trade, inclusive growth, and the role of...
TRANSCRIPT
Trade, Inclusive Growth, and the Role of Policy
Emmanuel A. San Andres APEC Policy Support Unit
Copyright © 2016 APEC Secretariat
Aid for Trade Seminar Hotel Jen Tanglin, Singapore | 21 April 2016
Outline
• What is APEC? • Economic growth and trade • Inclusive growth: concept and
measurement • Trade and inclusive growth • The role of policy
What is APEC?
Copyright © 2013 APEC Secretariat
• Established in 1989. • Forum for facilitating economic growth,
cooperation, trade and investment in the Asia-Pacific region.
• Intergovernmental grouping that operates on the basis of non-binding commitments, open dialogue, and equal respect for the views of all participants.
• Composed of 21 Member Economies.
APEC Member Economies
APEC Official Observers • Association of South East Asian Nations (ASEAN) Secretariat • Pacific Economic Cooperation Council (PECC) • Pacific Islands Forum (PIF)
Copyright © 2013 APEC Secretariat
APEC Policy Support Unit
Copyright © 2013 APEC Secretariat
• APEC Policy Support Unit (PSU) is the research and analysis arm of APEC.
• Conducts independent research in line with APEC’s core priorities. • Mission: To provide rigorous research & analysis needed to
improve the quality of APEC's deliberations and decisions. • Provide APEC members and fora with professional & tailor-made
research, analysis, policy support & evidence-based policy suggestions. • Five focus areas:
• Trade & Investment Liberalization & Facilitation • Structural Reform • Connectivity including Supply Chain Connectivity & Global Supply Chains • Economic and Financial Analysis • Sustainable Economic Development
Trade and economic growth
• Economies trade because it is mutually beneficial • Classical trade theory: specialise in goods you can make
efficiently (comparatively) and trade for goods you cannot make efficiently (comparatively)
• New trade theories: global value chains, horizontal integration, economic geography and networks, etc.
• Empirical data show synergies between trade and economic growth • More open economies grow faster than less open economies
• Economies that trade more get richer more quickly (e.g., East Asian miracles)
Trade and economic growth
• Elasticities: impact on GDP growth of 1% growth in trade • Positive for all economies; more positive in APEC
• More synergistic in recent decades
• But what about inclusive growth?
Period Elasticity (in %) Observations Overall R2
APEC Economies 1960-1988 0.428 376 0.687 1989-2013 0.565 453 0.783
Rest of the World 1960-1988 0.305 1,914 0.737 1989-2013 0.389 2,878 0.886
What is inclusive growth?
• Two aspects: inclusiveness and growth
• Growth is a necessary condition for inclusive growth
• But inclusiveness implies an improved distribution
Economic growth
• GDP per capita
• Mean household income
Inclusive growth
• [no commonly used measures]
Inclusiveness
• Gini coefficient
• Poverty measures
• Poor’s share of income
Measuring inclusive growth
• Inclusive growth is income growth adjusted for changes in inequality
• Both average income growth and reduction in inequality are considered
• An increase in inequality reduces the inclusiveness of income growth
• Note: mean HH income ≠ per capita income (but closely related)
inclusive growth = growth in mean household income – increase in inequality
Inclusive growth in APEC
Inclusive growth and per capita GDP growth, 1989-2012
Note: IG = inclusive growth; PCGDP = per capita GDP growth; ROW = rest of the world. Aggregate growth rates are averages of economy-level growth rates weighted by population. Source: PovcalNet data and APEC Policy Support Unit estimates.
Inclusive growth in APEC
Components of inclusive growth in APEC, 1989-2012
Note: Figures for inequality are presented in the negative: a negative growth rate means an increase in inequality while a positive rate means more equality. Aggregate growth rates are averages of economy-level growth rates weighted by population. Source: PovcalNet data and APEC Policy Support Unit estimates.
Trade and inclusive growth
Inclusive growth
Trade growth GDP growth
• Increased income and employment
• Investment and consumption multipliers
• Progressive public policy: taxation and service provision
Trade and inclusive growth
Inclusive growth
Trade growth GDP growth
• Increased income and employment
• Investment and consumption multipliers
• Progressive public policy: taxation and service provision
• Exports sector employs poor workers; located in poorer areas
• Imports make goods more affordable
• Access to educational materials and medicines; food security
Trade and inclusive growth
Trade openness All APEC Rest of the world
Inclusive growth years
Inclusive growth years
Inclusive growth years
Group 1 (least open) 41.8 16.7 50.0 Group 2 53.1 54.6 52.5 Group 3 46.3 43.2 47.0 Group 4 52.0 60.5 51.1 Group 5 (most open) 57.3 53.9 57.9 p-value 0.004 0.000 0.096
Bivariate analysis of inclusive growth and trade openness
• More open economies are significantly more likely to report inclusive growth
• Bivariate correlation seems to be stronger in APEC
Trade and inclusive growth
Variable (1) (2) (3) (4) Exports growth Negative* Negative* Imports growth Negative Positive Trade growth Negative* Merchandise trade growth Positive GDP growth x exports growth Positive* GDP growth x imports growth Negative GDP growth Positive Positive Positive Positive Population growth Negative Negative Negative Negative Inequality (Gini index) Negative* Negative* Negative* Negative* Note: Trade indicator independent variables for the models are: (1) exports and imports growth separately; (2) total trade growth (exports + imports); merchandise trade growth (goods exports + goods imports); and (4) exports and imports growth separately and interacted with GDP growth. Source: PovcalNet and WDI data and APEC Policy Support Unit estimates.
Multivariate correlations with inclusive growth
Trade and inclusive growth
• Empirically, direct relationship between inclusive growth and trade is mixed • Could be positive or negative depending on specification and
econometric model used
• Statistically insignificant in many cases
• Indications that the direct beneficiaries of trade growth are the more well-off segments of society • Bulk of APEC trade is in skill-intensive industries
• APEC top 3 exports: (1) integrated circuits and microassemblies; (2) ICT electric appliances; (3) petroleum oils (not crude)
Trade and inclusive growth
• However, indirect linkages point to positive effects • Coefficient for the exports-GDP growth interaction variable is
positive and significant
• Although direct beneficiaries of exports growth are the well-off, evidence to say the poor also benefit indirectly through the overall economy
• Interestingly, all coefficients for imports growth are not significant • No indication that the poor, in general, are hurt by imports
• Negative and positive impacts of trade seem to even out
• Protectionism not necessarily pro-poor
The role of policy
• Inclusive growth is not automatic with trade • Trade can play a positive role in inclusive growth
• But inclusiveness doesn’t just happen with trade; need to think about inclusiveness in policy/programme development
• APEC: SME internationalisation, cooperation in services sector
• Trade openness should be accompanied by structural reforms that enhance inclusiveness • Human capital investment and skills development
• Social protection (e.g., unemployment and health insurance)
• Labour market and financial sector policies that expand opportunities
• Access to finance and markets among the poor
Thank You
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