The first annual United Nations Day for South-South Cooperation, observed today, focuses on achieving the Millennium Development Goals through South-South cooperation. One of the most dynamic forms taken by that cooperation is trade, as UNCTAD points out in this press release, issued on that occasion.
"A new phenomenon is emerging: the South is moving steadily from the periphery to the centre of world trade and economic relations", says Carlos Fortin, Officer-in-Charge of UNCTAD, as the United Nations observes the first annual UN Day for South-South Cooperation.
UNCTAD has been at the forefront in analysing the "new geography of international economic relations" - the growing role of developing countries in international trade, investment, technology, services, commodities and finance. Four features of this phenomenon stand out in particular:
First, the South is increasingly important as a producer, trader and consumer in global markets, currently accounting for some 30% of world trade. In 2003, for example, the US imported more from developing countries than from developed countries, and its exports to developing countries increased to over 40% of all its exports. About half of Japan´s exports now go to developing countries, and roughly one third of those of the EU, excluding intra-EU trade.
Second, South-South trade is growing dramatically. Over 40% of all goods exported by developing countries, including basic commodities and manufactures, are directed to other developing countries, and this trade is increasing at an annual rate of 11% - nearly twice that of total world exports.
Third, the composition of trade from developing countries is changing, as these countries begin to export more manufactures than primary commodities, their traditional bread and butter. The share of manufactures in developing-country exports has climbed steadily, from 20% ($115 billion) in 1980 to nearly 70% ($1.3 trillion) in 2000.
Fourth, international investment flows from and within the South are also soaring. Over the past 15 years, annual foreign direct investment (FDI) outflows from developing countries have grown faster than those from the industrialized world. Their outward FDI accounted for over one tenth of world stock and nearly 6% of world flows in 2003 - $0.9 trillion and $36 billion, respectively - and some developing countries emerged as significant sources of FDI in other developing countries during the 1990s.
According to UNCTAD, a variety of factors are feeding this new geography:
- Successful developing countries and their firms have pursued strategic policies and actions, including carefully balanced roles for the State and the market;
- Transnational corporations are increasingly internationalizing their production systems, taking advantage of developments in information and communications technologies; and
- Rising liberalization has enhanced the mobility of production and business factors.
At the same time, however, there are risks associated with the "new geography", cautions Mr. Fortin. One is that companies will relocate, because activities that are competitive today may not be competitive tomorrow. Another is the risk of increased asymmetry, with some regions or countries within the South acquiring greater economic clout than others and even crowding them out; thus far, only a limited group of developing countries have benefited from the new trends.
But with judicious policy decisions, the South can succeed in nurturing, reinforcing and spreading the dynamic impetus of the new geography, UNCTAD believes. Increased trade and investment flows offer a direct and solid opportunity to enhance value added, increase employment and thus raise incomes. Bold new initiatives in South-South cooperation and the dynamism of the "new geography" could thus enhance developing countries´ prospects of achieving the MDGs for 2015 - and particularly those of halving poverty and creating an equitable international economic system.
