Experts offer fresh ideas to ensure trade is catalyst for development

04 October 2013

Experts came together at UNCTAD’s Trade and Development Board last week to share fresh thinking on how to harness global trade as a force for economic development.​

The session was entitled Evolution of the International Trading System and its Trends from a Development Perspective. It benefited from fresh ideas from panel members including Mr. Mark Halle of the International Institute for Sustainable Development (IISD), a civil society organization.

There was broad agreement among the panellists that the post-2015 development agenda should align trade and development goals much more explicitly.

Mukhisa Kituyi, the new Secretary-General of UNCTAD and a former Trade Minister of Kenya, opened the session. Speaking on the theme of trade, he noted that the integration of trade into development was "not automatic". Countries that had not benefited immediately from trade liberalization may require greater policy coherence, so that trade, economic and social policies could complement each other.

Mark Halle, Director of the Trade and Investment Programme at IISD, said: "We need to harness the trade 'engine' to the 'train' of sustainable development, so that the power of trade can drag our economies in the direction of sustainability."

He also emphasized that the trade policy world had its own culture. To influence it, "we need to adapt our ideas to that culture: we need to write sustainability software that runs on the trade operating system."

"Progress towards sustainable development should be measured and monitored to provide a clear picture of realities on the ground. Currently, development goals are not specified by the World Trade Organization, and goals such as reducing the gap between rich and poor countries are not included in agreements."

"We need policies designed from the bottom up," said Mr. Halle, "with a full knowledge of trade culture and the workings of the trading system."

Simon Gleasby, Chief Executive Officer of Addax Bioenergy, a bioenergy producer, discussed the potential for creating value in Africa's agricultural sector.

"More than 60 per cent of grain produced in Africa is wasted," said Mr. Gleasby. "There is potential to increase the supply of renewable energy while also improving food security. African countries should also focus on agro-industrial development, for example developing ethanol biofuel for export rather than exporting raw maize."

"Many of these industries require subsidies and long-term financing in order to become competitive," he said.

Addax Bioenergy is a sugarcane-based renewable energy company that has launched a sustainable energy project in Sierra Leone. As well as producing ethanol-based biofuel for export, the company produces food, and replants forests.

Debt financing for the investment had come from eight development finance institutions, which had provided €142 million in total, Mr. Gleasby said. "Sierra Leone has free trade agreements with the United States and the European Union - something that was critical to the success of the project," he said. "Producers need certainty of markets and of prices," he added. He praised the Sierra Leonean Government for "doing the right thing" by supporting the project.

Mr. Gleasby also said that Africa's financing needs in agriculture were $10 billion each year, and that its infrastructure investment needs were $90 billion. The challenge was accessing capital, for example the $20 trillion held in OECD pension funds.

Mr. Halle pointed out that global subsidies for fossil fuels were worth over $600 billion, and that there was a trade-off between these and sustainable development goals. "Instead, some of these funds could be used to fill Africa's funding gap in agriculture and infrastructure," he said.

Among other ideas, Aurelio Parisotto, Senior Economist at the International Labour Organization, said that employment needed to be one of the post-2015 development goals. Jobs were the most important issue for people in developing countries, and for young people in the recent My World 2015 survey.

Joakim Reiter, Ambassador of Sweden to the World Trade Organization, talked about bolstering accountability at the national level for achievement of the post-2015 development goals. He gave the example of OECD anti-corruption legislation, which was enforced rigorously at the national level.

Guillermo Valles, Director of UNCTAD's Division on International Trade in Goods and Services, and Commodities, presented some big-picture trends in world trade. World trade was continuing to grow each year, and developing countries now accounted for more than half of all trade. Within that, East Asian countries had a bigger share of world trade than all of the other developing countries put together.

There had also been a trend towards "re-commoditization" between 2006 and 2011. Mr. Valles noted that primary products were subject to more price volatility than processed or manufactured products. He added that more regional value chains were being formed, and that many regional preferential trade agreements were in force. "Beyond the tariff liberalization that has taken place, we see the growing prominence of non-tariff measures. Without getting into the question of whether these are legitimate or not, UNCTAD's role is to analyse and quantify the effects of these policies, and identify which ones are distortionary," he said. Mr. Valles added that the Secretary-General, Dr. Kituyi, had urged UNCTAD to find ways and means to ensure that trade is an integral part of the post-2015 sustainable development goals.