Twin brothers Hassan and Hussein harvest cocoa bean pods in Sinikosson, Ivory Coast, for the lucrative multibillion dollar chocolate trade, but remain mired in poverty. Their story is repeated manifold among other workers in Africa and elsewhere, including women and children.
But new hope is rising from the recent emergence of developing countries as major regional and global motors of trade, in particular from trade among them which has tripled to more than $2 trillion in 2006 from $577 billion in 1995.
Illustration: Jayachandran/ Mint
The burgeoning demand of developing countries and their increasing capacity to compete on cost and quality is opening extraordinary trading opportunities to boost global growth. Some see the opportunities as a new international public good holding promise of a win–win scenario for all countries.
Others discern a new trade geography shaped by developing countries that opens unprecedented pathways for achieving Millennium Development Goals, particularly to reduce poverty.
An encouraging model of development and globalization with a southern face is emerging in which a group of countries called the dynamic South, including China, India and Brazil, is leading the way. It is followed by other developing countries and emerging economies on all continents.
The figures are eloquent. Developing country exports to rich countries rose by 161% in the decade ending 2005, while their imports rose by 70%. Exports to transition economies exploded by 382% during 2000-06, while imports from them rose by just 123%.
Market-driven gains are occurring in trade both with richer countries and among developing countries in a triangular pattern beneficial to all participants. They span technology, knowledge and investment.
For example, overall developing country merchandise exports reached $4.5 trillion, or 37% of the world total, in 2006, up from 29% in 1996. China was ranked third in 2005 and seven other developing countries were among the world’s top 20 exporters, up from none in 1985.
The remarkable aspects are that their imports and exports are moving upmarket, are more diversified and have greater value- added content. Strength is being acquired not only in such traditional areas as natural resources and labour, but also in research and development, technology, capital and services.
Services exports of developing countries rose fourfold since 1990 to $700 billion in 2006, and four of them ranked among the world’s largest exporters instead of just one in 1985. The global services trade scored a sevenfold increase to $2.8 trillion in 2006 from $400 billion in 1980.
Developing country companies are serious players in international production-sharing and trade networks, including public-private partnerships. For the first time, exports of foreign direct investment (FDI) from developing and transition economies reached $193 billion, or 16% of the world total, in 2006, up nearly threefold since the 1990s. A recent example is the purchase by India’s Tata group of Britain’s Land Rover and Jaguar cars, Corus steel and Tetley tea.
An encouraging sign is that regional trade among developing countries is reaching critical mass with rapid growth between Asia and Africa, Asia and Latin America, and Latin America and Africa. It is now a stepping stone to new models of trade and investment that transmit development within and among regions— and give an impetus to business and employment.
These are symbiotic relationships that go far beyond just selling and buying to obtain income. For example, the urgent needs for energy and food security are pushing developing countries into one another’s arms as are their search for inputs for industrialization, infrastructure and economic growth.
This is good news because some experts think that complete trade liberalization among developing countries could bring welfare gains of $130 billion separately from merchandize and services.
The signals are clear. We must forge new South-South institutions in trade, finance, money and technology. We must also quickly adapt existing North-South institutions to harness emerging trade equations and meet new requirements to tap the entrepreneurial talents and resources of developing countries.
The forthcoming Unctad XII in Ghana provides a chance to start these processes. Among other things, it could finalize a third round of inter-regional negotiations to liberalize trade among developing countries. Historically high trade barriers are being dismantled because of increasing complementarities both within and among developing economies. Improved infrastructure for logistics and facilitation would give a welcome boost, such as speedier transport and customs procedures.
At this pivotal point in the world economy, only actions such as these can create the opportunities that Hassan and Hussein sorely need to improve their lives.
Panitchpakdi Supachai is secretary general of the UN Conference on Trade and Development. Its 12th quadrennial meeting is taking place from 20-25 April in Accra, Ghana. Comment at email@example.com