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TRADE: Asia the Engine Behind South-South Growth

Gustavo Capdevila

GENEVA, Aug 15 2003 (IPS) - Trade between developing countries was the driving force behind the growth in international trade in general over the past decade, but the phenomenon was largely concentrated in Asia, according to a new World Trade Organisation (WTO) report.

This imbalance between Asia and the other regions of the developing South must be dealt with in the future, said WTO director-general Supachai Panitchpakdi in presenting the first edition of the new annual "World Trade Report".

More than two-thirds of South-South trade originates from and is destined for nations of the Asian continent, states the new study.

But the WTO points out that this proportion reflects the fact that Asia’s markets are larger than those of the other regions, representing nearly half the gross domestic product (GDP) of the entire developing South, and more than two-thirds of its population.

Supachai, economist and former deputy prime minister of Thailand, proposes approaching the matter via the Doha Development Agenda, as the WTO refers to the multilateral negotiations process approved at the organisation’s fourth ministerial conference held in November 2001 in the Qatar capital.

The Doha talks could help South-South trade to continue to grow at a pace like that of the past 10 years, "but covering wider areas of participation so it is not concentrated only in the geographic area of Asia," said the director-general.

The multilateral negotiations, which are currently bogged down by differences between the developing world and industrialised countries, will be up for review at the next WTO ministerial conference, the organisation’s fifth, to take place Sep. 10-14 in the Mexican resort city of Cancun.

Several crucial factors for economic development of the countries of the South are included in the Doha negotiations package, particularly those related to agriculture, services, industrial tariffs, access to low-cost medicines and other trade aspects that could benefit the poorer economies.

Supachai noted that the Doha Agenda provides a valuable opportunity to enhance the South-South trade dynamic seen in the past decade.

Although the world economy was experiencing one of its most difficult periods, some middle-income developing nations showed surprising economic strength, noted Patrick Low, director of the WTO’s economic analysis division.

That trend was an important source of growing demand for trade from other developing countries, and for the rest of the world, said Low.

The figures the WTO includes in its World Trade Report indicate that in 1990 South-South trade represented 6.5 percent of global trade. But in the subsequent decade the developing economies grew at a faster rate than the industrialised and transition economies, and South-South trade was 10.7 percent of the world total in 2001.

Low’s research team predicts that this trend will continue throughout the first decade of the new century.

South-South trade expansion was based largely on the combination of high growth in the information technology industry worldwide and on agreements among Asian nations to share production for that sector.

The report suggests that trade liberalisation in Asia benefited from the Uruguay Round of negotiations (1986-1993) and from the Agreement on Information Technologies, agreed during the WTO ministerial conference held in Singapore in 1996.

The WTO, whose mission is to promote trade liberalisation worldwide, regrets that obstacles remain for achieving greater South-South trade.

Difficulties emerge as a result of high tariff protections, particularly for farm commodities and products like automobiles, textiles and clothing.

In 2001, developing countries exported goods worth 639 billion dollars, 66 percent of which came from Asia.

Coming in second place was the Middle East, with exports of 99 billion dollars – mostly petroleum – or 15.5 percent of trade within the South. Trade within that region was just 18 billion dollars in 2001.

Latin America recorded 82 billion dollars in exports, or 12.8 percent of South-South trade. Of that sum, 59 billion dollars represented intra-regional trade.

Africa’s exports to destinations within the developing South totalled 36 billion dollars, or 5.6 percent of the total. Just 11 billion dollars represented trade amongst African countries.