What new initiatives is the International Trade Centre involved in?
FRANCIS: Recently, we have been concentrating on the question of non-tariff measures because these have become even more important in international trade as we have seen tariff levels coming down. The proliferation of private standards for example is really beginning to have an impact on international trade. Therefore, we have been focusing on what is the impact of these non-tariff measures on actual trade. We have been doing surveys in sixteen countries across the world and we are finding out that many of the issues are related to domestic problems, such as infrastructure to support trade and regulations that are not in conformity with international standards. These domestic problems have been problematic for developing countries, who are trying to get to more developed countries’ markets. This is the first initiative that we have been engaged in. The second initiative we have been working on is looking at the role of women in international trade and trying to facilitate the expansion and the empowerment of women in trade. For example, we have done a joint initiative with a number of large corporations, particularly out of the United States, with annual purchasing power of $700bn a year. Currently, women only make up 1% out of their supply chains and therefore they are trying to increase that to between 5% and 7%. We see this as a huge market opening for women in the developing world. Our role is to identify the women-owned enterprises and to establish the relationship between them and the large corporations. That particular initiative has now been expanded into government procurement because there has been a plural-lateral agreement on government procurement signed at the last World Trade Organization (WTO) Ministerial Conference. This is another massive opportunity with respect to small- and medium-sized enterprises that should be qualifying for government procurement. Our role at the International Trade Centre is really to try helping companies find their way in international trade. Thus, we are working on the initiative on women, the initiative on government procurement, the initiative on private standards, and we are also looking at non-tariff measures. These are all ways we are trying to solve problems and increase access to international trade.
What is the impact of the global economic downturn on emerging markets?
FRANCIS: We have seen a big expansion in protectionist measures, which might be disguised as what we call non-tariff measures or private standards. That is why we are very much engaged with a number of other large institutions such as the World Bank, the WTO and UNCTAD (United Nations Conference on Trade and Development), looking at bringing greater levels of transparency. We have created a platform where all of the information has now become available and people can see what is happening. If something happens, there is the ability to report it immediately. Once it becomes globally visible, countries have to take corrective action. We just try to bring transparency on international affairs because we believe that transparency helps to reduce the negative behavior.
What are the main challenges facing exporters in emerging markets?
FRANCIS: What we have seen is that emerging markets have different strategies in growing their trade. China for instance is growing its production of finished goods and intermediary goods while Brazil is expanding its trade through commodities. The big challenge for China is therefore the slowdown in mature markets which is already having an impact on their growth while for Brazil it is the volatility of commodity prices. For other emerging markets it is about understanding the new trade patterns and adapting to the changing market trends through access to timely information on which to make good decisions.
How much potential exists to increase intra-regional trade in the Arab world?
FRANCIS: The Arab world has its peculiarity because it has mainly oil and gas based industries. This has been a real constraint for them in terms of employment opportunities, since oil and gas it is not a huge generator of jobs. Despite the fact that Arab countries have free trade agreements among each other, they do not trade with each other and they are not familiar with each other. Their focus has been mainly on external third countries, outside of the region. The International Trade Centre has been working on a study on the Arab states, looking at the free trade agreements that they have signed. In addition, we are looking into the intra-regional agreements they have established. Despite efforts of reducing tariffs among the League of Arab states members, regional integration has not yet materialized. According to our findings, this may be partly due to non-tariff barriers in place and partly due to a rather low level of trade complementarity, which means the similarity of what these countries export and what they import, is moderate. That demonstrates an opportunity in terms of products and services that they could be selling to their neighbors. Therefore, there are definitely big opportunities for growing regional economies through diversifications of products and services within the area. Furthermore, such economic growth would fully utilize their human capital.
In the Arab world, which countries have been successful at growing their industries through the lowering of non-tariff measures?
FRANCIS: A good example is our work in the cosmetics industry in Jordan. There are a number of companies that have Dead Sea products and these products are classified as pharmaceuticals in Egypt. What we had to do was to work with the Egyptian authorities and the Jordanian authorities to change the classification of these products in order to let the products move across borders. When it comes to the UAE, they have really opened their economies, particularly Dubai. It is known that only 30% of the economy is based on oil and gas, whereas ten years ago that was not the case.
The crisis and the shifting of the axis of trade have changed the way globalization works. Therefore, companies should prepare themselves to be agile and more flexible in order to understand what it means to move freely from market to market.
What is your general outlook for the future dynamics of global trade?
FRANCIS: The crisis and the shifting of the axis of trade have changed the way globalization works. Therefore, companies should prepare themselves to be agile and more flexible in order to understand what it means to move freely from market to market. Companies, which are part of a global supply chain, are somewhat protected by the changes in the environment. Nevertheless, they should also consider strategies to ensure the positioning of their products in the most adequate ways. My advice will be to actually understand this new dynamic of trade and become inquisitive about what is happening in the world.