Special Address by Arancha González at the Global Trade Development Week 2015

28 October 2015
ITC News
Special Address by Arancha González, ITC Executive Director at the Global Trade Development Week 2015
28 October 2015 - Dubai, UAE

HE Hani Al Hamli, Secretary General Dubai Economic Council

Your Excellencies,
Ladies and Gentlemen,

It is with great pleasure that I find myself back in Dubai on the occasion of the Global Trade Development Week. I can think of few places more appropriate for a discussion on global trade. Dubai embodies the transformational power of trade, compounded by strategic and deliberate policy making. Today it is a thriving metropolis, an international centre for business, finance and leisure.

Trade is at the heart of what we do at International Trade Centre (ITC), and for us trade AND development go hand-in-hand. Our purpose it to make sure that trade works for all, and that it can realize its full potential of enabling prosperity that is both sustainable and more inclusive.

Today, I would like to highlight a few areas that continue to have a fundamental impact on the global trading landscape and its ability to generate development gains, namely technology, sustainability and increased global integration.

Firstly, on technology:
While the global economy is currently facing a slowdown, technology uptake continues to grow unabatedly. The increased access and affordability of technology has empowered so many in such short period of time. Today, there are an estimated 2.3 million Facebook users in Dubai alone – that is basically 100% of the total population of the city. There has been a three-fold increase over the past 4 years alone. Although I’m only using this as an anecdotal example, it does illustrate the speed and power of technology to connect and empower people.

Now, using perhaps an example a bit closer to our line of business, today we have data available on the significant impact of e-commerce on survival rates of SMEs. According to a recent study by eBay, over 70% of SMEs which transact online survive beyond their first year of operation, as opposed to less than 50% for those who are not digitally connected. In terms of the rate of internationalization, e-commerce enabled SMEs export to an average of 26 countries, as opposed to only 3 countries for traditional SMEs.

Technology is enabling SMEs today to be born global. There is even a term coined for this phenomenon, it is called the rise of the “micro-multinationals”.

More recently, we have also conducted our own assessment of the role of connectivity as a critical factor driving SMEs ability to compete at a global level. In our recently launched “SME Competitiveness Outlook” report, we looked at the big gap on access to electronic connectivity between large firm and SMEs, and how this impacts on SMEs ability to compete. This is particularly evident in 3 regions, namely East Asia and the Pacific, Sub-Saharan Africa and South Asia. Landlocked countries also ranked particularly poor in e-connectivity.

In modern economies, firms need to be constantly connected to sources of market information in order to understand the forces of demand and supply and to assess whether they are shifting. This knowledge is fundamental for designing an offering that is well-suited to targeted market segments and thus suitable to compete in international markets at a given moment in time. This knowledge is also fundamental to adjust and change the firm’s offering in the light of changes in the market. The ability to adjust to and ideally to pre-empt change is crucial in dynamic, fast-moving markets.

Finally, we have seen the impact technology has on labor productivity. With higher productivity also comes higher wages. Closing the technology gap is an important element to make SMEs more productive and growth more inclusive.

Secondly, on Sustainability:
With the recent adoption of the Global Goals by the UN General Assembly in New York last month, sustainability has emerged at the forefront of the discussion on economic growth and development. Goal number 8 explicitly states the need to – and I quote – “Promote inclusive and sustainable economic growth, employment and decent work for all.”

In the name of sustainable economic growth, consumers are increasingly demanding transparency across the entire supply chain – “from farm to fork”, so to speak. And in a global trade landscape dominated by supply chains, it is that production and distribution network that has to be our first port of call. And as consumers have asked – and demanded, companies are responding.

For example, Unilever committed to source 100 percent of agricultural raw materials sustainably by 2020. Mars announced that 100 percent of cocoa supplied will come from sustainable sources by 2020. IKEA aims to source 100 percent of cotton for its products from sustainable sources by the end of this year.

It is becoming increasingly clear that if supply chains are not sustainable then the trade impact that we are aiming for, will itself not be sustainable and will not deliver the growth and employment benefits that it should. All actors- from upstream farmers to the ultimate consumers can benefit enormously if sustainability issues are placed at the heart of the trade discourse.

And what does that mean for the smaller players in this context, the millions of smallholder farmers or SMEs who supply goods and services to global brand names? Stricter voluntary standards and supplier codes of conduct are putting the burden of compliance on the weaker links of the chain.

As a way to address this, ITC partnered with the private sector and the Global Standard 1 to launch the “Blue Number Initiative”, a new global registry for ‘sustainable –minded’ farmers.

Through the Initiative, already 60,000 farmers have been provided with a geolocation number - the blue number. The blue number is part of a profile that contains the farmer’s name, gender, product, and email address or mobile number. Think of it as an online networking platform – a Facebook or LinkedIn for farmers. Once the farmer is in the registry, major global brands and thousands of farmers will fuel their business.

This initiative will also help buyers with improved traceability of their value chains, as well as with data to make informed purchasing decisions such as identify women-owned farms with whom to trade.

This brings me to another important initiative launched just last month by the ITC – a Call to Action to bring 1 million women entrepreneurs to markets by 2020.

Sustainable economic growth is not just about how you trade, it is also about who is doing the trading. One of the target groups under UN Global Goal 8 is women – the largest excluded group on the planet making up almost 50% of the global population. To deepen our contributions towards more sustainable and inclusive trade, ITC launched the Call to Action, encouraging private and public sector stakeholders to actively engage in activities that can help us bring those 1 million women entrepreneurs to markets within the next five years.
For those of you have not yet considered or committed to support activities that can bring women to markets, I encourage you to visit our website to learn how you can join the Call to Action.

Lastly, on increased global integration:
The reality of globalization is a fact. As the world grows increasingly interconnected and interdependent, your ordinary assumptions shaped by past trends may not serve you as a business leader or policy maker. Recent trade agreements such as the Trans-Pacific Partnership and others being negotiated such the Regional Comprehensive Economic Partnership between ASEAN and Japan, China, Korea, India, Australia and New Zealand, or the Trans-Atlantic Trade and Investment Partnership, will inevitably bring a new dynamic to the global trading system, where countries outside this framework will have to re-evaluate their competitive positioning vis-à-vis traditional markets. Where we will have to be vigilant to ensure that we keep working towards leveraging the global level playing field.

According to the “Global Connectedness Index” by DHL, advanced economies have not kept up with the big shift of economic activity to emerging economies. Emerging economies are reshaping global connectedness and are now involved in the majority of international interactions. The 10 countries where global connectedness increased the most from 2011 to 2013 are all emerging economies. This includes countries such as Mozambique, Jamaica, Ivory Coast and Myanmar, just to mention a few. However, in terms of their integration into international capital, information, and people flows, emerging economies still lag far behind.

In spite of the good progress achieved by trade opening, there are still many challenges ahead to make sure the global trading system works for all.
The first is to understand the real trade figures. Today they are still in gross numbers, whereas trade today is about value added operations along a production chain. We need to start measuring trade in value added too.

The second is the area of Non-Tariff Measures (NTMs). Through our work on mapping out NTMs we are hoping to shed additional light on the main impediments to make “trade impact for good”. In this context, SMEs are particularly penalized with the burden of compliance with NTMs. And the burden becomes greater when SMEs need to comply with multiple rules stemming from multiple bilateral or regional trade agreements. We hope ITC’s work on NTMs help business leaders and policy makers alike ensure that NTMs contribute and does prevent us from maximizing the benefits of a more open global trade landscape.

In concluding, these are exciting times to be working in the field of trade development. I commend the organizers of the Global Trade Development Week for setting up a very interesting programme and I hope that these next couple of days will help bring more visibility to the incredibly important role of global trade in advancing opportunities and prosperity for all.

Thank you.