REGIONAL trade as well as South-South trade can provide a significant opportunity for developing countries to diversify their production and export basket, according to the United Nations Conference on Trade and Development’s (Unctad) Trade and Development Report 2023.
“Given the new industrial policy initiatives being adopted in advanced countries, which may shorten their existing supply chains, developing countries will need to look for new outlets to diversify their export markets,” the Unctad report noted.
The report said that since 1995, South-South merchandise trade has grown faster than global trade and faster than North-South trade.
The Philippines is one of the countries in the South-South trade. According to a report by Unctad, Asian countries, particularly the “tigers” and “dragons” among them, dominate South-South trade in terms of trade value.
The report said South-South trade accounted for around 54 percent of South’s total trade in 2022.
“South-South trade has also grown steadily in food, fuel, ores and metals, and fertilizers, with many developing countries, including Brazil, China, India, Indonesia and Thailand playing major roles,” the report underscored.
While South-South trade should not be seen as an “alternative” to North-South trade, it can provide an opportunity for developing countries to diversify their production and export basket, Unctad said.
To further boost South-South trade, the UN’s focal point for trade and development said the Global System of Trade Preferences (GSTP) initiative of Unctad can play a “critical role” by providing an opportunity to negotiate, among others, tariff reductions among developing countries in products based on “mutual preferences.”
Apart from South–South trade, the report said regional integration programs such as the African Continental Free Trade Area (AfCFTA) — to the extent they support diversification and the benefits are broadly shared — can also mitigate the negative effects of the current situation, including with respect to climate change and food insecurity.
Unctad’s Report said that after experiencing a rollercoaster ride in 2020–2022, global trade is forecast to grow about 1 percent in 2023, “significantly” below world economic output growth, with merchandise trade “hovering in negative territory.”
Moreover, multiple downside risks remain, which could further impact the trade outlook. These include the ongoing trade tensions between major economies, the weakening of global demand and growing geopolitical uncertainties, it said.
“In the medium term, trade is heading back to its subdued precrisis trend; in the near term, it will stand even below this figure. This is because the growth of merchandise trade has hovered around negative territory in 2023, despite global trade in services showing resilience,” it added.
Last week, Sergio R. Ortiz-Luis Jr., the President of Philippine Exporters Confederation Inc. (Philexport) expressed optimism that the country’s exports will recover, albeit at a gradual pace, despite the external headwinds such as the conflict in Middle East and Eastern Europe, which he said are beyond the country’s control.
In January to August 2023, the country’s merchandise export earnings amounted to $47.81 billion, a 6.6-percent decline from the $51.18 billion recorded in the same period last year.
In 2022, the country’s export earnings reached $78.98 billion.