made highlighting the issues covered in the report.

Panellists stated that in an era which is seeing a weakness in the international trading system, focus on aid for trade (AfT) is needed. This can help build and enhance Low-and-Middle-Income Countries’ (LMICs) participation in the global economy by integrating them into the international market. The Covid-19 pandemic has increased inequalities and further increased the requirement to build back better by enhancing trade. Inclusivity of women, young people, MSME etc., who have been disproportionality affected from pandemic should become a priority.

After the pandemic, there has been a rise in regional agreement as opposed to multi-lateral agreements. In this scenario, how new trade agreements relate to the already existing multi-regional needs to be evaluated. Since new agreements do not super succeed existing ones, whether regulatory convergence and coherence is promoted or not with such new agreements needs to be evaluated through an evidence-based approach. Further, whether these agreements get used by the private sector or whether they are just signed and not used also needs to be evaluated. Monitoring the effectiveness of an agreement can be done by assessing utilisation rates. Low utilisation rates suggest that a preference scheme is not working. Further, high utilisation may not always be a positive sign. However, utilisation rates are important as they are key to increasing transparency.

Panellists also highlighted that not all AfT programs in the nature of capacity building have equal success. However, successful programs have a few things in common. All such programs are demand driven and based on custom. They are a response to immediate requirement and ownership is the key ingredient. These programs have forward looking effort and involve private sector and civil society. Further, they also have a strong donor coordination. Adopting such measures can lead to developing synergies so that comparative advantage of each stakeholder can be exploited.

Panellists opined that the digital economy is key to enhancing global trade. Pandemic has increased digitalisation and most of the new generation Free Trade Agreements (FTAs) are focusing on digital economy. Digital Economic Partnership Agreement (DEPA) signed between Chile, New Zealand and Singapore is a good example. It has been based on factors like end-to-end facilitation of trade, Trust, innovation, and inclusion. Further, there are soft norms included such as focus on interoperability and coherence. New issues can be added and new members can join.

However, only 0.4% of total AfT is utilised for digital transformation. Thus, there is a need to refocus and modernise AfT. AfT can help in the following way for digital transformation. Digital agreements are happening between developed countries and developing countries missing from the table. Rules for trade are being developed right now and developing countries have to join in co-designing the rules. For this purpose, developing countries need to have a good policy framework such as a National Digital Strategy and further regulatory building blocks should be in place which include frameworks for data protection, cyber security, competition policy for digital economy, digital transactions, and consumer protection, among others. Policy makers need to know how to regulate the digital economy and its aspects like artificial intelligence, digital identity, etc. Here, civil society and businesses need to be brought on the table. Developed countries can open opportunities for engagement and collaboration for developing countries.

On the panel were Albert Park, Chief Economist and Director General, Economic Research and Regional Cooperation, Asian Development Bank; Amy Stuart, Counsellor (Services and Investment), Australian Permanent Mission to the WTO in Geneva; Jong Woo Kang, Principal Economist, Economic Research and Regional Cooperation Department, Asian Development Bank; Francesco Abate, Adjunct Professor, Turin University; Pramila Crivelli, Economist, ERCI, AsDB; Andrea Giacomelli, Aid-for-Trade and Trade Policy Advisor, Permanent Delegation of the Pacific Islands Forum to the United Nations, World Trade Organization, and Other International Organizations in Geneva; Stephanie Honey, Co founder, Global Trade Insights; Roy Lagolago, Head of the PACER Plus Implementation Unit, (PPIU); Shawn Tan, Senior Economist, ERCI, AsDB.