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UN Urges Increased South-South Cooperation in Response to Crisis
As global indicators continue to reveal the breadth of the financial crisis, developing countries may soften the impact on their economies by increasing cooperation with other nations of the South, according to the United Nations Conference on Trade and Development.
Amidst UNCTAD forecasts that developing country exports may fall by as much as 9.2 percent in 2009, international experts met in Geneva last week to take part in the “Multi-Year Expert Meeting on International Cooperation: South-South Cooperation and Regional Integration,” hosted by the UN body. The meeting explored ways to harness trade, investment and financial flows, among others, to help insulate the South from the full effects of the crisis.
Traditionally, developing nations have been heavily dependent on exports to advanced economies for their long-term growth, and are expected to be severely impacted by sharp drops in commodity prices, as well as increased difficulty in obtaining credit and aid from developed nations.
However, figures from the International Monetary Fund indicate that developing economies will maintain positive growth this year as industrialised nations shrink.
“A global financial crisis has shaken the economic foundations of the North, and is threatening to shatter the growth and development aspirations of the South. The timing, therefore, is right to explore how greater South-South cooperation can help developing countries to cope with the crisis,” said UNCTAD Secretary-General Supachai Panitchpakdi.
The Secretary General went on to say that merchandise trade between developing countries grew at an average of 13 percent per year from 1995-2007, amounting to US$ 2.4 trillion over the period, or 20 percent of world trade.
“South-South trade has been one of the most dynamic components of international trade generally for the last 10 years or so,” said Bonapas Onguglo, a senior economist at UNCTAD.
As developing countries continue to grow, so shall their need for essential products produced by other emerging nations, highlighting the potential for these countries to expand trade among themselves and create greater independence from EU and US markets.
Although it is unlikely that developing countries will pursue complete self-sufficiency, the increased cooperation may help fill the void left as industrialied nations focus on revitalising their own economies in 2009.
"South-South trade is one avenue. We've not used it fully – now is the time," Onguglo said.
Among the measures proposed over the two-day meeting were regional stimulus packages and trade arrangements, as well as increased South-South lending and “diversification of foreign-exchange reserves” where developing countries purchase the debt of other nations, a strategy utilised successfully in the Asian financial crisis of 1997.
Others topics discussed included reform of international financial institutions and the need for a conclusion of the Doha Round of multilateral trade negotiations at the WTO, which encountered significant setbacks last year, (see BRIDGES Weekly, 17 December 2008, https://www.ictsd.org/bridges-news/bridges/review/with-no-doha-conclusion-in-sight-wto-considers-how-to-proceed).
Not subject to debate, however, was the need for immediate action as some participants termed the meeting an “emergency clinic.”
“This crisis is not just any crisis,” said Debapriya Bhattacharya, a prominent economist and President of UNCTAD's Trade and Development Board.
ICTSD reporting; “Developing countries turn to South-South trade,” REUTERS, 8 February 2009; “More ‘South-South’ action called for as poor countries face global financial crisis,” THE FINANCIAL, 6 February 2009.