LDC5 High-level Thematic Round Table 4: Enhancing participation of least developed countries in international trade and regional integration
Your Excellency, Évariste Ndayishimiye, President of the Republic of Burundi and Co-chair of this Round Table,
Your Excellency, Sheikh Hasina, Prime Minister of Bangladesh and Co-chair of this Round Table,
Dear Xiangchen Zhang, Deputy Director-General of WTO,
Your Excellencies, Distinguished Delegates, Dear Friends,
UNCTAD and the least developed countries (LDCs) share a common origin – our Inaugural Ministerial Conference of 1964, where the question of the less developed countries in the world was first raised. In our 1964 declaration, it reads “UNCTAD member states agree that special attention must be “paid to the less developed among the developing countries, as an effective means of ensuring sustained growth with equitable opportunity for each developing country”. Seven years later, as fruits of these efforts, the LDC category was formally created, including specific provisions on the global trade arena.
It is no coincidence that the LDC project started within a general conference on trade and development. Almost by definition, to be least developed is to be least integrated to global trade. And conversely, to enhance LDC participation in international trade is perhaps the oldest and surest way to support LDCs in their long-drawn quest for sustainable development.
Sadly, LDCs are more marginalized in world trade today, than when the LDC category was established 50 years ago. Together, the 46 LDCs barely account for 1 per cent of world trade. Furthermore, even when LDCs trade, their exports tend to be severely concentrated in a few primary commodities.
Lack of industrial capacities and low value addition mean that in 2021, LDCs continued to depend on commodities for more than two-thirds of their exports.
Reversing the marginalization of LDCs in the global economy requires building stronger productive capacities. This is a gigantic task, made ever more difficult by the extremely challenging context we find ourselves in. We live, as the Secretary General says, in a ‘perfect storm’ of crises, marked by climate change, pandemics, debt distress, and armed conflict.
To continue with the metaphor, of all countries in the world, LDCs lack the most shelter to weather the ongoing storm.
The next decade of action will be critical for LDCs. LDCs, together with the international community, must take decisive action and bold policy steps.
In this context, let me briefly highlight 8 key policy messages:
First, it is urgent that we renew, expand, and refine international support measures (ISMs) in favour of LDCs. This is a major step for the international community to address their core vulnerabilities and development challenges in the 21st century.
Second, LDCs, perhaps more than any group of countries in the world, need a strong multilateral trading system, with a strong WTO at it is centre. And when I say multilateral, I mean multilateral, not plurilateral, or bilateral – multilateral. As we say in Costa Rica, a small country with a big export industry – “without multilateralism, we cannot dance with the elephants”.
Third, strengthening regional trade is a major opportunity for LDCs. LDC exports to nearby markets typically have higher value-added and higher technological content than those to far-away markets. ASEAN, the RCEP, the AFCFTA are huge opportunities for green structural transformation in LDCs.
Fourth, environmental trade-related policies have risen 15-fold between 2009 and 2020. While this is overall very positive for the world, it poses a major challenge for LDCs, given their limited institutional capacities in both their public and private sector. LDC partners should be aware of the unintended adverse side-effects of some of these policies and address them accordingly.
Fifth, the worldwide transition to a low-carbon economy is likely to bring the potential for higher exports by LDCs, since many of them have reserves of strategic minerals that will be increasingly demanded in that process – lithium, platinum, cobalt, rare earths, silver, copper, etcetera. However, it is crucial to avoid that this rising demand leads to the aggravation of their commodity dependence. This would happen if the relevant natural resources were exported as unprocessed goods, reproducing traditional patterns of integration of most LDCs into the world economy. The low-carbon transition is a historic opportunity to avoid repeating the errors of the past.
Sixth, the emergence of the digital economy is another mega-trend that offers challenges as well as opportunities for LDCs. At present, LDCs are largely being by-passed by the expansion of e-commerce and the intensification of trade in services enabled by information and communication technologies. This is due to their glaring infrastructural gaps vis-à-vis more advanced economies and their reduced productive capacities in the internationally more dynamic sectors.
Seventh, to seize these opportunities LDCs must invest heavily in their infrastructure, upgrade their productive structures, and build their skills and human resources. This requires massive finance commitments, which must come mostly from abroad, especially from development finance institutions. That said, so far, the export of commodities – especially minerals – has been a major channel of illicit financial outflows from LDCs. It is of utmost urgency to stem this leakage of resources. Being successful in this endeavour requires decisive fair international tax laws and international cooperation to tackle illicit flows.
And eight, finally, we at UNCTAD have repeatedly called for more flexible rules of origin to substantially boost LDC exports. There are several measures that LDC trade partners can take to bolster LDC exports in the short run and to raise preference utilization rates.
Your Excellencies, Ladies and Gentlemen, Dear Friends,
As the old saying goes, the real problem is not having problems, the real problem is not having options. LDCs face an extremely difficult environment, but each of us must feel empowered by the recognition that there is much that we can do to help. Because there are many options available. What we need is the will to pursue them. Thank you.