Asian trade bucks the protectionist trend – but struggles with sustainability
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Asian trade bucks the protectionist trend – but struggles with sustainability

THE global rules-based trading system is facing its biggest threat in recent history as protectionist forces are on the march across many developed countries in the West, a new report from the Economist Intelligence Unit has found.

Asian countries, however, are showing no sign of rejecting international trade as they continue to broaden and deepen existing trading relationships, following a quick and convincing regroup after the United States’ withdrawal from the Trans-Pacific Partnership.

The Hinrich Foundation Sustainable Trade Index, released last week, believes Asia is in a prime position to help lead and sustain the global economy’s commitment to free and fair trade. But stresses the importance of sustainable trade if this is to be successful.

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Despite its enthusiasm for trade, Asia has experienced an overall regression in sustainable trading practices – a practice defined by its support of the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital.

The report found that while Asian countries, especially richer ones, have seen improvements in their economy, these are offset by significant declines in social and environmental areas.

“This suggests that even as many countries continue to achieve exceptional rates of growth, they have not done enough to mitigate certain negative externalities such as air pollution and inadequate labour standards,” the report reads.

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Hinrich Foundation Sustainable Trade Index 2018. Source: Hinrich Foundation/Economist Intelligence Unit

The majority of the 20 countries surveyed saw a backslide in sustainability score from the previous 2016 survey.

Topping the 2018 index, Hong Kong was one of the few destinations that achieved a slight increase in its score.

The Chinese territory had a strong performance in technological infrastructure and labour force growth, as well as steady increases in educational attainment and political stability.

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But Hong Kong was a rare bright spot in an otherwise disappointing trend.

Only five of the 20 countries – 19 in Asia and the United States – saw an increase in sustainability. In addition to Hong Kong, these include China, Burma (Myanmar), Pakistan, and India.

The report found that while countries generally performed well in terms of growing their labour forces as well as their per-head GDP, inequality has risen and political stability has become shakier everywhere from Brunei and Laos to the US.

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Deforestation in West Kalimantan, Indonesia. Source: David Gilbert/RAN

Environmental protection also suffered over the last two years, with only China, Laos and Pakistan recording improvements.

In 2017, China pledged to invest 2.5 trillion yuan (US$378 billion) in renewable energy by 2020 as it continues with its plan to move away from burning coal. This saw China’s air pollution score improve dramatically.

Laos and Pakistan are the only two countries with reduced transfer emissions, and Pakistan also saw a vastly reduced rate of deforestation.

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The report highlights that sustainability is increasingly becoming an important determinant of foreign direct investment as companies strive to ensure sustainable supply-chains to give them a competitive edge.

While Asia’s enthusiasm for trade is heartening, there is still a long way to go in terms of achieving fully sustainable practices.

“At a time when the word ‘trade’ has negative connotations in many parts of the world,” the report reads. “It is comforting to see that Asia’s commitment to trade-related growth and success appears stronger than ever.”

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