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    40 Years of Building Capacity to Trade... And More to Come

     

     
     
    © International Trade Centre, International Trade Forum - Issue 4/2004

    Photo: Bianco

    When the International Trade Centre (ITC) was created in 1964, developing countries were emerging slowly from an era of import substitution and trade was largely in the hands of the industrialized world. Developing and socialist countries (171 of them) had only 21% of the share of world trade, which totalled US$ 175 billion.

    Forty years later, trade has increased more than 40-fold, to reach the staggering amount of US$ 7.3 trillion. Trade touches every corner of the globe. Developing and transition economies (171 of them) now account for 31% of world trade, 50% more than their share in 1964.

    Tackling the time bomb in international trade

    This is an indication of remarkable growth. But the achievement conceals within it a time bomb. Ten developing and transition exporting economies  - China, Hong Kong (Special Administrative Region of China),  Republic of Korea, Malaysia, Mexico, Russian Federation, Saudi Arabia, Singapore, Taiwan (Province of China) and Thailand - account for nearly 80% of the total trade by developing and transition economies.

    The situation is most dramatic for the world's 50 least developed countries (LDCs), which have barely made it out of the starting blocks. Over the past 40 years, LDCs' share of world trade declined from 1.9% to 0.6%.

    This is a huge problem, one that has threatened to explode for several years now. Today's waves of mass migration, civil unrest and pandemics have their roots in poverty and the widening gulfs between rich and poor.

    When ITC was created in 1964, the major trade challenges for the developing world were the lack of goods to export, the lack of capital to develop supply capabilities, the lack of market access and the lack of export skills.

    Forty years later, the challenges may be essentially the same… but the fuse of the time bomb has shortened considerably. What more can ITC do?


    Trade has increased exponentially in 40 years, from US$ 175 billion in 1964 to US$ 7.3 trillion in 2003 for merchandise trade alone. Not all countries have benefited equally. While the developed world has forged ahead, most developing countries have not. The situation is most dramatic for the world's 50 poorest nations. Over the past 40 years, their share in world trade declined from 1.9% to 0.6%.

    Growing recognition of trade as a tool for development

    First, one must recognize that, fortunately, ITC is no longer alone in offering trade-related technical assistance (TRTA). While bilateral development agencies had no interest in trade as a tool for development until recently and multilateral agencies started timidly to pay attention to private sector development as recently as 20 years ago, all have now accepted that trade, essentially conducted by the private sector, can, indeed, be a powerful tool for development. And they are devoting increasing attention to put trade to work for social and economic growth.
     
    ITC has made a systematic effort to team up with all other TRTA players. Given the new landscape for TRTA, how can ITC's 40 years of experience best contribute to the collective effort in the years ahead?

    Streamlined operations for a new chapter in ITC history

    Over the past ten years, ITC has streamlined its operations. It has invented new tools, methodologies, approaches and programmes. It has actively promoted the coming together of the private and public sectors as national teams for development through trade. Beneficiaries, parent bodies and donors have reacted well to ITC's efforts and have supported it enthusiastically. Several portraits of ITC's work in recent years are presented in this anniversary issue of Trade Forum.

    Today ITC is getting ready to write a new chapter of its history. Some of its more traditional fields of activities have attracted other development agencies and private consulting firms, some with much bigger means. This is not a handicap for ITC. On the contrary, it gives ITC another opportunity to review its strengths and to align them to the new TRTA landscape.

    ITC activities revolving around private-public partnerships, practical capacity building for export, supply-side expertise, enhancement of trade support institutions and enterprise competitiveness are its quintessence. While continuing to keep its eyes fixed on clients' demand and to deliver services for which it has the "critical mass" to start a chain reaction of development among its clients, ITC has to keep inventing better ways to fulfil its mandate.

    The following areas, all solidly anchored in ITC's expertise, present, in my view, special opportunities for ITC to concentrate its efforts and continue to grow in its traditional niches.

    Public-private partnerships

    Since its inception in 1999, ITC's Executive Forum has become the premier venue for practical debate on national export strategy as the guiding framework for export development. Participants have built a network for permanent consultation. They have developed, under ITC's leadership, tools and methodologies for their own use. Participants optimize the impact of limited national resources for export development. The steady evolution of the Executive Forum into an all-encompassing and ever more daring programme presents a unique opportunity for ITC to be of additional help in a most promising niche of its own.

    Encouraging South-South trade

    The organization of effective buyers-sellers meetings for South-South trade has been an ITC specialty for over 20 years. More recently, ITC innovated with programmes such as Buying from Africa for Africa, LatinPharma, AsiaHealthcare and various front-end techniques to enhance the efficiency of the programme. Each year, the United Nations (UN) system buys US$ 3 billion worth of humanitarian goods for Africa, with less than 7% sourced in Africa. Buying from Africa for Africa is directed at this anomaly. Over the next ten years, it is estimated that 60 major pharmaceutical products, selling today for US$ 40 billion, will lose patent protection, in an exciting prospect for pharmaceutical companies in the South.

    More generally, Brazil is now systematically looking at the Chinese market, India at the Brazilian market and China is positioning itself for both. A new geography of world trade is in the making. Big firms will need no help to gain from it. Small and medium-sized enterprises (SMEs) will - and this is where ITC can make a difference. Targeted trade flow analyses, supply and demand surveys, pragmatic matchmaking and enhanced buyers-sellers meetings in carefully selected sectors, such as health and education, present a promising niche which ITC should continue to occupy in creative ways.

    Export-led poverty reduction

    ITC has been working for a number of years with the concept of export-led poverty reduction, linking poor communities with export chains of products and services they can supply. The focus is on low-capital-intensive sectors such as light manufacturing, textiles, leather, agricultural products and community-based tourism. Preliminary results in Brazil, Cambodia, El Salvador and India have attracted the attention of rural populations and their governments.

    The ITC approach calls particularly for partnerships with cooperatives, community associations, non-governmental organizations, private sector companies and others. While the programme is still at a pilot stage, it shows high potential. It is a promising niche for ITC to define further and occupy fully, particularly in the context of "trade mainstreaming" initiatives, such as those possible under the Integrated Framework. To extend the reach of the programme's limited core resources, guides for "self-implementation" of pilot projects are being prepared.

    Business advocacy for trade talks

    Another area where demand for ITC's services is growing rapidly is the promotion of the culture of business advocacy in the context of trade talks. The evolution of the world trading system, under the auspices of the World Trade Organization (WTO), has brought about an urgent need for effective teamwork by government and business. Through ITC initiatives, the South is becoming increasingly aware that business advocacy, which is already extensive in the North, can also work for developing and transition economies by making the voice of businesses heard and reflected in trade negotiations. World Tr@de Net activities, currently covering 52 countries, along with Business for Cancún regional meetings, held in the run-up to WTO's Cancún Ministerial Meeting, contributed to a welcome increase in the effective presence of business in developing country negotiating teams. The subsequent Business for Development meetings continue to focus attention on regional business issues related to trade talks.

    Future demand will be for more intensive assistance in sectors such as agriculture, textiles and clothing, and services, and in issues related to market access, non-agricultural market access and trade remedies. ITC is particularly well equipped to help in these areas.

    Services exports represent new opportunities

    Globalization and the advent of modern information and communications technologies have combined to make the service sector the fastest-growing segment of international trade. Many developing countries and economies in transition are already exporting services, to the surprise of most people. Many more of these countries could use this avenue to diversify their economies. In the recent past, ITC has intensified its efforts and reshaped its approach to support exporters of services. Its programme is in high demand throughout the developing and transition world. ITC's ServiceExportNet is a rapidly growing network dedicated to small and would-be services exporters.

    Services exports represent a growing niche for ITC's work as it strives to respond to changing trends in trade in the 21st century.  Beyond services, industries related to bio-diversity and culture present special opportunities for ITC to better understand and support, in order to achieve development through trade.

    Strategic trade information

    Trade information, where ITC started 40 years ago, has grown exponentially with the advent of the Internet. More importantly, global market experts predict that in the 21st century, knowledge and speed in using information and expertise will determine which countries and companies become leaders in world trade. The UN Secretary-General Kofi Annan has underlined the importance of the changes taking place: "Access to information in today's world can help make all the difference between progress and poverty."

    How can producers and traders in low-income countries rapidly identify business opportunities? Transparency of market trends, competition rules and knowledge of trade barriers are prerequisites for all traders. But trade transparency is not yet a reality for many firms in distant parts of the developing and transition world or for new negotiators who enter into trade talks on their behalf.

    In cooperation with sister agencies, ITC has developed a suite of efficient, easy-to-use, web-based market analysis tools to enhance transparency of trade flows, market access conditions, competition and business opportunities. A recent external evaluation of ITC's strategic market research tools commends ITC's achievements and emphasizes the importance of stepping up efforts towards ensuring better transparency of international markets.

    This is a niche ITC has to continue to occupy with bold initiatives to help the developing world break away from its precarious dependence on a limited number of products. These countries need new niche markets to achieve social regeneration.

    Practical tools

    Competitiveness is the key to business survival and growth. As a result, most SMEs of developing countries and economies in transition are looking for practical business improvement tools customized to their specific needs. A series of innovative and practical tools for trade, such as practical guidebooks on international trade, export fitness checkers and trade-related benchmarking systems, training and counselling material and methodologies have been developed by ITC over the last decade. These supports for SMEs are channelled through national trade support institutions, which tailor them to a specific country or sector. These tools for trade and trade capacity building, unique to ITC, are in great demand and constitute an area in which ITC can continue to innovate and grow.

    The years ahead

    Globalization is here to stay. Competition for international trade will continue to grow. Trade must be made to work for all. The time frame for poor people to benefit from international trade is limited. Concerted efforts, of a bigger magnitude, need to be made to bring the poor on board the global economy. In this collective effort, ITC will continue to be pragmatic and play a distinctive role.

    Over the past 40 years, ITC has built up a reputation as a centre of excellence for trade-related technical assistance and capacity building. If it is to defend its "trademark", ITC must remain pragmatic, demand-driven, daring and exclusively focused in its areas of expertise. A range of growth areas exists, where ITC's past performance and expertise make it ideal-ly suited to act. This is in line with its original mission: to help developing and transition economies gain a greater share of world trade. ITC is already working to meet the demands it anticipates in the years ahead. But ITC must also maintain the flexibility and a sense of creativity to meet new challenges and opportunities for the developing world, which are hardly visible now but will inevitably arise as the global trade picture changes in the 21st century.