LDC5 side event: Exploring LDC trade priorities for the next decade

 

 

Your Excellency, Agnes Chimbiri-Molande, Ambassador of Malawi and LDC Coordinator at the United Nations,

Dear Xiangchen Zhang, Deputy Director-General of the World Trade Organization,

Dear Madhu Kumar Marasini, Secretary of Commerce and Supplies, Nepal,

Dear Marcelo Olarreaga, Professor of Economics, University of Geneva,

Dear Ragnheiður Elín Árnadóttir, Director, OECD Development Centre,

Excellencies,

Distinguished Delegates,

Ladies and Gentlemen,

Thank you for this question which puts the spotlight on one – if not the – defining feature of our future: climate change.

Climate change is a global challenge, but its negative impact affects some countries more than others. The least developed countries (LDCs) are a prime example. They are on the front lines of the climate crisis. For instance, almost 70 per cent of worldwide deaths caused by climate-related disasters occurred in LDCs over the last 50 years. And this despite the fact that LDCs account for less than 4 per cent of global greenhouse gas emissions.

Yet, climate change is merciless and unfair: LDCs will pay a high price for the emissions they did not produce.

As the world begins to transition to a low-carbon or a lower-carbon economy, we will face difficult choices.

With climate change, production processes, consumption and trade patterns are changing radically. 

For instance, our 2022 LDC Report shows that trade for some raw materials, such as lithium or rare earths, will grow strongly. But trade for other products will decrease and leave behind stranded assets in many developing countries.

Environmental measures targeting international trade are increasingly considered. But without coordination, these measures may have unintended consequences, including for the LDCs.

They could create distortions that put LDCs in a terrible dilemma: between further marginalization from global trade or gradually becoming a pollution haven. This would undermine their efforts to transition towards a low-carbon economy.

For LDCs, the low-carbon transition and its development implications are a daunting challenge.

LDCs need targeted, sufficiently flexible, and long-term development to support the transition and address their development challenges.

Let me emphasize three points about the support LDC need so much.

First, LDCs need climate finance.

But at present, LDCs struggle to access climate finance of the scale they need.

A problem is also that climate finance takes increasingly the form of loans.

Another concern is that climate finance is highly concentrated. The OECD estimates that the total amount of climate-related development finance to LDCs increased from $2.4 billion in 2010 to $21 billion in 2020. However, it is primarily allocated to transport and storage.

Support for adaptation focuses currently on sectors closely linked to the ecosystem, such as agriculture, forestry and fishing, and water supply and sanitation.

The problem is that little is received for industry, mining and construction – the sectors which are key for developing more sophisticated productive capacities, achieving economic diversification and attenuating commodity dependence of LDCs. In 2020, only about 1 per cent of climate-related development finance was received for those sectors.

Second, compliance with changing rules and regulations is part of climate change adaptation. However, LDCs need time to comply.

They need support to be able to comply in a just and equitable manner.

LDCs need to build the institutional capacity to cope with new procedures and processes. They need careful sequencing, staggered implementation and exemptions, as well as other forms of support to gradually build their capacity to comply.

Developed country partners should thus focus on providing targeted support in the form of technical assistance or technology transfer. Also, the international community needs to introduce measures to ensure that trade remains a catalyst for economic diversification and more sophisticated productive capacities. Trade can, indeed, be a viable source of financing for a sustainable low-carbon transition in the LDCs.

This is an area where WTO and UNCTAD can provide much support to LDCs.

For instance, for fostering better understanding on new regulations and their development impact, or for capacity building of LDC negotiators so that negotiations account better for the challenges of these countries.

Third, tackling climate change is a shared responsibility.

At the national level in LDCs, it requires domestic leadership, planning and coordination for sustainable structural transformation.

At the international level, it requires decisive strengthening of international support to LDCs so that they can transition to lower carbon economies. One core means is to strengthen the productive capacities of LDCs in a sustainable way. Productive capacities are the only real pathway for long-term development in LDCs. UNCTAD developed a Productive Capacities Index for this purpose, and conducts National Productive Capacities Gap Assessments that allow LDCs to strategize their structural transformation.

The transition to low carbon economies is not only in the LDCs interest. It is a shared global interest for environmental, security and economic reasons.

Ladies and Gentlemen,

LDCs transition from carbon-intensive to low-carbon economic activities requires a tremendous effort that should be acknowledged and supported by development partners.

For nearly 60 years, UNCTAD has been at the forefront of dialogue and global policy debate on the development challenges of developing countries, and LDCs in particular.

In our Least Developed Countries Report 2022, we emphasize the magnitude of climate-related development challenges at the global level as well as for the most vulnerable countries: the LDCs.

We remain fully committed to supporting LDCs in transforming so that the opportunities of the future are more equally shared.

Thank you.