Even as news of Japan’s trade deficit due to falling Asian exports trickled in and Asian companies slashed jobs across the board, APEC leaders decided the financial crisis would end by 2010, within 18 months. Prudent or not, the leaders decided to strike an optimistic note “We are convinced that we can overcome this crisis in a period of 18 months,”a joint statement said.
Hedging himself on emerging Asia, Bob Buckle, chairman of the APEC Economic Committee told the AFP “If China and India come through this crisis with very good growth rates that would be very important for the rise of global economy.”
The IMF added that emerging economies, which include China and India — will account for approximately 2.2 percent of global growth next year. According to the AFP, it estimates rich nations’ economies will together grow by just 0.1 percent this year while the developing world will grow by 5 percent.
Deciding to act quickly and decisively, leaders who control half the world economy also resolved not to raise trade barriers but instead to quickly resolve the WTO Doha round of trade talks. “A prompt, ambitious and balanced conclusion to the World Trade Organization – Doha Development Agenda negotiations would deliver substantial improvements in market access and reduce market-distorting measures in global agricultural trade,” they told the BBC.
So why are global leaders pushing for trade? Why not seal off boarders and depend on domestic industries and consumption? One point analysts argue could be the growing clout of developing nations, and their ability to resuscitate the global economy. Proponents of free trade, or those against protectionism follow the economic principle of comparative advantage ie. it allows countries to specialize in the production of goods and services in which they have a comparative advantage, leading to the most efficient use of resources at competitive prices. Alan Greenspan, former chair of the American Federal Reserve in his criticism of protectionist proposals said “If the protectionist route is followed, newer, more efficient industries will have less scope to expand, and overall output and economic welfare will suffer.”
In this context, industry insiders feel that in resolving the financial crisis, which follows the food and fuel crisis, developed countries are supporting developing countries on their call for free trade hoping that the lack of trade barriers leading to competition will drive for better prices, wages, living conditions and a more efficient use of resources.
