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AFRICA: A Lot More Needed to Make South-South Trade Work

Annelise Sander

GENEVA, Mar 17 2009 (IPS) - Trade experts are sceptical about the United Nations Conference on Trade and Development’s renewed emphasis on South-South trade to counter the global economic crisis.

Fostering South-South ‘‘recently much-expanded’’ economic cooperation and trade to soften the impacts of the economic and financial crisis on developing countries was discussed at an expert meeting convened by the United Nations’ Conference on Trade and Development (UNCTAD) in February this year in Geneva.

‘‘A global financial crisis has shaken the economic foundations of the North and is threatening to shatter the growth and development aspirations of the South. The timing is right to explore how greater South-South cooperation can help developing countries cope with the crisis,’’ UNCTAD Secretary-General Supachai Panitchpakdi told the meeting.

Esperanza Duran, director of the Agency for International Trade Cooperation and Information (AITIC), remarks that, ‘‘every time there is a problem, there is a call for increased Southern trade and cooperation.

‘‘But that will not get us out of this crisis, which is an economic and financial one. The main obstacle is the lack of credit that is essential for export and export guarantees, affecting trade both in the North and in the South.

‘‘Credit is the oil needed to keep the machine functioning. In theory, increased South-South trade could mitigate the effects of the current crisis but in practice, I don’t see how.’’ AITIC is an intergovernmental organisation promoting trade-led growth in developing countries.

Mariarosaria Iorio of the International Gender and Trade Network (IGTN) in Geneva also questions what kind of South-South cooperation UNCTAD is referring to. IGTN is an international network of feminist gender specialists who provide technical information on gender and trade.

‘‘In Africa, trade has meant mainly exports of primary commodities, such as minerals, that increased as the continent fed off the economic boom in China. But for trade to bring real benefits, it should also involve manufactured goods that have an added value.’’

Therefore, in light of the current economic and trade systems, growth of South-South trade would demand a reorientation of local production capacities from mostly primary to manufactured products.

It would also entail a re-balancing of international trade rules and more active participation of Southern partners in global economic decision-making processes, Iorio argues.

Mark Halle of the International Institute for Sustainable Development (IISD) in Geneva finds South-South cooperation ‘‘a good idea but South-South trade is still limited.

‘‘This is because the principal reason for promoting it tends to be politically motivated – to replace inequitable market relationships between the North and South with fairer ones between Southern countries.’’

The problem, Halle argues, is that the latter is not necessarily fairer: Southern businesspeople also look for profit and trade works everywhere on the basis of the market, not political criteria. ‘‘Where South-South trade has happened, like in India, China, Brazil and South Africa, it was for the usual commercial reasons, not for political ones.’’

IISD is a policy research institute that promotes sustainable development.

Iorio points to structural problems: ‘‘Developing countries face the challenges of mono-crop production, small internal markets, weak industrial capacity, high interest rates and low purchasing power.

‘‘Increasing South-South trade requires strengthening local capacity-building and investment, trade-related infrastructure and more aid for trade.’’

The latter is a condition that is harder to achieve than ever in the current context of a financial crisis. Duran points out that, ‘‘at the WTO meeting in Hong Kong in December 2005, the European Union promised an increase in its aid for trade to two billion euros per year. Where is that money?’’

The South Centre’s Aileen Kwa agrees that South-South cooperation, even more than trade, can be a way out of the crisis. ‘‘Trade must benefit small agricultural holders and small industries,’’ she adds. ‘‘We always support African countries in their search for regional integration but it must be real.

‘‘It is not just a matter of opening up to the external world but of using a bigger market to create synergies with smaller ones.’’ South Centre is a Geneva-based intergovernmental policy think tank of developing countries.

What Kwa calls for, is a different kind of trade, ‘‘not based on the same old pattern of just using opportunities of market access. We don’t want a big country coming in and taking over the market of a small neighbouring one.

‘‘Rather, it should provide know-how on how to organise the smaller country’s economy and how to upgrade its industry to produce complementary products. The market must be used to increase income equity within the region.’’

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