Need for new domestic sources of growth, moving up global value chain, and coherent trading systems stressed by UNCTAD S-G

17 August 2012

Delivering the keynote address at an academic seminar on the new era of global trade and investment organised by the University of the Thai Chamber of Commerce in Bangkok, Thailand today, UNCTAD Secretary-General Supachai Panitchpakdi pointed to a number of challenges for developing countries in the current international economic situation.

For many developing countries that have been basing their development model largely on exports, the UNCTAD Secretary-General advised that given the fallout from the global financial crisis and faltering demand in advanced countries, there will have to be a rethink of such development strategies and new sources of growth found domestically. Diversifying export markets and strengthening intra-regional trade will also become more important in enhancing resilience and spreading the risk, he said.

A second challenge would be to move up the global value chain and avoid the risk of falling into a "middle income trap" whereby a country that has integrated into global supply chains become stuck in relatively low-value added activities within the value-chain, rather than slowly learning to compete in ever-higher valued-added activities, which is a source of growth. Here, improving infrastructure, encouraging technological skills and learning, and building productive capacity in higher value-added activities will be required, Dr. Supachai said.

A third continuing challenge relates to poverty reduction and inequality. While countries that have gone through export-led growth have demonstrated a positive record in reducing poverty, challenges still remain with regard to polarization, inequalities and internal regional disparities. New policy approaches and priorities, focusing more on comprehensive policy initiatives that combine trade-led growth strategies with pro-active industrial and social policies, while setting productive capability formation and poverty reduction as two major policy objectives would be required, the UNCTAD Secretary-General stressed.

In such trade-led growth strategies, the adequate content, depth, sequencing and pacing of liberalization is key, Dr. Supachai said.

The prolonged negotiations under the WTO Doha Round continue to pose a challenge and are driving the increasing creation of new-generation bilateral, regional and plurilateral trade arrangements and initiatives in various parts of the world, Dr. Supachai observed. As economic wealth and opportunities are shifting to the South and the East, along with the increased prominence of regional and South-South trade, the international trading system today is becoming more multi-polar, complex and fragmented.

Dr. Supachai stressed that coherence and organic linkages should be established between the multilateral and regional processes, so as to ensure an optimal mixture of both arrangements. It is important that policy flexibilities for development and industrial policy purposes allowed at the multilateral trading system level not be overridden by RTAs, he said.

In his remarks, Dr. Supachai also pointed to the challenge and opportunities of climate change and the need for countries to support a transformation to a greener economy. Adaptation to the adverse impacts of climate change is essential to ensure sustained economic development, he said. Beyond the immediate adaptation and mitigation efforts, he urged a wider transformation of production and consumption modes to make them more environmentally and socially sustainable, by moving towards what has come to be called the "Green Economy". While there certainly will be increased costs associated with greening production and consumption patters, he believed that the future gains to be reaped from improved access to foreign markets, and from increased exports to meet growing demand for green products, will outweigh the added costs.