Free trade has spurred record economic growth in the Asia-Pacific but also widened income inequality as unskilled workers are left behind by globalisation, a UN report said Thursday.
"Asia's opening to the global market has propelled record economic growth and reduced income poverty in much of the region," the UN Development Program (UNDP) said in its 2006 Asia-Pacific Human Development Report.
The economy in the Asia-Pacific region, home to more than 60 percent of the global population, expanded annually 7.9 percent on average from 1980 to 1990, making it the fastest-growing region in the world.
Between 1990 and 2003, the region continued to grow 7.6 percent a year, surpassing 5.4 percent in South Asia, 2.7 percent in Latin America and the Caribbean and 3.2 percent in the Middle East and North Africa. This rapid economic growth came in tandem with "steady trade liberalisation," the UNDP said, adding Asian governments should take credit for implementing liberalisation, including lowering tariffs.
At the same time, however, free trade widened income inequality in the region as globalisation benefited well-paid, skilled workers rather than poor, unskilled labourers.
"Asia and the Pacific have embraced globalisation but globalisation cannot embrace the region's poor without determined action on the part of governments," said Hafiz Pasha, director of the UNDP's regional bureau for Asia and the Pacific.
Although free trade has helped reduce poverty, with the number of people living on less than one dollar a day falling by nearly a quarter of a billion, the UNDP said globalisation "has exacerbated inequalities" within the region.
"One of the most disturbing outcomes is that for most developing countries in the region, a greater engagement with international markets has been accompanied by a rise in income inequality."
For poor countries, the textiles and clothing industry is the launch pad for their industrial development but the UNDP said competition from China was now threatening job opportunities in the poor nations.
"The benefits were unequally shared. The main winners have been China and India; the main losers have been Nepal, Philippines, Thailand and Pakistan," it said.
The UNDP also argued that many governments in the Asia-Pacific region were neglecting agriculture and investing far less in their rural development.
In the early 1960s, the developing countries had an overall annual agricultural trade surplus of seven billion dollars.
But they have become net importers of agricultural products since the start of the 1990s, with the farm trade deficit reaching 11 billion dollars in 2001. "As a result, global food supplies could become much tighter. This raises questions of food security," the UNDP said.
To distribute the benefits of free trade equally, the UNDP called on the industrialised economies to give poorer nations the chance to compete in the global marketplace. It also argued the region's accumulated foreign exchange reserves worth 1.9 trillion dollars should be used for investing in human development priorities such as health and education.
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