DEVELOPING COUNTRIES ARE FACING THE HARSH IMPACT OF DECLINING COMMODITY
PRICES
Delegates at the meeting of the G20 Trade Ministers that is held in
Istanbul, Turkey are in agreement that globally trade has slow down. The
meeting was focusing on the slowdown in global trade and how to make the
multilateral trading system work better. The meeting also focused on the
implications of the global trade slowdown for the future of trade and at policy
options to further integrate SMEs into global value chains.
South African Minister of Trade and Industry, Dr Rob Davies said that
the global trade slowdown has a disproportional impact on developing countries
given their relative size of their economies and consequently their heavy
reliance on international trade.
“This being the case, developing countries are facing the harsh impact
of declining commodity prices and falling export demand that are attributable
to global trade slowdown. Added to this, financing pressures are becoming more
acute, and are expected to remain so for an extended period of time. Access to
private trade finance has become hard to come by, and the prospects for foreign
direct investment in particular will be challenging over the foreseeable
future,” said Minister Davies.
He added that the UNCTAD report (2014) also confirmed that the rate of
income growth in developed economies since 2008 has been significantly lower
than it was prior to the crisis, and statistical evidence also points to a
considerable weakening of import elasticity of demand in these countries.
Minister Davies indicated that in order to address this, trade needs to
support industrial development particularly in developing countries and should
be seen as part of a wider economic development strategy with accompanying
measures.
“Accordingly, trade policies must be strategically aligned with
industrial policy objectives. A mix of policies that are critical to achieve a
scaled-up industrial policy and a shift towards strengthening the productive
side of the economy are required,” he added.
Minister Davies specified that developed countries can provide
support to Africa’s infrastructure drive and to the efforts to stimulate the
development of Africa’s regional industrial value chains
“To enable the countries in Africa to integrate meaningfully into the
world economy it will require infrastructure development and the building of
production capacity and capabilities. In Africa, we have embarked on a process
to build regional development integration through the upgrading of regional
infrastructure and productive capacity,” stated Minister Davies.
He further said that trade liberalisation has failed to deter Africa
from relying heavily on exporting primary commodities to the rest of the world.
According, to Minister Davies, broadening and upgrading the
industrial base to encourage production and export of more sophisticated value
added products requires purposeful intervention in the industrial economy
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