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Q&A: No ‘One-Size-Fits-All’ for Surging South-South Cooperation

Thalif Deen interviews SUPACHAI PANITCHPAKDI, Secretary-General of UNCTAD

UNITED NATIONS, Nov 10 2009 (IPS) - A major international conference on South-South cooperation is scheduled to take place early December in the Kenyan capital of Nairobi against the backdrop of a rising trend in regional economic integration in Asia, Africa, the Middle East and Latin America.

Supachai Panitchpakdi Credit: UNCTAD

Supachai Panitchpakdi Credit: UNCTAD

In Africa, there is a proposal for a single confederation and a common market; in Southeast Asia, there will be a free trade area by January next year; in the Middle East, the Gulf Cooperation Council (GCC) is toying with the idea of a common currency; and Latin America is moving towards the creation of a global South Bank.

“There has been a steady upward trend across all dimensions of South-South economic integration over the past two decades,” says Supachai Panitchpakdi, secretary-general of the Geneva-based U.N. Conference on Trade and Development (UNCTAD).

He pointed out that trade and foreign direct investment (FDI) among developing countries has been growing faster than the world average.

Since 1995, South-South merchanised trade alone has grown by 13 percent per year, reaching 2.4 trillion dollars, or 20 percent of world trade in 2007, compared with the annual world trade growth of 9.0 percent.

In an interview with IPS U.N. Bureau Chief Thalif Deen, Supachai said one important new trend has been the move towards greater South-South monetary and financial cooperation.


“In some cases monetary and financial cooperation is tracking closer trade integration but it is also a response to the growing threats to economic stability from unregulated international financial flows,” he explained.

“This is something that I have followed closely in my own region [Asia] where the financial crisis of 1997 triggered a number of important initiatives,” Supachai said.

But renewed efforts at financial cooperation are also underway in Latin America, he added.

Excerpts from the interview follow.

IPS: What role does China play in the overall trend in South-South trade, finance and investment flows? SUPACHAI PANITCHPAKDI: A good deal of attention has of course been focused on the role of China in this rising trend. Closer trade links with neighbouring countries have raised integration levels in East Asia to over 40 percent of its total trade. But China has also emerged as the principle trade partner for a number of other large developing countries outside Asia, including Brazil and South Africa.

IPS: How significant are the growing trade links between China and Africa? SP: Trade between China and Africa has been growing by around 30 percent annually since 2000, exceeding more than 100 billion dollars last year as China became the continent’s biggest trading partner.

IPS: How does East Asia, Latin America and Africa fare in terms of South-South cooperation? SP: In the case of East Asia, regional trade integration has been closely tied to rising investment flows through the spread of regional production networks. This accounts for a significant portion of the increasing flows of South-South foreign direct investment (FDI).

Latin America has also seen growth in regional trade although the production profile of the region, dominated by agricultural products, resource-based manufactures and niche industrial goods, limits the extent of intra-regional trade.

In Africa, where output is dominated by commodities, intra-regional trade is still very low. However, the increase in Africa’s trade with the rest of the South has been accompanied by growing development cooperation, particularly with China, but also Brazil and India.

IPS: In a new report on “The State of South-South Cooperation”, Secretary-General Ban Ki-moon says the rapid deteriorating of the global economy has created a number of new opportunities for South-South cooperation. What are these opportunities? SP: It is clear that developing countries in general have not decoupled themselves from developments in advanced countries – indeed many least developed countries (LDCs) are now suffering the most damaging impacts of the crisis. There are some encouraging signs of economic resilience among developing countries, particularly some of the bigger economies such as China, Brazil and India which have been able to respond to shocks positively because of strong fiscal and payments positions.

This is very different from previous crises. How this divergence might play out in terms of the shape and pace of recovery is one of the critical issues facing policy makers at both the domestic and international levels. Getting back to “business as usual” – unregulated financial markets, boom-bust asset cycles and deeply distortionary patterns of income distribution – is not an option.

Moreover, many advanced countries will be facing difficult adjustments that will take time to resolve. As a consequence access to traditional sources of finance will become more difficult, aid flows will likely stagnate or fall, remittances will drop and market access will be restricted even if protectionism is resisted.

This in turn implies that developing countries will need to establish new growth levers if they are to meet their longstanding development objectives. The challenges this poses for policymakers differ from region to region.

IPS: There are several proposals for increased South-South economic integration in the next decade, including free trade areas and common currencies. How many of these proposals are feasible? SP: The kind of cooperation arrangements pursued by developing countries obviously depends, in part, on the challenges to be addressed. These are likely to differ across regions. As such South-South cooperation will need to avoid the ‘one-size-fits-all’ prescriptions that have been so damaging to development cooperation in recent years.

Indeed, it is precisely the sensitivity of developing countries to each other’s historical circumstances and their current conditions which makes South-South an attractive option. Beyond using closer economic integration to help build markets, extend the division of labour, realise scale economies, etc., the examples you mention clearly reflect very different institutional challenges.

However, it is also true that the greater the degree of economic interdependence among countries, the greater the challenges on collective decision-making. Success depends on a mixture of positive leadership, supported by targeted resources and a readiness on the part of the countries involved to make some sacrifice in national sovereignty in support of a common interest and actions. It also certainly depends on the nature of the cooperation. Free trade areas may be achieved earlier than a common currency.

IPS: What is UNCTAD’s role in South-South cooperation? How does it plan to help strengthen relations among developing nations? SP: UNCTAD has a long history of promoting South-South integration and cooperation. Indeed, it was one of the 15 General Principles for governing world trade agreed to at our first conference in 1964. UNCTAD’s work in this area reached a high point in the late 1970s and early 1980s around the Global System of Trade Preferences (GSTP) among developing countries, cooperation among state trading organizations and the establishment of multinational marketing enterprises.

This work declined after the debt crisis and the resulting reorientation of development policy and cooperation. Now UNCTAD has, as part of its allotment of posts from the development pillar, established a new unit on economic cooperation and integration among developing countries.

The object is not to revive the past agenda but to be forward looking in terms of addressing the development policy and interdependence challenges I referred to earlier and providing when requested advice to members states. Where appropriate it will also address new threats and challenges such as those arising from climate change and food security.

Other parts of the U.N. system are also adding South-South cooperation to their work programmes. So, we will also be seeking to forge collaborative ties across the system to ensure that the work we do avoids duplication, is well coordinated and widely disseminated.

 
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