2010 World Export Development Forum - Renewed Optimism for Export-led Growth in the Post-crisis Era
The 11th World Export Development Forum (WEDF) held in Chongqing, China on 9–12 September highlighted renewed optimism and commitment to the export-led growth model and the necessity for trade, with a need to rethink strategies and objectives in the post-crisis era.
As International Trade Centre’s flagship event, WEDF is dedicated to discussing developments in global exports and competitiveness, and to identifying and analysing related challenges faced by developing countries and economies in transition.
With the theme of ‘Adapting to Post-Crisis World Trade Patterns and Lessons for Export Development’, the event was attended by more than 300 delegates from 48 developed and developing countries, including senior national and international policy-makers, heads of trade support institutions (TSIs), representatives of international agencies and business leaders.Insights into China’s Domestic Economy and Foreign Trade
Co-hosted by the Ministry of Commerce of the People’s Republic of China (MOFCOM), the China Council for the Promotion of International Trade (CCPIT) and the city of Chongqing, the event offered delegates a unique opportunity to gain first-hand insight into both China’s domestic economy and foreign trade policy, and one of the country’s fastest growing cities. A development success story with total foreign trade of US$ 7.7 billion and foreign direct investment in 2009 of more than US$ 4 billion, Chongqing has enjoyed an annual growth rate of 15% in the last three years, which rose to 17% in the first seven months of 2010.
In welcoming WEDF to the city, the Mayor of Chongqing’s municipal government, Huang Qi Fan, set the tone of optimism for the two-day event by saying that he was confident that the momentum of growth Chongqing was experiencing could be maintained.
MOFCOM’s Vice-Minister, Yi Xiaozhun, said that international trade was an important impetus for the recovery of the world economy following the recent financial and economic crisis. Through trade, he said, many countries including China have achieved sustainable economic growth.
Mr Yi stressed that China was committed to open trade and was not pursuing trade surpluses. The country was accelerating economic restructuring aimed at increasing domestic demand, and this would create opportunities for other countries to increase their exports to China and thus contribute to world economic recovery.
The Vice-Chairman of CCPIT, Wang Jinzhen, said that he hoped the WEDF would make an in-depth analysis of the global trading landscape and of appropriate trade promotion measures. He said China was currently trying to increase the number of brands it exported, and his organization was actively seeking opportunities for small and medium-sized enterprises (SMEs).
Adapting to the New World Economic Order
Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), said it was not just a question of exporting more but linking export growth to employment and enhancement of the skills of indigenous companies.
Dr. Supachai said the increase in South–South trade was an important development with the greatest growth in global demand coming from emerging countries. Where countries such as Brazil, India and China were doing well, they were pulling other countries up with them.
Pascal Lamy, Director-General of the World Trade Organization (WTO), spoke of trade’s role as a transformational driver of economic growth and poverty reduction, but noted that if it was to work to the benefit of all, strong disciplines were required in order to create the fair, level, transparent and predictable trading context entrepreneurs needed.
Discussing the problems of the 49 least developed countries (LDCs) in joining global supply chains, Mr Lamy stressed that market access on its own did not guarantee market entry. Supply-side constraints still prevented many countries from entering markets.
Representing the private sector, the Vice-Chairman of Tata Steel India, Balasubramanian Muthuraman, said that the recent global financial crisis was hastening the restructuring of the world economic order and a global economic rebalancing was under way.
On the one hand, said Mr Muthuraman, the combination of low savings rates, high consumption and high fiscal deficits, coupled with inherent lower competitiveness, could result in a very slow recovery in the developed world. On the other hand, countries in the developing world, which had the advantage of low labour costs, were now becoming technologically savvy and increasing their productivity levels, while also becoming major consumption points.
An additional factor to consider was growing pressure to readjust currency values as a result of the much faster GDP (gross domestic product) growth rates in some developing countries compared to the developed world. It was not easy to predict how all these developments would pan out, in terms of speed and intensity, but there would certainly be a major impact on world trade.Responding to the Crisis
In opening the Forum, Patricia Francis, Executive Director of ITC, warned that despite positive signs of recovery, trade strategies in the wake of the financial crisis need to focus on long-term sustainable growth, rather than short-term fixes. She said that as the world faced the combined crises of finance, food and climate change, it was imperative to assess the impact of behaviour and review structures and systems.
Ms Francis warned that short-term thinking could lead to protectionism and loss of trust and confidence due to a focus on avoiding risk rather than on making things happen.
‘To ignore one aspect of the crisis for the benefit of another could result in short-term gains, and to ensure that the market truly works for the people it serves, global, regional and local parties need to agree on a common set of equitable goals and responsibilities,’ she said.
Ms Francis reminded participants that the world has changed immeasurably since the last WEDF two years ago, when the focus was on consumer conscience as an essential driver of purchasing decisions and a signifier of shifting markets. This seismic shift in the marketplace has meant there is a need to rethink the fundamental aims and outputs of organizations and businesses. The economic crisis was a catastrophic event for all, even if some sectors and nations fared better or worse than others. In times of crisis there is a tendency to bunker down and look after one’s own pressing issues, but this is no cure.
‘We must look for synergies across our aims and harness strengths to engage the collective will,’ Ms Francis said.
To ensure long-term sustainability and opportunities for the future, thinking needs to focus on the long term and the big picture. Ms Francis also stressed that development requires mutually beneficial partnerships across regions, between private and public sectors and within supply chains, with the support of strong trade institutions and financing for enterprises.
The State of World Trade
In his keynote address, global strategist and author of Redefining Global Strategy, Pankaj Ghemawat, spoke on the theme of ‘Trade and Globalization in Perspective’.
Professor Ghemawat said that, in order to make progress, it was necessary to address three key issues: the real extent of globalization; the extent of barriers constraining trade; and understanding the broad gains that trade can deliver. He demonstrated that there were widespread perceptions that globalization was far more advanced than was actually the case. He also identified five features that facilitated trade: a common language; membership of a regional trading block; a relationship between former colony and colonizer; a common currency; and a land border.
‘Countries that share all five elements trade up to three times more than countries which do not share them,’ he said.
Barriers to trade went far beyond the administrative, Professor Ghemawat suggested. Cultural, economic and geographic factors need to be taken into account and the gains to be made from trade, in particular overseas investment, need to be examined in a broader context than the traditional focus on increasing volume and reducing costs. There were also elements of differentiation, intensifying competition, normalizing risk and generating knowledge which all bring value.The Dynamism of South–South Trade
In examining the state of world trade in the post-crisis era, panellists agreed that while traditional markets in developed countries were likely to remain sluggish, dynamic growth could be expected in the emerging markets and the developing world, with a particular emphasis on growth in South–South trade.
The big story of the recovery was the diversification of markets and products and the growth of South–South trade, which was expanding at twice the rate of global trade, driven by economic integration, open trade and investment policies and by WTO commitments. The new dynamism and forces of economic growth contrasted with the sluggishness and uncertainty of the recovery in developed countries, which were experiencing low rates of growth likely to persist for the next decade or so. Although it is not possible to anticipate whether the pace of growth in the South would outpace the impact of depressed conditions in traditional markets, issues to be addressed included the appropriate balance between domestic market growth and export growth, the roles of regional integration and how to enhance the value-added components of South–South trading agreements.
New challenges to maintaining the momentum of growth included ensuring growth strategies were inclusive; addressing problems of food security; managing and facilitating investment flows; assuring trade financing, whose vulnerability had been exposed by the crisis; regulation and transparency; and multilateral trade liberalization.Financing the Supply Chain
There is a need to find innovative new ways of financing to help secure more transactions in a way that benefited all stakeholders.
The Chairman of Audit Control and Expertise Global, André Soumah, said that one of the biggest problems in international trade was lack of trust between the various players in the supply chain. At the same time, no one wanted to accept responsibility and undertake obligations. This lack of trust made it difficult for banks to lend on a transaction basis, coupled with the complexity of value chains in developing countries. He proposed an alternative supply chain-financing model, focusing on five key stages in the chain: producers; storers; traders; processors; and end-users.
The Regional Head for Commodity Traders and Agriculture for Africa for Standard Chartered Bank, South Africa, Zhann Meyer, said the crisis had produced a major shift in the availability to banks of conventional security for loans based on balance sheet analysis. For forward-thinking banks, this had led to a 180-degree change in the way they looked at collateral. They were moving towards an approach that recognized that the commodities that are being traded have an intrinsic value that can be used as collateral.The Need to Rethink Strategies and Objectives
New structures and mechanisms being shaped under multilateral organizations, governments and trade support institutions, aimed at meeting the demands of the new multipolar economic world, bring with them the need for businesses and TSIs to adapt. There is an urgent need for TSIs to adjust to the new economic realities in order to provide strategic direction for investment opportunities, and potential areas for export development, within the new realities of a multipolar world.
Traditional TSI services are not enough, nor are the reach and availability of such services. TSIs need not only to look at foreign markets, but also to adopt an inward orientation, assisting enterprises to better meet quality requirements, using the domestic market for research and development, ensuring that enterprises are sufficiently prepared to obtain financing and helping exporters find the right slot in global supply chains.
In conclusion, there was consensus that the need for strong, well-equipped TSIs remained and that they needed to be more agile than ever in changing circumstances. It may also be necessary for TSIs to take a broader view of their role within their own countries, by adopting an integrated trade model that addresses not only exports, but also imports and outward investment as gateways to new opportunities.
Strategic responses to sustainable growth in the new trade environment will have to include:
- Trade support institutions becoming more dynamic and responsive;
- Entrepreneurs integrating themselves into global supply chains;
- Policy-makers addressing standards and non-tariff measures at the multilateral level, preventing them from becoming barriers;
- The financial service industry providing greater flexibility;
- and The private sector speaking with one voice to be effective in public–private partnerships.
For further information, including session summaries and downloads, visit www.intracen.org/wedf/.
In her closing address, ITC’s Executive Director, Patricia Francis, highlighted conclusions reached during the meeting, including:
- The world was still perhaps not as globalized as some people thought, and this meant there were opportunities for business to exploit.
- Large emerging economies will need to balance growth of domestic demand with boosting exports.
- Companies and countries should focus on increasing the value rather than the volume of exports.
- Regulatory frameworks should support this through fiscal measures and targeted support, leading to enhancement of innovation.
- Regional integration was vital, particularly in Africa and small island regions such as the Caribbean and the Pacific.
- South–South trade between developing countries and emerging markets will become one of the most important drivers for trade and growth.
- Companies and countries need to think long term and incentives should be devised to encourage this.
- The trade in services will expand and tourism represents an easy entry for many developing countries.
- Urbanization could contribute to poverty reduction if linked to export strategies and dynamic markets.
- All actions had to be undertaken in a context of low carbon growth.