UNCTAD Secretary-General targets trade barriers and calls for decisions to turn into action

Reducing barriers to trade and achieving true development for all countries were issues in the spotlight as a major meeting of experts in commerce, investment and policy got underway in Geneva today.

Referencing the global geo-political context, UNCTAD Secretary-General Mukhisa Kituyi stressed the important role of multilateralism at a time when international trade is focused on “mercantilist self-interest” rather than mutual benefit.

Dr. Kituyi used the opening of UNCTAD’s Trade and Development Board (TDB) to give life to the 2030 Agenda for Sustainable Development, adopted by the entire international community in 2015. The ambitious package of measures, which include the 17 Sustainable Development Goals, form the “defining agenda of our time,” he said.

The TDB meets up to three times a year in between the quadrennial editions of the UN Conference on Trade and Development, to deal with urgent policy issues, as well as management and institutional matters.

This TDB session, the 64th, is taking stock of the work done since the UNCTAD XIV summit, held in Kenya in July 2016. The “Nairobi Maafikiano” report, adopted by governments there, highlighted the link between regional integration and sustainable development.

“Our approach is balancing agility with prudence,” Dr. Kituyi told the TDB. “We have prioritized those elements of the Maafikiano that are the newest, and the most impactful.”

The presidency of the TDB rotates among the different regional groups of countries in the United Nations, and Ambassador Tudor Ulianovschi of Moldova took the helm on Monday, succeeding his Ugandan counterpart Ambassador Christopher Onyanga Aparr.

Mr. Ulianovschi highlighted the importance of dialogue and trade to achieve results on the path to the 2030 Agenda.

“We all need to make an effort to make the institutional machinery work to reduce barriers to trade,” he said on the sidelines of the event, where he also emphasized his determination to “eliminate” gaps in national legislation when it comes to facilitating trade.

“It is time to take decisions to actions and to results,” he said.

Mr. Ulianovschi is charged with guiding the TDB at a time when international trade is centre-stage in geo-politics and at a moment when the implementation of the 2030 Agenda is in focus.

A high-level dialogue during the second day of deliberations on Tuesday will give senior figures the opportunity to exchange experiences on regional economic integration matters through the presentation of best practices. The aim is to help craft practical policy recommendations on how Regional Trade Agreements can promote inclusive and sustainable development and meet emerging challenges, while supporting structural economic transformation.

The TDB also offers an opportunity to review the evolution of the world economy in 2016 and 2017 and analyze the factors that are making this recovery the longest and slowest on record. Delegates will likely demonstrate their concern over the continued slow pace of growth in advanced economies, as well as issues of debt and financial fragility.

The TDB debates will consider recent trends in financial markets and flows and address the vulnerabilities faced by developing countries. Delegates will also address rising inequality as one of the fundamental constraints on faster global economic growth. In addition, they will examine how inequality and financial instability jointly pose structural limits to inclusive growth, and propose a global agenda to address them.

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Evolution of the international trading system and its trends from the perspective of Africa: Download the presentation by Jamie MacLeod, Trade Policy Fellow, Africa Trade Policy Centre (ATPC)

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Evolution of the International Trading System and its Trends from a Development Perspective

Speech delivered by ITC Executive Director Arancha González

Let me start by commending the UNCTAD secretariat team for the background document prepared for this session. It provides a comprehensive overview of recent trade trends, both positive and less so, while outlining the challenges and opportunities facing developing countries seeking to use trade to achieve the United Nations Sustainable Development Goals.

Ahead of today’s meeting, the organisers had asked about the perceived fragility of the international trading system, and how recent trends in trade had affected our respective institutions.

This question is a bit different for the International Trade Centre than for our parent organizations.

ITC is, first and foremost, an organization that operates on the ground. Our mandate is to enable businesses to make the best possible use of international market conditions. Adapting to changing market conditions – in other words, dealing with markets as they are, not as we would like them to be – is part of our DNA. We are not a rule-setting organization. Our work does have an analytical component, but it is designed directly to enhance the impact and efficiency of our projects, and to equip governments and other actors with the information they need to help micro, small and medium-sized enterprises (MSMEs) become more competitive internationally.

That said, the entrepreneurs we work with tell us they are concerned about the prospect of shrinking value chains and rising trade barriers. They are right to be worried. Recent research on the trade slowdown suggests that arm’s length suppliers to international value chains were especially vulnerable to the crisis and its aftermath, as well as to current policy uncertainty. Intra-firm trade has held up more robustly.

To the extent that the international trading system looks in danger of disintegration today, it is primarily because of a backlash in some advanced economies against economic globalization.

This backlash owes something to anxieties arising from the rising economic and political clout of developing countries. But it is in great measure the result of a generation-long political failure: domestic policies have not ensured that the gains from trade and growth were more widely shared. Economic models clearly predict that trade hurts some people while benefiting societies as a whole. In too many places, however, some groups have borne nearly all the pain of adjusting to technological change and to less extent to trade, while the biggest gains have accrued to too few.

We in this room know that if protectionist rhetoric is translated into reality, it would diminish prospects for trade-led growth, especially in developing countries. It would cause economies at all income levels to miss out on the productivity gains that trade makes possible by allowing for increased specialization and scale. Closing markets would lower growth potential, and it is highly probably that slower growth, with fewer job opportunities, would make for politics even uglier than what we are seeing today.

In sum, making trade work for the 99% is more important than ever, in the world’s poorest countries and its richest. This is a moral necessity and necessary for meeting international targets. But is also a practical imperative: growth needs to be inclusive, or else, as recent events show, anti-growth policies will grow in popularity.

Inclusive, sustainable growth is at the heart of the UN Global Goals. The SDGs are well-known for seeking to eradicate extreme poverty by 2030. But it’s also important to remember that the SDGs aim to boost incomes for people in the bottom 40% in all countries.

Eradicating extreme poverty gets more attention, since it not long ago seemed an unattainable dream. But the income growth target matters too. Evidence suggests that even as extreme poverty and income inequality are decreasing, the proportion of the world population earning less than half the global median income has risen. Put differently: the global median income is rising, which is a good thing. But a growing number of people are being left behind relative to it. It’s not difficult to imagine how this might carry the seeds of future instability.

Maximising trade’s contribution to inclusive growth is at the heart of ITC’s mandate. It’s why we focus on micro-, small and medium-sized enterprises. MSMEs are the key to inclusive trade. The reason why is straightforward: jobs and incomes are how most people either share – or don’t share – in economic growth. MSMEs account for about 70% of jobs and over nine out of every ten businesses. Because the productivity gap between large companies and smaller ones is especially wide in developing countries, it means wages and working conditions are substantially worse for large sections of the workforce, particularly for women and young people. More productive MSMEs translate to better paying jobs in the segments of society that most need them.

Trade is a critical part of this story. Why? Because when MSMEs are able to ‘internationalize’, whether directly or by tapping into multinational supply chains, they register particularly high productivity, employment, and wage gains. Young MSMEs that manage to break into international markets are far likelier to thrive and expand. If enough companies are involved in trade, rising incomes in these firms in turn put upward pressure on wages in the rest of the economy.

Unfortunately, MSMEs are underrepresented in world trade. That’s why ITC works to empower more MSMEs to trade, especially in LDCs, small and vulnerable economies, landlocked countries, and fragile states. When successful MSMEs are run by women or young people, the socioeconomic dividends are especially large. That’s why we place particular emphasis on connecting women- and youth-owned businesses to markets through our SheTrades and youth programmes. It’s why we support governments to build trade strategies that take into account gender and environmental implications while tackling the bottlenecks impeding export success in promising sectors.

Equipping more MSMEs with the tools and policy environment they need to trade would foster job creation and inclusive growth. The 2030 agenda has recognised the importance of MSMEs. At ITC, we have aligned our entire project portfolio with the ten SDGs we directly support. Foremost among the ten are Goal 8, decent work and economic growth, and Goal 17, namely partnerships for the SDGs, followed by poverty elimination and gender equality.

Information matters for companies seeking to trade across borders. ITC’s surveys of more than 20,000 enterprises in 38 developing countries have found that “information transparency issues” are among the biggest obstacles faced by would-be traders. Before companies can seize international opportunities, they need to understand where they are, and what they need to do for market entry. The cost and effort of accessing information about market trends and tariff and non-tariff barriers weighs heavily on smaller firms, especially from poorer developing countries. This is why market intelligence has been at the center of ITC’s work since day one in 1964. Our suite of market intelligence tools have over 600,000 registered users, and enabled an estimated $300 million in trade transactions last year. But we think we can do even better.

Access to information is just one way businesses, governments, and international agencies can work together to lower the obstacles facing MSMEs in world markets. There are other ways to reduce fixed costs related to trade. Implementing the WTO Trade Facilitation Agreement is one. Another is for big businesses to help small-scale suppliers meet the costs of complying with international standards.

Before closing, I want to stress a point very much in keeping with the spirit of this Trade and Development Board. Economic rules, trade policy included, are critically important, but they cannot solve development challenges by themselves. They need to be complemented with other support policies. For example, the WTO rulebook supports development more effectively when accompanied by Aid for Trade, and by national social policy and skills-building.

On environmental sustainability, nothing can replace national and international rules that price in environmental externalities. But complementary initiatives to help MSMEs produce more sustainably can make a material difference. ITC’s Trade for Sustainable Development Forum later this month will focus on practical action to build sustainable supply chains. Please consider all of yourselves invited.

Finally, to help MSMEs make the most of regional and multi-regional value chains, accompany regional trade agreements with cooperation among trade promotion organisations, business associations, and other trade and investment support institutions. This is one of the lessons to emerge from the third edition of ITC’s flagship research report, the SME Competitiveness Outlook, which will come out next month. The report will include new econometric analysis on the relationship between deep regional agreements and value chain trade. It sheds new light on how best to bolster the competitiveness of MSMEs in a world where some regions are intensifying trade and investment integration, even as others step back from it.

In conclusion, MSMEs are central to making trade, and growth, more inclusive and more sustainable. There is much we can do to help MSMEs use international markets to generate the hundreds of millions of decent jobs needed to achieve Agenda2030.

ITC looks forward to working with you.