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Developed countries contribute to trade capacity-building in growth markets.

Global Trade: As Advanced Economies Invest in Developing Markets, What's in It for Them?ARTICLE

By Debra Donston-Miller

Recent investments by economically developed nations highlight the import-export trade challenges facing developing economies and the need to ensure they are able to effectively participate in global trade. Developing economies – also often called “growth” economies – present huge import-export trade opportunities for businesses in advanced nations, notes PwC in its January 2017 report Winning in Maturing Markets.1

“[Developing] markets are on the verge of a new era of leading global growth in which they are projected to enjoy 1.9 times the absolute growth in GDP as compared to developed markets by 2021, and account for 60 percent of global growth within the next five years,” according to the report. “This will create significant opportunities for private sector players looking to create and deliver value to the 2.7 billion people expected to join the middle class in Asia alone by 2030.”

Similarly, as noted by International Monetary Fund (IMF) Managing Director Christine Lagarde, developing economies account for almost 60 percent of global GDP, up from just under half a decade ago, and have contributed more than 80 percent of global growth since the 2008 financial crisis – helping to save jobs in advanced economies.2

According to the World Economic Forum (WEF), G20 countries are the main international trading partners of low-income developing countries (LIDCs): about 70 percent of LIDC imports come from G20 countries and 80 percent of LIDC exports go to G20 countries.3 For developing markets, the benefits of international trade include expanded business opportunity, improvements in labor and environmental standards, opportunities for export diversification, and improved international relations, according to the European Commission.4

Developing Markets’ Import-Export Trade Challenges

However, developing markets face multiple international trade challenges. This is a global trade problem not only for developing markets, but also for advanced economies that have come to rely on developing markets for investment returns and customers.5

WEF notes, for example, that international trade costs between LIDCs and any G20 country are systematically higher than the trade costs among G20 countries or between non-LIDC countries and any G20 country. G20 tariff policies are also a concern, especially on agricultural goods, according to WEF. Non-tariff regulations can also be barriers to expanded trade for LIDCs.6

Other global trade issues include, but are certainly not limited to, declining commodity prices and asynchronous monetary policies, notes the IMF’s Lagarde. For example, the U.S. Federal Reserve has raised interest rates in response to a strengthening U.S. economy, but some other advanced nations have kept interest rates level or even lowered them. Consequently, a rising U.S. dollar exchange rate puts considerable strain on those developing market companies that took on large amounts of dollar-denominated debt.7

3 Countries Invest to Boost International Trade with Developing Nations

To help overcome these challenges, developed nations have begun making strategic international trade investments – both large and small – in developing economies.

The government of Germany, for example, announced in June 2017 that it is contributing €1 million ($1.2 million) to help developing and least-developed countries enhance their trade negotiating skills.8 “Trade can be an engine for stimulating economic development through job and wealth creation,” said Walter Werner, Germany’s alternate ambassador to the World Trade Organization (WTO). “Germany cooperates closely with developing and least-developed countries in order to help them better integrate into the multilateral trading system and reap the economic gains of global trade.”

Also in June, Canada said it would contributed CAD 200,000 ($158,000) to the Standards and Trade Development Facility (STDF) to help developing countries comply with international food safety and animal and plant health standards in order to more easily access agricultural markets.9 Managed by the WTO, the STDF brings together trade, health and agriculture experts worldwide to share knowledge, tools and best practices in order to increase the effectiveness of sanitary and phytosanitary (SPS) technical assistance provided to developing countries.10

“Building the capacity to meet international standards is a key stepping stone for developing countries,” said Canada's Chief Agriculture Negotiator, Frédéric Seppey. “Not only does it improve food safety, plant and animal health domestically, it also supports economic development and facilitates access to international markets.”11

Likewise, the government of Finland is contributing 48,000 Swiss francs ($49,300) to support the participation of least-developed countries in the 11th WTO Ministerial Conference, taking place in December in Buenos Aires, Argentina.12 “The participation of LDC representatives in the Buenos Aires Ministerial Conference is an important means of ensuring that all WTO members benefit from the multilateral trading system,” said Terhi Hakala, Finland's ambassador.

The Takeaway

Developing nations represent a key source of international trade growth and business opportunity for developed nations. Volatility is a characteristic of developing nations’ growth, but many countries agree the rewards for expanding import-export trade with developing nations warrant ongoing strategic investment.

The Author

Debra Donston-Miller

Debra Donston-Miller is a veteran journalist, specializing in IT, business, career and education content. Formerly editor of eWEEK magazine and content director of eWEEK Labs, Donston-Miller currently develops content and content strategy for multiple organizations.

Sources

1. Winning in Maturing Markets, PwC; https://www.pwc.com/gx/en/issues/high-growth-markets/assets/pwc-gmc-winning-in-maturing-markets.pdf
2. “The Role of Emerging Markets in a New Global Partnership for Growth,” International Monetary Fund; https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp020416
3. “How Can Trade Help Developing Countries?” World Economic Forum; https://www.weforum.org/agenda/2015/10/how-can-trade-help-developing-countries/
4. “10 Benefits of Trade for Developing Countries,” European Commission; http://trade.ec.europa.eu/doclib/docs/2012/january/tradoc_148991.pdf
5. “The Role of Emerging Markets in a New Global Partnership for Growth,” International Monetary Fund;
6. “How Can Trade Help Developing Countries?,” World Economic Forum;
https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp020416
https://www.weforum.org/agenda/2015/10/how-can-trade-help-developing-countries/ 7. The Role of Emerging Markets in a New Global Partnership for Growth,” International Monetary Fund; https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp020416
8. “Germany Donates EUR 1 Million to Help Developing Countries Participate in Trade Talks,” World Trade Organization; https://www.wto.org/english/news_e/pres17_e/pr795_e.htm
9. “Canada Donates CAD 200,000 to Support Food Safety, Animal/Plant Health Standards and Trade,” World Trade Organization; https://www.wto.org/english/news_e/pres17_e/pr794_e.htm
10. Ibid
11. Ibid
12. “Finland Donates CHF 48,000 for LDCs’ Participation in Ministerial Conference,” World Trade Organization; https://www.wto.org/english/news_e/pres17_e/pr793_e.htm

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