New dynamics in global trade

14 January 2013
ITC News
Susilo Bambang Yodhoyono, President of the Republic of Indonesia, opened the 13th World Export Development Forum (WEDF) in Jakarta by urging the 500 participating policymakers, business leaders and trade support institution representatives to ensure that businesses, especially small- and medium-sized enterprises (SMEs), benefit from greater links between growth markets and the rest of the world.
The recognition of SMEs as drivers of growth and the need to enable them to participate in intraregional and interregional trade were recurring themes in the proceedings of the ITC flagship event, which ran from 15 to 17 October under the theme Linking Growth Markets: New Dynamics in Global Trade.Co-hosted by the Ministry of Trade of the Republic of Indonesia, WEDF took place in one of the growth markets of the South that was a focus of discussion. ‘In Indonesia, about 50% of trade in 2011 was with other developing countries, mainly in East Asia,’ said President Yodhoyono. Indonesia has also been actively pursuing stronger trade links with growth markets outside Asia, resulting in, for example, a doubling of its total trade with Latin America over the past 10 years.

In her welcoming remarks at WEDF, ITC Executive Director Patricia Francis noted an increase in South-South trade, as termed by the United Nations, and said: ‘It is not a new development, of course, and it has been discussed for quite some time, but we believe that it has now reached a tipping point where we are finally beginning to see emerging economies diversify their exports towards other emerging economies.’ As exports to key traditional markets remain flat, or in some cases are declining, this development takes on added significance.

According to Pascal Lamy, Director-General of the World Trade Organization (WTO), growth in the United States of America, the European Union and Japan can not be expected in the short term; developing countries therefore needed to observe the new dynamics of globalization that focus increasingly on South-South trade. Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development, stressed the need for further diversification and adjusted investment policies to counter the risks of maintaining traditional roles within the new trade landscape – Latin America as an exporter of food products, Africa as an exporter of minerals and raw materials, and Asia as an exporter of manufactured goods.

Indonesia’s Minister of Trade, Gita Irawan Wirjawan, sees greater focus on education as key to becoming a more knowledge-based economy, while Nigeria's Permanent Representative to the WTO, Ambassador Yonov Frederick Agah, sees the need for African countries to boost agriculture, manufacturing and the transport infrastructure with revenues from commodity exports.

Africa is still far behind Asia and Latin America in terms of intraregional integration. According to Rob Davies, Minister of Industry and Trade in South Africa, only 10% of Africa’s total trade is intraregional and Africa still accounts for only 3% of global trade. Africa’s Trade Potential: Export Opportunities in Growth Markets, a technical paper published by ITC in October 2012, shows that exports to Asia from Western Africa are expected to increase by up to 14% annually over the next decade.

‘Sustainable growth of South-South trade will require investment in new capabilities, trade facilitation measures, infrastructure and trade finance,’ said Francis. During discussions at the event, speakers and participants identified which measures were needed to build on the momentum of the new dynamics in global trade. ‘Countries are now trading not in goods, but in tasks,’ said Peter Allgeier, President of the Coalition of Services Industries, a fact that could lead to greater opportunities for SMEs to feed into the global supply chains of larger companies.

‘One of the effects of a slowdown in global growth was that non-tariff measures were more readily applied,’ said Surin Pitsuwan, Secretary-General of the Association of Southeast Asian Nations. This concern was repeated by government and private sector representatives throughout the event. According to ITC surveys covering the experiences of exporting and importing businesses in 18 countries, more than half of trade barriers are domestic in nature and imposed by the governments of exporting companies. Speakers representing government and the private sector from Cambodia, Rwanda and Peru suggested that public-private dialogue, capacity building within government and businesses, and access to information would all be crucial to complying with export trade requirements, including sanitary and phytosanitary measures and technical barriers to trade.

In addition to supply-side constraints, participants at WEDF concluded that changing consumer behaviour and new demand for higher value-added products and services have a fundamental impact on value chains and that this demand creates opportunities for developing and least developed countries. Tim Groser, New Zealand’s Minister of Trade and Climate Change Issues and Associate Minister of Foreign Affairs, urged these countries ‘to get the cost right, to get the productivity under control, and to identify where they sit in the global value chain.’ One of the encouraging messages that came out of WEDF was that global trade could enable economies of any size to advance through specialization and integration if attention is paid to improved productivity and connectivity. Another key message was that governments play a crucial role as enablers by providing favourable business environments and, above all, stable and reliable legal and regulatory frameworks.

Coinciding with World Food Day, WEDF also looked at commodity supply chains and explored how they could be improved to achieve greater regional and global food security. ‘Sustainable agriculture is still a viable option for food security and job creation for the youth,’ said Emma Hippolyte, Minister for Commerce, Business Development, Investment and Consumer Affairs in Saint Lucia. While trade itself would not be sufficient to deliver food security, Valentine Rugwabiza, Deputy Director-General of the WTO, stressed that ‘it is indispensable for the accessibility and affordability of food.’ Agricultural policies and the effort to remove obstacles to trade are crucial. While Africa has 60% of the world’s available arable land, over the past three decades it has turned from a net food exporter to an importer because it lacks investment in agriculture.

‘If trade is the engine of growth, then trade finance is the fuel,’ said Nazeem Noordali, General Manager of Corporate and Structured Finance at the International Islamic Trade Finance Corporation of the Islamic Development Bank Group. At WEDF, regional development banks and private financial institutions demonstrated ways to gain better access to finance, a market condition that is urgenly needed, especially for SMEs, in developing countries. Consensus on the importance of SMEs for growth and development is also reflected in the choice of the theme for the fourteenth WEDF in 2013: Export-led Employment Generation through the Integration of SMEs into Supply Chains.

For full WEDF coverage, including session reports, session videos, speeches and presentations, visit www.intracen.org/policy/ wedf/2012-programme/