‘
makingit_12_pp22-29_keynote_print 11/11/2012 19:31 Page 25
The Euro-zone continues to struggle and has yet to find a way out of its financial woes, and growth across the industrialized countries remains slow. For many developing and emerging economies, this means that exports to their traditional markets are flat and, in some cases, even declining. All is not grim, however, and there are bright spots – particularly in the trade between developing and emerging countries, so-called South-South trade. But South-South trade is not without its drawbacks and risks. The trade is largely driven by a few countries – the so-called “Emerging 7” – and, for now, by a limited number of commodities. For South-South trade to become sustainable, it will require investments in new capabilities, trade facilitation measures, infrastructure and trade finance. But the expansion of these growth markets has the potential to revolutionize world markets in the same way that trade between developed nations revolutionized markets in the 1950s and 1960s. A recently published International Trade Centre study, Africa’s Trade Potential: Export Opportunities in Growth Markets, finds that, based on current trends, a reorientation of sub-Saharan African (SSA) exports is already taking place: it forecast an annual increase of up to 14% of SSA to Asia for the next decade. But, while this sounds impressive, this growth is chiefly down to the increase of exports of commodities rather than value-added processed goods, which make up only 5% of exports to Asia. To increase value-added exports to Asia and Latin America, though, African countries need to attract investment from these regions, not only in extractive industries, but also in manufacturing and services. The value addition in African exports will be a natural consequence of this change. For South-South trade to truly flourish, more must be done to integrate small and medium-sized enterprises (SMEs) into regional trade. This requires an improvement in the business environment through harmonized rules and standards, improved logistics and connectivity. Only then can SMEs feed into the global supply chain of larger companies. More must be gained from South-South trade than what has been the case for North-South trade. The South must become a real partner rather than a bystander in the process. Trade benefits everyone but there is a need for a new model, one that breaks the cycle of dependency, is inclusive of women and the poor, and creates real and long-lasting South-South partnerships.
PATRICIA FRANCIS is the Executive Director of the International Trade Centre, a subsidiary organization of the World Trade Organization and UNCTAD, helping developing and transition economies to promote their exports.
‘
RICARDO MELÉNDEZ-ORTIZ is Chief Executive of the International Centre for Trade and Sustainable Development. Previously, he was General Director of the Fundación Futuro Latinoamericano.
The landscape and geography of the global economy and of international trade has dramatically changed and continues to do so as a consequence of new growth champions in the developing world, particularly China. Generally speaking, barriers to trade remain higher in non-OECD countries (commonly referred to as the South), and there’s much to gain from further integration of these economies into global markets. The ongoing downturn and recession in the developed world is further inducing intensification of South-South trade and an ensuing diversification in the organization of production across multiple jurisdictions, investment flows and growth opportunities. The evolution of investment and of the geography of international value and supply
‰
MakingIt 25
‘