“Trade on Human Terms”

Imelda M. Nicolas is a trustee of INCITEGov— International Center for Innovation, Transformation and Excellence in Governance—and is working closely with Action for Economic Reforms on a Fiscal Reform Agenda project. She is a former Secretary General of the National Anti-Poverty Commission. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, September 4, 2006 edition, page S1/5.

By any stretch of the imagination, I cannot consider myself an economist (with my measly 12 units of economics in college).  But there was no way I would skip attending a forum with the highly provocative title of Trade on Human Terms: Makatao Pa Ba? (Making Trade Work for the Poor).

The title goes beyond intellectual titillation, however, as the August 17th forum,  hosted by the UP National College of Public Administration and Governance (UP NCPAG), was the occasion for the launching of  the United Nations Development Programme’s (UNDP) 2006 Asia-Pacific Regional Development Report on “Trade on Human Terms: Transforming Trade for Human Development in Asia and the Pacific.”  I am happy to say that I was not disappointed—there is so much “meat” contained in the report that one could suffer from mental indigestion, if one tries to take it all in one sitting.

The report examines many supposedly established dictums on  international trade and economics, globalization and liberalization using a wider-angle,  human development lens—to see whether or not  these economic activities  truly result in an equitable distribution of opportunities, resources and benefits—keeping an eye especially for the poor (and of equal interest to me, the women)  in the region.

Of course, Asia Pacific, the study’s focus, sustains the excitement in reading such a report since it is the world’s most economically dynamic region (during the period 1990-2003, GDP grew annually on average by more than 7 percent). It has some of the fastest current  growth rates in international trade (e.g., China and India) and is inhabited by more than 60 percent of the global population and enriched by a diversity as shown  in the 2003 Human Development Index (again of UNDP). The region’s 37 countries (e.g. Philippines, Pakistan, Korea, Fiji, Mongolia, Iran, Vietnam, Sri Lanka, Papua New Guinea) ranked between 3rd and 140th, out of 177 countries.

It is also home to 37 percent of the world’s least developed countries (LDCs)  or 14 out of 50 so-called LDCs (to name a few, Cambodia, Tuvalu, Nepal, Timor-Leste, Afghanistan, Bangladesh). Another stark contrast existing within the region: the per capita income of its richest country is more than 30 times that of the poorest.

Thus, there is a wealth of lessons to be gained from the different experiences, experimentations and characters of these widely divergent nations.  The dynamism of these economies means that even now, traditional economic and trade philosophies, policies, and practices are being challenged and transformed, constantly questioned and tweaked.

And what are some of the thought-provoking findings and conclusions of the report?

First, for most of the developing countries in the region, increased international trading came hand in hand with increased income inequality. Paradoxically, on the other hand, despite this growing income gap, there was a significant reduction in poverty.   From 1990 to 2001, the percentage of people living on less than $1 a day declined from 41 percent to 31 percent, in South Asia and from 30 percent to 15 percent, in East Asia and the Pacific.

However, the least developed countries (LDC’s) were less successful in their poverty reduction efforts, despite their expanded global trade (from 20 percent in the 1980s to 33 percent in the 1990s).  While the proportion of those living on less than $1 a day is 22 percent for the region’s developing countries, it is 38 percent for the LDCs.

Again, putting on the human development lens of the report, one notes that even with the  reduction in income poverty in the region, much is still to be desired especially in terms of food security, education  and  employment.

The liberalized importation of food may have reduced prices but it has not resulted in better nutrition for the people:  Asia still has more hungry people than in any other region— over 510 million in 2002. And sadly, recently, the number has even grown worse—one in every six persons is undernourished.

In education, another unfortunate paradox is observed—the global market logically should lead to better and higher education as it “rewards” people who are better-educated and with improved skills.  But the data do not support this premise (even in the most basic level of education)—in South Asia, one child in five is not enrolled in primary school while a significantly large percentage of those who enroll do not finish their primary education.  In addition, in the sub-regions where enrollment is high, the situation did not improve: in 2001-2002, enrollment declined from 92 percent to 91 percent, in South-east Asia and from 97 percent to 95 percent,  in North-east Asia.

The employment picture is more complex.  Again, the commonly assumed theory is that “more trade should mean more jobs and a decline in unemployment.”  On the contrary, the report points to a recent phenomenon called “jobless growth.” The 1980s generated 337 million jobs; this figure was halved (176 million) in the 1990s. Most of this decline can be attributed to East Asia, which is responsible for 70 percent of this amazing job generation total. South Asia fared better—64 million jobs in the 1980s and 72 million in the 1990s.

Briefly and simplistically, this can be explained by the changing character of  manufacturing—from low-tech, labor-intensive to high-tech, capital-intensive industries and that it  could not cope in absorbing people who are “migrating” from the agricultural and rural sectors.

Chapter 2 of the report Trade and Human Development ends with a gloomy summary of the employment situation in the 1990s: “There was ‘jobless growth’ both in agriculture and manufacturing.  The overall unemployment rate increased and labor market conditions probably deteriorated for unskilled workers.  The rising gaps between urban and rural income, between capital and labor income and between the incomes of the skilled and unskilled workers have led to sharp increases in inequality.  The failure of employment to rise and the growing income disparities imply that the ‘trickle down’ effect of fast trade and income growth on human development and poverty reduction is limited.”

If there is one basic lesson that I hope our country (especially this and future administrations) would glean and learn from this quite substantive UNDP report, it is this: that economic growth, though necessary to reduce poverty in any country, is NOT sufficient to achieve that goal.  The nature of that growth matters—whether or not it is pro-poor, whether or not it is translated into human terms, whether or not human development and equity considerations are an essential part of that growth.

This is the reason why despite the rosy economic picture drawn by the administration of favorable peso-to-dollar exchange rate, higher export earnings,optimism in the stock market, lower government deficits, a projected balanced budget in 2008,  approximately six out of ten  Filipinos  still say they are poor (based on the June 2006 quarterly self-rating poverty survey of Social Weather Stations or SWS).

All these supposedly positive signs of growth and economic prosperity do not mean anything to the overwhelming majority of our people. For they do not feel them in terms of  more jobs,  better  and  higher education, healthier families, safer environment,  cleaner water, a roof over their heads,  food on their table.  The question our leaders must continuously ask themselves as they grapple with the issues of trade expansion and liberalization, globalization and economic growth is, as the UP Forum puts it: “Makatao pa ba?”

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