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Monday, Jun 14, 2004

Opinion

Opinion - Editorials

BOOSTING SOUTH-SOUTH TRADE

IF CANCUN 2003 saw the emergence of a new kind of South-South alliance in the world of trade diplomacy, Sao Paulo 2004 will test the willingness of the developing countries to enlarge the areas of cooperation. It is fitting that Brazil will host the 11th quadrennial meet of the United Nations Conference on Trade and Development (UNCTAD) between June 13 and 18. It is the country that has taken the initiative to breathe new life into economic relations among the countries of the South. It was also responsible for forging and then nurturing the G-20 coalition that was so effective in protecting developing country interests in agriculture at the World Trade Organisation conference in Cancun. And it was Brazil that promoted the idea of increasing cooperation among the larger countries of the developing world. The formation of the India-Brazil-South Africa Forum in 2002 was the fruit of these efforts. The ambitions for UNCTAD XI are, however, much greater. This U.N. conference is seen as a stepping stone to evolving what Brazil calls `a new trade geography' in the world, one that would witness a dramatic growth in trade within the South.

It is a fact that the share of the developing countries in world exports grew substantially during the 1990s and intra-developing country trade rose alongside this increase. A number of WTO and UNCTAD studies have recently drawn the contours of this new trade geography. The South's share of world trade now stands at 30 per cent, an increase of 50 per cent over the previous 20 years. Secondly, developing countries have become both major markets and suppliers to the advanced economies. The United States, for instance, now imports more merchandise from the South than from the developed nations. Thirdly, trade within the South has been growing twice as fast as world exports and has come to account for 11 per cent of the global total. Yet despite these changes, the potential for such trade remains vastly under-utilised. Intra-developing country exports are dominated by the countries of Asia, and in the continent by the East Asian economies. Besides, a predominant proportion of intra-South exports goes to economies in the neighbourhood. To set these imbalances right and to give a new momentum to trade in the developing world, UNCTAD hopes to catalyse the regime of General System of Trade Preferences (GSTP) under which the poor countries exchange import tariff concessions with one another.

Sao Paulo is to see the launch of the third round of GSTP negotiations that should lead to a customs duty regime much more favourable to intra-South trade. For example, UNCTAD estimates that if India and the Mercosur trade grouping of South America reduce tariffs mutually by 50 per cent, they should expect a 16-fold increase in trade. The GSTP agreement was first negotiated in 1988, but unfortunately it has not made much of a contribution to inter-regional trade. One reason is that no more than 40 countries participated in the two previous rounds. A second is that the concessions provided have been too small to make a difference. A third factor was that some countries came forward with only minor reductions in customs duties but demanded large cuts from other signatories to the treaty. There is hope that given the new global trade environment the problems bedevilling the GSTP regime will be avoided in the third round of talks. The South has realised that a manifold expansion of trade among the poorer economies of the world can serve two purposes. Booming trade within the South lessens dependence on the markets of the North and enables the Governments to take much tougher positions in international negotiations.

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