Despite Massive Trade, Investment, Benefits of Global Trading System, Value Chains Remain Inadequate for Least Developed Countries, Speakers Tell Round Table
DOHA, 7 March — Despite the massive expansion of trade and investment over the past decades, least developed countries still face considerable challenges in effectively integrating into the global trading system and benefiting from the opportunities afforded by international trade and global value chains, speakers stressed today during the fourth of a series of high-level thematic round tables of the fifth United Nations Conference on the Least Developed Countries.
Opening the meeting on “Enhancing the participation of least developed countries in international trade and regional integration”, Évariste Ndayishimiye, President of Burundi and Co-Chair of the eight round tables, noted that the 2030 Agenda for Sustainable Development defines international trade as “an engine for inclusive economic growth and poverty reduction”, which helps promote sustainable development. Almost eight years into the implementation cycle of the Sustainable Development Goals, legitimate concerns remain, he said, especially for least developed countries which remain on the margin of global trade flows and global value chains, witnessing a widening gap with advanced economies and emerging markets. Over the past decade, these countries’ share of merchandise export has been static at 1 per cent and their share of exports of commercial services has hovered around 0.7 per cent.
“These numbers demonstrate that least developed countries are yet to integrate into the global trading system,” he said. Turning to the vulnerable situation of landlocked States, such as his own, he voiced support for South-South cooperation and noted that Burundi has joined the construction programme of a railroad linking the United Republic of Tanzania and the Democratic Republic of the Congo and has organized regional forums to publicize the trade products of East African nations.
Sheikh Hasina, Prime Minister of Bangladesh, who also co-chaired the round tables, emphasized that in order to be competitive in the global market, least developed countries must focus on enhancing their trade-related infrastructure building and productive capacity. To achieve this aim, these countries require support, investment connectivity, human capital and technology transfer, he stressed. His Government is constructing a multi-modal transport system as part of efforts to improve national and cross-border connectivity. Moreover, Bangladesh is implementing various initiatives aimed at increasing productivity and the country’s competitiveness. Stressing the importance of engaging the private sector, she said that thanks to Government efforts, Bangladesh has graduated from the least developed country status.
Xiangchen Zhang, Deputy Director-General of World Trade Organization (WTO), delivering a key keynote address, said the Conference in Doha represents a historic moment for the international community which brings hope to the 1 billion people living in least developed countries. Describing the integration of these countries as “our shared objective”, he stressed the importance of boosting least developed countries’ export through duty-free access. He further underscored that such countries should have the time to implement the double trade facilitation agreement, with the benefit of lowering trade cost and simplifying custom procedures.
Highlighting the need to build strong partnerships for food security and digital connectivity, he observed that the trade share of least developed countries remains below 1 per cent. Exporting a handful of products to a handful of markets, firms in these countries remain vulnerable to external shocks, as demonstrated by the pandemic. “Now is the time to boost least developed countries’ trade integration, not isolation,” he declared, calling for “a fresh perspective” and encouraging these countries to strengthen their trade capacity and fortify their dialogue with the private sector.
The round table also featured panellists Pan Sorasak, Minister of Commerce of Cambodia; Kitty van der Heijden, Vice-Minister for International Cooperation of the Netherlands; Pedro Manuel Moreno, Deputy Secretary-General of the United Nations Conference on Trade and Development (UNCTAD); and Professor Marcelo Olarreaga from the University of Geneva.
Mr. Sorasak said that Cambodia — a least developed country — has gained numerous benefits under the WTO framework, including preferential market access, special and differential treatment and other international trade-related measures that help least developed countries fully integrate into the multilateral trading system, as well as the regional and global economy. Cambodia has been making great strides by taking an active role in regional and global trade integration. Spotlighting essential elements for all least developed countries — especially those on the path to graduation — he drew attention to Cambodia’s experience with regional integration efforts which formed an integral part of the country’s long-term graduation strategy. While meeting the least develop country graduation criteria is a major achievement, countries that graduate will still face trade challenges due to the loss of trade-related international technical assistance and erosion of trade preferences. Minimizing the negative impacts resulting from the removal of these measures is essential to securing a smooth transition from the least developed country category, he stressed.
Ms. van der Heijden, highlighting the potential of digital trade to boost innovation, create jobs and tackle inequalities, said the Internet economy could add $180 billion to Africa’s gross domestic product (GDP) by 2025. The key challenge, however, is to make sure digitalization and new technologies create value for all, she said, noting that right now, that is not the case. According to the United Nations, almost half of the world’s population has little — if any — access to the Internet. In least developed countries, only 27 per cent of the population is online. While over half the population in high-income countries shops online, this figure is only 2 per cent in low-income countries. In a world where economic development has become more dependent on digital technologies, a deepening digital divide automatically impedes human development, she said, stressing the need to pursue digital policies that empower business to create a human-centred digital future. She noted that international trade rules play a key role in tackling these challenges and bridging the digital divide. Turning to gender equality in the digital realm, she highlighted the United Nations Conference on Trade and Development (UNCTAD)’s eTrade for Women initiative, which aims to inspire tech women around the world and support them in capacity-building and networking. Closing gender gaps by 2025 could add $14.5 billion to the value of the ecommerce market in Africa by 2030.
Mr. Moreno said that “to be least developed is to be least integrated in global trade”. Conversely, to enhance least developed countries’ participation in international trade is the oldest way to support them in their quest for sustainable development. Sadly, these countries are more marginalized in world trade today than when the least developed country category was established 50 years ago, and their exports seem to be severely concentrated in a few primary commodities. Reversing the marginalization of these countries in the global economy requires building stronger productive capacity. “This is a gigantic task,” he stressed, pointing to an “extremely challenging context we find ourselves in”. Amid “a perfect storm of crises”, marked by climate change, debt distress and armed conflict, least developed countries lack shelter to endure the ongoing storm, he said. Such countries — together with the international community — must take decisive action, he emphasized, highlighting policy messages, including refining international support measures in favour of least developed countries. These countries also need stronger multilateral assistance.
Mr. Olarreaga, echoing other speakers on the potential of digital trade for least developed countries, said it represents a fast-growing area which creates opportunities in the very near future. Low-income countries’ share is no longer small, he said, noting their huge comparative advantage based on labour cost, skills and the ability to find buyers and sellers online all over the world, even in the most remote areas. He observed that the cost of selling internationally is 30-40 per cent higher in a country with per capita GDP below $3,000 compared to a country with a $30,000 figure. Highlighting differences in access to information and finding potential buyers and sellers, he stressed that, online, these differences vanish and the cost of selling internationally gets reduced by 80 per cent. Online trade makes international trade much more inclusive. Moreover, it is much easier for small firms to export, he said, pointing to data from eBay, indicating that 90 per cent of exporting firms from Thailand, Malaysia, China and Peru tend to be very small. This reduces income inequalities, he asserted.
The round table then turned to its lead discussants, David Beer, Chief Executive Officer of TradeMark East Africa; and Jane Seruwagi Nalunga, Executive Director of Strengthening Africa in World Trade.
Mr. Beer stressed that the least developed country trade is not where it should be. However, these are “imminently solvable problems”, he said, spotlighting models that work well in terms of regional integration. The hardest challenge is that it takes coordinated effort over a period of time, as well as both visionary political commitment and strong technical support. Funding on its own will not suffice, he asserted, noting that only a combination of factors delivers results. Other challenges relate to hard and soft facilitation processes. In this context, he stressed the need to put in place the hard infrastructure, digital infrastructure and cooperation. It is only through dedicated mechanisms — bringing the public and private sectors together — that barriers can be tackled. “The future is green,” he declared, citing this fact as an economic imperative for least developed countries.
Ms. Seruwagi Nalunga said that, to increase regional integration among least developed countries and to realize the Doha Programme of Action, steps must be taken at national, regional and international levels. Doubling the share of such countries in trade means they will continue exporting more raw materials. Their meaningful participation will require supportive trade-related policies at all levels, accompanied by a mindset change in designing such policies. She also stressed the importance of policy framework. At a local level, small-scale producers should be assisted and provided a fair price to guarantee inclusive trade. She highlighted the importance of regional cooperation in promoting least developed countries’ participation in international trade.
When the floor opened, ministers and delegates detailed national initiatives and international efforts to help these countries to overcome marginalization, increase their participation in global trade and achieve sustainable development.
A Deputy Minister of the Cabinet of Turkmenistan voiced concern over the negative impact of the COVID-19 pandemic on least developed countries’ economies and their participation in regional trade and integration. He stressed that Turkmenistan is expanding exports and imports with its partners in 2022. Furthermore, the country is actively working on accessing new markets and expanding its transport capacity and e-commerce, as well as carrying out large-scale development projects. Addressing the transport problem should be constantly on the United Nations agenda as it is pertinent to landlocked developing countries.
Lejone Mpotjoana, Minister for Foreign Affairs and International Relations of Lesotho, described exports as an important engine of growth for the economies of least developed countries as they contribute significantly to employment and create new economic opportunities. Thanks to its water, wind and solar resources, Lesotho has great potential to become a large exporter of green energy and clean water. Embracing the commitment outlined in the 2030 Agenda, he stressed the importance of export promotion through the development of frameworks and strategies. Today, the global value chains connect economies more strongly than ever and provides ample market access. However, least developed countries tend to operate at the lowest rung of the ladder as they mainly supply raw materials and other low-value manufactured products due to the imposition of tariff and non-tariff barriers. This for Lesotho relates mainly to textile and apparel, as well as diamond, industries representing the main economic sectors, he noted.
Jeremiah Manele, Minister for Foreign Affairs and External Trade of Solomon Islands, said that the key to unlocking least developed countries’ trade potential lies is infrastructure investments, which connect producers to international consumers throughout domestic and global value chains. He drew attention to partnership needed to reduce the cost of doing business in least developed countries by investing in a low-carbon economy, science, digital investment and connectivity. Moreover, access to finance and support to build a knowledge-based society with an enhanced labour skill opens more opportunities for economies of least developed countries, he said.
In closing remarks, Ms. Hasina recalled that participants stressed the importance of enhancing connectivity, improving logistics, promoting export and diversification and addressing climate vulnerability. Highlighting that transition financing would be instrumental for graduating from the least developed country category and securing graduation with momentum, she called on the international community to make a concrete, predictable commitment to the successful implementation of the Doha Programme of Action.
Mr. Ndayishimiye said that least developed countries continue to face multiple challenges, as highlighted during the round table by panellists and speakers. However, there are reasons for hope, he said, noting that some progress has been achieved by putting in place measures that have created an enabling environment to integrate these countries into global trade. On the policy front, such countries enjoy preferential access to markets of key trading partners. More recently, WTO members extended the least developed country transition period. However, more needs to be done by all stakeholders, he underscored, pointing to the goals outlined in the Doha Programme of Action.
Also speaking were ministers and delegates of Hungary, Kyrgyzstan, Mozambique, Viet Nam, Côte d’Ivoire, Cuba, Sweden, Morocco, China, Nigeria, Nepal and Mali.
Representatives of the United Nations Industrial Development Organization (UNIDO), as well as the Third World Network, speaking on behalf of civil society, and the European Commission for International Partnership also spoke.