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Ph:DR: South-South trade is the key to more sustainable and inclusive growth
It needs ratification by another of its members for the global system of trade preferences between developing countries to release the full potential of a market of 16,000 billion dollars and more than 4 billion people.
At the end of 2022, Brazil ratified the commitments made under the Global system of trade preferences among developing countries (SGPC), thus rekindling international interest in the trade agreement, which is only one ratification away from its entry into force.
The 42 members of the GSTP, countries in Africa, Asia and Latin America, have 4 billion people and represent a total market of 16,000 billion dollars, or about 20% of world imports of goods.
The Group of 77, a coalition of developing countries, drew up this agreement more than thirty years ago to stimulate trade between the countries of the group.
“Today opens a window of opportunity for the SGPC,” said UNCTAD Deputy Secretary-General Pedro Manuel Moreno on May 8 at the opening of the 2023 United Nations Business Forum, which will focus on the agreement.
The GSTP stimulates trade between developing countries – also known as South-South trade – by reducing tariffs on products they import from each other. These reductions make it possible to lower the final price of a product for consumers, increasing its competitiveness.
UNCTAD estimates that if SGPC members commit to the tariff reduction adopted in the last round of negotiations – known as the “São Paulo Round Protocol” – then they could increase their collective prosperity by around $14 billion. of dollars.
The tariff concessions would concern products such as fish and other foodstuffs as well as articles of clothing and spare parts, in accordance with the commitments of each country.
Growing faster than world trade
The GSTP would help unlock the full potential of South-South trade, which has grown faster than global trade.
“South-South trade, which has long been a mere aspiration, has become one of the main forces driving growth and development over the past two decades,” said Rubens Ricupero, Brazilian economist and former Secretary General of UNCTAD.
Trade among developing countries has grown at an average annual rate of 9.8% since 2000, reaching $5.3 trillion in 2021. Over the same period, world trade has grown at a slower pace of 5.5%.
- Moreno pointed out that good results were also observed for products with high added value. In 2021, South-South trade accounted for nearly 60% of high-tech exports between developing countries.
Business partners, not competitors
The potential of the GSPC as a tool for business cooperation is particularly evident in the agricultural sector.
Accord members are spread across the globe, meaning the cultures they practice and the foods they produce complement rather than compete with each other.
For example, while South American countries mainly export oilseeds, meat and cereals, India tends to export rice, shellfish, tea and spices, while Morocco mainly exports fish products, vegetables, sugar and honey.
Increased agricultural trade between members should therefore benefit everyone and contribute to strengthening food security.
Trade to address common challenges
In addition to food security, the GSTP would enable developing countries to address other common challenges, such as climate change and pollution.
Although developing countries have historically contributed the least to global CO2 emissions, they bear the brunt of its effects.
The highest decision-making body of the SGPC – the Committee of Participants – can consider and convene a new round of negotiations for trade integration in areas such as renewable energy and natural products.
Reducing tariffs on renewable energy goods and services could boost the energy transition in developing countries and help them meet their climate commitments under the Paris Agreement.
The deal could also create a bigger market for natural plastic substitutes such as seaweed, bamboo and agricultural waste.
Many GSTP members have these materials in abundance and could use them to make eco-friendly versions of straws, food wraps and other consumer products that are plastic today.
Vahini Naidu of the South Centre, an intergovernmental organization of developing countries, said this was an area that “deserves further consideration” under the GSTP.
Federico Villegas, Argentina’s ambassador to Geneva and current chairman of the committee, said he plans to give the agreement “new life by revitalizing its intergovernmental process in order to implement high-impact initiatives that could enable developing countries to respond to global challenges.
