One step away from reaching a key trade agreement for developing countries

After the ratification of Brazil at the end of 2022, only one nation is missing for the Global System of Trade Preferences among Developing Countries (GSTP) to enter into force, an agreement that seeks to increase South-South trade through tariff reductions and negotiated in the framework of the United Nations Conference on Trade and Development (UNCTAD).

The 42 members of the System in Africa, Asia and Latin America have 4 billion inhabitants and constitute a total market of 16 trillion dollars, adding up to nearly 20% of world merchandise imports.

This Agreement was created more than three decades ago by the Group of 77, a coalition of developing countries, to boost trade between them.

“An opportunity now opens” for this mechanism, UNCTAD Assistant Secretary-General Pedro Manuel Moreno said Monday at the opening session of the United Nations Trade Forum 2023, which focused on the deal.

The UN agency calculates that if the members of the agreement apply the tariff reduction commitments from the last round of negotiations, known as the Protocol of the São Paulo Round, they could increase their common revenue by about $14 billion.

The tariff reductions would affect a wide variety of products ranging from fish and food to clothing and machinery-related items, depending on each country’s commitments.

Faster growth than world trade

The System would make it possible to take advantage of the full potential of South-South trade, which has grown faster than world trade.

“South-South trade, which for a long time was just an aspiration, has become one of the main forces responsible for growth and development in the last two decades,” said former UNCTAD Secretary General, Brazilian economist Rubens Ricupero.

Since 2000, trade between developing countries has grown at an average annual rate of 9.8%, reaching $5.3 trillion in 2021. During the same period, world trade grew at a rate of 5. 5%.

Moving from competitors to trading partners

If there is any sector that especially benefits from this agreement, it is agriculture.already the members of the agreement extend throughout the planet creating a complementary and non-competitive network of crops and food.

Thus, the South American countries mainly export oilseeds, meat and cereals, while India tends to send rice, crustaceans, tea or spices and Morocco fishery products, vegetables, sugar and honey.

Trade helps address common challenges

In addition to food safety, the pact addresses other common challenges from developing countries such as climate change and pollution.

Although developing countries contribute the least to global CO2 emissions₂They are the ones who suffer the most from its effects.

Lowering tariffs on renewable energy goods and services could boost the energy transition in developing countries and help them meet their climate commitments under the Paris Agreement.

The deal could also create a bigger market for natural plastic substitutes.such as seaweed, bamboo and agricultural residues.

Many System members have these materials in abundance and could use them to make eco-friendly versions of plastic straws, food wrap, and other consumer products.