WTO Aid for Trade Review focused on how LDCs can better integrate value chains

22 July 2013

At the WTO Aid for Trade (AFT) review on 8-10 July, one side event looked at how Least Developed Countries (LDCs) can better integrate value chains and how they can overcome existing bottlenecks that currently impede this process.

The discussions recognised an increasing fragmentation of global production processes where intermediate goods and services are sourced in different parts of the world, i.e. Global Value Chains (GVCs). Panelists highlighted the risk for LDCs to be trapped in the lower end of the GVCs and discussed ways for countries to move up these chains.

Patrick Low from WTO insisted on the importance of finding a way past domestic and foreign constraints in accessing value chains. He defended that a method of battling domestic constraints is key in order to develop better infrastructure and improve governance. Among several, he suggested that central criteria to make progress in this area constituted having good social and foreign investment along with increased trade.

Samoa Minister of Trade, Lauofo, mentioned that AFT in Samoa should focus on geographical connectivity given the fact that the country is geographically isolated, making exports development difficult. As a consequence, he also echoed one of Low's posits, saying: "the most important thing to undertake in order to push forward economic growth is to build up governance." He stressed that his country is now less dependent on tariff measures and that policies should focus on non-tariff barriers. "A special emphasis must be placed on services, which play a role in employing an increasingly educated population," he said.

Senegal Minister of Trade, Sarr, stated that relocating VCs in Africa raises two issues: the issue of competitiveness among LDCs themselves to attract foreign direct investment and the participation of LDCs in the low value-added segments of the value chains. He put forward three solutions to enhance LDCs' participation in the value chains: develop policies to attract FDI; design industrial policies toward agricultural transformation, and sign win-win agreements. He went on to urge more coordination between projects, focusing on promising opportunities that span across regions, such as the cashew nut trade.

According to Ambassador Getahun of Ethiopia, structural transformation, investment promotion, and human and agriculture development are key to connect to value chains. He also added "to connect to the global market, we need more streamlined and efficient terms to join WTO." He pursued by stating that regional integration of value chains and strong national ownership are also important for a real impact on the ground, as well as developing productive capacity. When asked by a participant from the audience about the impact of AFT on the ground in Ethiopia, he answered "AFT needs more ownership to be more effective ... it is not easy to pinpoint which exact part of AFT specifically goes to growth."

Speaking for Nepal, Ambassador Gyan Acharya highlighted the importance of tourism in the services sector as overall tourism is the predominant sector for many LDCs.

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