The Asia-Pacific HDR 2006 has set out an eight-point agenda for the countries in Asia and the Pacific to help them respond to new challenges in international trade. How different are these from those that are often prescribed by the IMF and the World Bank?
Our prescription is different essentially in two areas. One, we have advocated the adoption of a strategic trade and industrial policy.
This means these countries must have a selective approach to protecting some of their industries, and investments should be made to prepare them for competition ahead.
Two, we feel that most of these countries have moved away from agriculture, resulting in a reduction in investment in the agriculture sector. We want to restore focus on agriculture.
A selective approach towards protection implies discretionary policies. Are you in favour of such discretion?
There has to be a criterion for selecting industries that deserve special treatment, and there should be a clear time-frame for protection, which should be phased out.
We are opposed to fiscal incentives as a policy instrument, and instead prefer the public investment route to boost infrastructure.
But protection policies, once introduced,
are difficult to phase out.
Yes, there are political difficulties in phasing them out. But there have to be clear-cut announcements on the phase-out programme and a strong competition policy should be in place. It is a complex process and there are dangers of corruption.
What role do you see for markets in agriculture?
We need to view agriculture as a food security issue. There will be need for protecting farmers and market-support policies to encourage crop diversification.
Aren't rigidities in labour laws a hindrance to the process of change?
We are not in favour of extreme rigidities. Labour policies must be flexible and there have to be redundancy payments to compensate displaced labour and re-train them.
Your report seems to be in favour of both, a multilateral trade regime and the formation of regional trade blocs. Aren't these contradictory?
We are not in favour of bilateral trade because we fear there is trade diversion and welfare loss. We endorse the multilateral trading regime. But we are less opposed to regional trading arrangements, because we see these as the building blocks for a strong multilateral trading system.
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