The anti-trade mood sweeping parts of the world will hurt global efforts to pull millions of people out of poverty, according to Indonesian Finance Minister Sri Mulyani Indrawati.
The former World Bank managing director said in an interview in Jakarta that she’s worried about the threat from rising barriers to trade at a time when “populist sentiment has been translated into political rhetoric and policy, which is really against the wider need.”
Anxiety is growing in emerging markets, particularly in Asia, as trade policies turn more protectionist under U.S. President Donald Trump. He pulled the U.S. out of a Pacific trade deal that would have benefited Asian nations from Malaysia to Japan, and has threatened to punish China with higher tariffs. For Southeast Asian nations like Indonesia, free trade has been key in boosting economic growth and living standards. The sentiment that “trade is a zero sum game -- if you’re profiting, then somebody else is losing -- this is not the basic core or value or belief or theory, whatever you name it, it’s not economics,” Indrawati said on Monday. A worrying aspect is that “the relationships in this world are actually dictated by this zero sum game,” she said.
Globalization and rising trade has helped to cut world poverty rates to 9.6 percent in 2015 from almost 30 percent in 1999, according to the World Bank. In Indonesia, the government has made inroads in reducing inequality as the economy grew on average 5 percent in the past five years.
Indrawati said that while there was “genuine insecurity from quite a significant part of the people because of this globalization” the response was “not serving the world best at this moment”.
Countries in the Association of Southeast Asian Nations group, or Asean -- particularly smaller ones like Laos, Cambodia and Myanmar -- “would never be able to reduce poverty without global trade,” she said.
“The achievement of the Asean countries in reducing poverty in such a very impressive and significant way is the achievement of this global trade,” she said. “When this is no longer there, when global trade is no longer believed as a good policy, then you should come up with what is then the alternative policy.”
With a population of 260 million people, Indonesia has a strong and growing domestic market that helps to shield the economy from trade risks. The country is among the least trade-dependent ones in Asia, with exports accounting for about a fifth of gross domestic product, compared with 71 percent in Malaysia and 69 percent in Thailand, according to World Bank data.
Indonesia has its own brand of economic nationalism, limiting foreign participation in certain industries. The government banned the export of mineral ores in 2014 and encouraged mining companies to build smelters in an effort to transform Indonesia into a value-added resource producer. Last month it scaled back the export ban.
While Indonesia was not party to the original 12-nation Trans-Pacific Partnership with the U.S., it had been actively considering joining a pact that would have covered 40 percent of global GDP.
Like many of its Asean partners, Indonesia is now turning its focus to the Regional Comprehensive Economic Partnership, which includes China and could potentially create the world’s biggest free-trade bloc. The next RCEP round of talks will be held in Kobe, Japan, later this month.
“For Indonesia, we can be very opportunistic,” Indrawati said. “Indonesia has the Asean economic community, which in itself is a big market for us, and this is already a group of 10 countries. If you add three more, China, South Korea and Japan, we’re actually big enough.”
Source : Bloomberg