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DEVELOPMENT: Time Has Come for South-South Trade

Mario Osava

RIO DE JANEIRO, Jun 9 2004 (IPS) - Trade expansion for developing countries has only just begun and potential for reciprocal exchange within the South is “enormous” said government and business sector representatives participating in an international forum on regionalism and South-South cooperation Wednesday in this Brazilian city.

The emblematic case of this new reality, debated during the meet, is the closer ties between India, with its market of one billion people, and Mercosur (Southern Common Market), comprising Argentina, Brazil, Paraguay and Uruguay, with a combined population of 225 million.

Trade between the South American bloc and India could increase 16-fold if they take advantage of all existing possibilities, says the secretary-general of the United Nations Conference for Trade and Development (UNCTAD), Brazil’s own Rubens Ricupero.

For now, this bilateral trade flow is a relatively small 1.8 billion dollars a year, according to Mercosur figures for 2002, or 1.3 billion according to India’s statistics.

In either case, “it is very little,” because the participation of each party in the total imports of the other does not surpass 1.2 percent, noted Jayant Dasgupta, India’s assistant trade secretary.

Lack of mutual knowledge, different languages, distances that drive up shipping costs, customs rules and a lack of financial facilities stand in the way of greater trade. Overcoming these obstacles is essential for the success of the tariff preference agreement signed in January by Mercosur and India, according to Dasgupta.

The two sides currently are considering products for which trade could be stimulated by reduced tariffs. Of the initial list of 2,000 presented by Mercosur and 1,700 by India, they hope to select 700 to 800 products to be included in the accord, said New Delhi’s trade official.

An UNCTAD report states that Mercosur exports could reach 13.6 billion dollars and India’s could reach 12.7 billion, based on projected flows from 2000 to 2002 and the market demand on both sides.

A big delegation from India is participating in the activities of Foreign Trade Week in Rio de Janeiro, a preparatory event for eleventh UNCTAD sessions, to take place in the other Brazilian metropolis, Sao Paulo, Jun. 13-18.

The objective is “to expand mutual understanding” and establish conditions to increase trade, such as facilitating credit from the banks that finance exports, explained Yogendra Modi, head of the federation of India’s chambers of commerce and industry.

Modi stressed that, in addition to trade, his country is looking to attract investment from Mercosur, particularly from Brazil and its bigger corporations.

UNCTAD’s Ricupero declared his “personal enthusiasm” for the expansion of trade, not only between Mercosur and India, but also involving developing countries in general, which today “for the first time” surpasses industrialised countries in exporting goods and services to the United States.

But it is South-South trade that is growing fastest, although it represents just 10 percent of global exchange. That trend is likely to continue, given the long-term economic growth forecast of six percent annually in the 41 developing countries of Asia, he said.

It is not a matter of “substituting trade with the industrialised countries,” but rather increasing the flow and in a complementary way, Ricupero said.

The nations of the developing South currently are responsible for 32 percent of international trade and 49 percent of Japan’s imports, the second-largest national economy. Furthermore, 70 percent of the South’s exports are manufactured goods, said the U.N.. official.

But trade relations with some of the bigger developing countries, like China and India, are expanding in ways that are causing concern in Brazilian industrial sectors.

The trend that makes Mercosur a supplier of raw materials or semi-manufactured goods, while the bloc imports mostly industrialised products from India must be corrected, said José Augusto Fernandes, executive director of Brazil’s National Confederation of Industries.

While Brazilian sales to the United States represent 68 percent of the South American giant’s manufacturing exports, these products of highest added value are just 27 percent of what the country sells to India, Fernandes told IPS.

Unrefined Brazilian petroleum and Argentine soybean oil are the two leading products that Mercosur sells to the giant Indian market.