WEDF 2012 Opening Plenary Session Report

The Growth Markets’ Potential: What their emergence means for the future

The opening Plenary session of WEDF 2012 was an open discussion moderated by Ms Haslinda Amin of Bloomberg TV, Singapore. Participants covered areas including the prospects for enhancing South-South trade, as well as constraints faced, including the problem of volatility in commodity and currency markets.

Mr Pascal Lamy, the Director-General of the World Trade Organization (WTO), told the forum that growth in Europe, the USA and Japan should not be expected for five years, and emerging countries need to ride the new dynamics of globalization, which are become increasingly South-South in orientation. There is a need for a change in the existing North-South mind-set in trade negotiations, and in the future developing countries need to pay more attention to what is happening in other developing countries.

Dr Supachai Panitchpakdi, the Secretary-General of the UN Conference on Trade and Development (UNCTAD) said that South-South trade had been expanding rapidly and developing countries are now exporting more to each other than to the rest of the world, although much of this trade is still concentrated in Asia.

Much of South-South trade is in intermediate goods, with the final products heading to the North. Thus some export-oriented economies in Asia are not doing well because they rely on global supply chains that depend on Northern consumption. He expressed concern that different continents appear to be caught in traditional roles: Latin America exporting food products, Africa minerals and raw materials and Asia manufactured goods. There is a need for diversification, investment policies need to be addressed in different ways, and NTMs need to be tackled.

H. E. Minister Gita Irawan Wirjawan discussed the difficulties Indonesia had experienced in diversifying away from dependence on exports of natural resources. There could be, however, still good opportunities to move towards a more knowledge-based economy based on exports. There is a need for focus on education if Indonesia is to move up the value chain. He noted that the country tends to export to other Asian countries, which are in turn dependent on exporting to Europe, so that the economic downturn in Europe has resulted in an inability to expand exports in the short term. Signs of economic improvement in the United States and Europe will be reflected in Indonesia.

Dr Marta Lucia Ramirez de Rincon, CEO of the National Coalition for Colombian Production and former Minister of Trade, said that in recent years Colombia has seen strong growth in mining, and oil and gas, while more traditional exports have been growing at a lower pace. The government is using royalties from oil and gas and mining to invest in innovation and education. There is also a need to support the agriculture, manufacturing and services sectors. While the country would not abandon its main market, the United States, it is looking to increase trade with other Latin American countries, taking advantage of its knowledge of markets and the common language.

Ambassador Yonov Frederick Agah, the Permanent Representative of Nigeria to the WTO, said that Nigeria’s high level of dependence on natural resources, and particularly oil and gas, meant that agriculture and manufacturing had declined over recent decades, along with transport infrastructure such as roads and railways. The government is now using oil revenues to address these problems and support the private sector in areas like trade finance. The aim is to be a country friendly to foreign direct investment, with a more streamlined customs agency system, and to develop trade links in the ECOWAS sub-region, including a connectivity initiative creating a Lagos-Abidjan corridor and a coastal ferry system.

In subsequent discussion, Minister Gita said more progress in breaking down trade barriers would have been made in Asia without the Asian financial crisis of 1998. The lesson learned was that patience is required and that results would not come overnight. He also raised the problem of price volatility in commodity markets attributable to speculative activity. For example, far more oil is traded on international markets every day than is physically consumed.

Dr Supachai drew attention to the important work ITC is doing in trade intelligence, helping countries to understand the markets available to them, and also on NTMs. He said that for years efforts had been made to find ways of measuring NTMs, which are not always tangible or easily measurable. There is a need for a transparent system of NTM measurement with a focus on South-South trade. He highlighted that UNCTAD is working on an automated data system on customs operations. He agreed that speculation in commodity markets is a problem, while accepting the need for futures trading and hedging.  He did not believe that speculation was good for exchanges, and added that trade restrictions could create unpredictability in markets. There is a need for more transparency, and he noted the creation of the AMIS information exchange system by the G20 and said he believed there is a need for a global governance mechanism that goes beyond the G20 to coordinate matters such as quantitative easing. He expressed concern about the inflationary potential of excessive liquidity and said countries need a policy-based system to manage capital flows.

Mr Lamy said that improved rules were needed regarding trade in natural resources: in particular, on export restrictions, which are currently weakly regulated. He agreed that NTMs, and in particular the discrepancies between them, were hugely important as future obstacles to trade. In future, tariffs themselves would be less important. On the issue of speculation, Mr Lamy said WTO would like to see a more stable environment for trade, whether in commodities or currencies, but the problem is how to achieve this. One reason for volatility is that markets are not open. In some sectors there is a degree of cartelization. Responding to a question on ways to increase trade capacity, Mr Lamy referred to the WTO Aid for Trade programme and said there is a need for a redirection of international development assistance. Aid for Trade could help LDCs whose human and productive capacities are lagging by helping them to understand and track markets.

Dr Ramirez said South-South trade provided opportunities to improve and develop capacities. There is a role for governments in supporting innovation, increasing knowledge of markets, strengthening institutions, legal systems, logistics and transportation systems: all essential to improve competitiveness. There is a need for stable, long-term policies.

Following the Plenary session, the Ambassador of Switzerland to Indonesia, Timor-Leste and ASEAN, Mr Heinz Walker-Nederkoorn was invited to address WEDF delegates in recognition of Switzerland’s generous support in facilitating the participation of delegates from various developing and Least Developed Countries (LDCs).

The Ambassador highlighted the need to address trade-related challenges using what he called the “3-Cs approach”: compete, comply and connect. He said that for companies to compete in international markets supply capacities need to be enhanced through practical action, including innovation. Consumers and retailers demand reliable, transparent, and internationally recognized information regarding production and processing methods. Institutions that can ensure quality and consistency in complying with international standards must be developed. Since value chains are increasingly global, improving production at the farm or enterprise level without progress in logistics and supply chain management is not workable.

The Ambassador concluded that, since trade development is a complex activity involving a diversity of players, concerted and coherent action is critical. He highlighted the need to involve the private sector in trade development and improve coordination between multilateral and bilateral technical cooperation. He emphasized Switzerland’s commitment to partnerships with multi- and bilateral agencies and their priority partner countries, including Indonesia.