UNCTAD urges developing countries to diversify production, markets

Developing countries should diversify their production and export to new markets, the United Nations Conference on Trade and Development (UNCTAD).

In its Trade and Development Report 2023, the United Nations’ trade and development body, said that regional trade as well as South–south trade can provide a significant opportunity for developing countries to expand their production and export basket.

“Given the new industrial policy initiatives being adopted in advanced countries, which may shorten their existing supply chains, developing countries will need to look for new outlets to diversify their export markets,” the United Nations Conference on Trade and Development (UNCTAD) said in its Trade and Development Report 2023.

The report said that since 1995, South–south merchandise trade has grown faster than global trade and faster than North–south trade.

In 2022, the report said that South– South trade accounted for around 54 percent of South’s total trade. It has also grown steadily in food, fuel, ores and metals, and fertilizers, with many developing countries, including Brazil, China, India, Indonesia and Thailand playing major roles, it said.

To further boost South–south trade cooperation, the Global System of Trade Preferences (GSTP) initiative of UNCTAD can play a critical role by providing an opportunity to negotiate tariff reductions among developing countries in products based on mutual preferences, among others.

GSTP is an agile partnership framework that allows its members to take a variety of cooperative actions in the area of tariffs, para-tariffs, non-tariff measures, direct trade measures and sectoral arrangements.

Citing earlier reports, UNCTAD said GSTP can also support a just green transition in the developing countries by focusing on green products and facilitating green technology transfers.

Apart from South–south trade, the report said regional integration programs such as the African Continental Free Trade Area (AFCFTA), to the extent they support diversification and the benefits are broadly shared, can also mitigate the negative effects of the current situation, including with respect to climate change and food insecurity.

UNCTAD’S Trade and Development Report 2023 said that after experiencing a rollercoaster ride in 2020–2022, global trade is forecast to grow about 1 percent in 2023, significantly below world economic output growth, with merchandise trade hovering in negative territory.

“In the medium term, trade is heading back to its subdued pre-crisis trend; in the near term, it will stand even below this figure. This is because the growth of merchandise trade has hovered around negative territory in 2023, despite global trade in services showing resilience,” it added

Moreover, multiple downside risks remain, which could further impact the trade outlook. These include the ongoing trade tensions between major economies, the weakening of global demand and growing geopolitical uncertainties, it said.