Global Policy Forum

South-South Trade Boom Reshapes Global Order


By Thalif Deen

Inter Press Service
December 21, 2006

The world's new economic powerhouses, including India, Brazil, South Africa and China, are largely responsible for a dramatic surge in trade and investments among the 132 developing nations in the global South.

"The South as a whole is not only richer in absolute terms but their combined economic weight relative to the global economy has also substantially increased," says Yiping Zhou, director of the U.N.'s Special Unit for South-South Cooperation. According to the latest figures, South-South trade has grown rapidly over the last decade: from 222 billion dollars in 1995 to 562 billion dollars in 2004. The figures for 2005 and 2006 are expected to be significantly higher.

"This South-South trade is expanding faster than any other trade flows -- at about 11 percent per year," Zhou told IPS. And it is this "spectacular growth achieved by some large developing countries, particularly in Asia, that is allowing many smaller countries to benefit from increased exports of commodities and products that are in great demand in these growth centres," he added. South-South foreign direct investments (FDI) have also increased, from about 14 billion dollars in 1995 to 47 billion dollars in 2003, with figures for 2006 expected to reach beyond 55 billion dollars.

U.N. Secretary-General Kofi Annan points out that trade within the South has risen rapidly. Southern multinational corporations have become providers of capital and technology, and have created jobs and generated wealth. "Faster-growing developing countries have also emerged as an important source of investments, (migrant) remittances and development aid," he said Tuesday, addressing a meeting on the U.N. Day for South-South Cooperation. Annan said that recent meetings and initiatives, including last year's South America-Arab Summit and this year's China-Africa Summit, "signal a strong commitment among developing countries to maintain and increase this momentum."

During the past two-three decades, Zhou pointed out, developing country economies have grown much faster than those of the developed and transition economies. New patterns of trade, investment and other economic linkages are emerging rapidly, eroding the structures inherited from a colonial past, he added.

"This reality is also changing the institutional and power structures of the South, presenting before us an entirely different landscape of South-South and, for that matter, also South-North relations politically, economically and culturally."

Ambassador Dumisani Kumalo of South Africa who chairs the 132-member Group of 77 developing countries, said South-South Cooperation is "a crucially important tool for developing and strengthening the economic independence of developing countries and achieving development as one of the means of ensuring the equitable global economic order." He said a proposed Global South Development Forum in 2007 will contribute to enlarging Southern policy space and enable the developing countries to expand and diversify cooperation within the South. It will contribute to promote South-South cooperation on a broad front through dialogue of all major stakeholders. The upcoming forum will also enable developing countries to achieve the Millennium Development Goals (MDGs) through South-South cooperation, he noted.

The MDGs include a 50 percent reduction in extreme poverty and hunger; universal primary education; promotion of gender equality; reduction of child mortality by two-thirds; cutbacks in maternal mortality by three-quarters; combating the spread of HIV/AIDS, malaria and other diseases; ensuring environmental sustainability; and developing a North-South global partnership for development. A summit meeting of 189 world leaders in September 2000 pledged to meet all of these goals by the year 2015. But progress towards their implementation has been slow.

Zhou cited several concrete examples of South-South cooperation linked to trade, investments and assistance involving India, Brazil, South Africa and China. India has already built up significant balance of payment surpluses, and its commitment to Africa's development was underlined by its pledge to provide 200 million dollars for the New Partnership for Africa's Development.

India has also provided a credit Line of 500 million dollars to countries in West Africa, in addition to canceling substantial amounts of debt owed by some of the 50 least developed countries (LDCs), especially in Africa, and described as the poorest of the world's poor.

Zhou said Brazil has "dramatically stepped up its South-South cooperation with Africa", encompassing many areas, including agriculture, infrastructure, trade and public administration. The Brazilians have written off more than a billion dollars in African debts. And most recently, Brazil has decided to grant duty-free access to its market for products from the 50 LDCs. South Africa, on the other hand, has co-financed a two-billion-dollar construction of the Mozal aluminium smelter in Mozambique.

And, under the India-Brazil-South Africa Poverty Initiative -- known as the IBSA Initiative -- the three countries have decided to contribute one million dollars each annually to support South-South initiatives aimed at helping LDCs to reduce poverty, and fight hunger and disease. Already these three developing countries have also emerged as growing importers of primary commodities, especially metals and minerals, and of energy supplies.

"Commodity and energy producers in the South are looking more and more to these countries for their markets and for new opportunities of trade, investment and transfer of technologies," Zhou said. Meanwhile, China has revitalised its South-South strategy to give more focus to the economic development of Africa. With foreign exchange reserves now reaching more than a trillion dollars, China has cancelled about 1.3 billion dollars in debts owed by 31 African LDCs.

By 2009, Zhou predicted, China will double its assistance to Africa; provide five billion dollars in preferential loans and buyer's credit; and create a five-billion-dollar China-Africa development fund to encourage Chinese firms to invest in Africa.

The Chinese government is also planning to increase the number of zero-tariff products originating from Africa from the current 190 items to 440 items in the next three years.

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