Prof SK Mohanty
Global South making major strides in aligning its trade output with that of North
UNDERSCORING the need for stronger SouthSouth Cooperation, Prime Minister Narendra Modi had highlighted issues such as socioeconomic difficulties, climate change, education, and skill development as the challenges facing southern countries. In his address at the third Voice of the Global South Virtual Summit last month, he stressed the crucial role of trade for Southern nations, especially in relation to technological development, among the key points.
The Global South has significantly advanced in overcoming underdevelopment by leveraging trade as a key driver of its rapid economic growth. The subdued growth and developmental challenges faced by the Global South during the 1970s through the 1990s are now a thing of the past. The Global South is making significant strides in aligning its GDP growth and trade performance with that of the North.
A new set of emerging countries, such as India, Brazil, and Indonesia, is steadily progressing toward achieving top economic status in the foreseeable future. Moving from the sidelines, these economies are emerging as key global leaders, significantly contributing to the international economic framework.
The global recession served as an unexpected catalyst aiding the Global South in closing the development and trade gap with the North. The Global South’s exports surged to $10.3 trillion globally in 2022, with $5.9 trillion of that export occurring within the Global South. Its imports in 2022 reached $9.9 trillion worldwide, with $6.4 trillion sourced from within the South.
Unexpected catalyst
The volume of intra-Global South trade, for both exports and imports, was much greater than trade between the Global South and the North. The intra-trade differences between the North and South narrowed substantially from 2002 to 2012, contributing to a more equitable distribution of global trade.
Share of intra-south and intra-north trade in the world
As the world economy rebounded, the South struggled to increase its trade share from 16 per cent to 26 per cent, coinciding with a decrease in the North’s trade share from 48 per cent to 34 per cent during 2002-12. The reduction in trade disparities between the North and South was most pronounced during this decade. The decade from 2012 to 2022 saw the global trade shares of the North and South remaining relatively stable.
The North’s export share was 34 per cent of global trade, while the South’s share was 26 per cent, leaving an 8 percentage point gap in 2012. As the recession began, the trade gap between the North and South continued to narrow for a few years, but with the extended global downturn, it stabilised and remained almost unchanged between 2012 and 2022.
Trade gap contracts
The trade gap between the North and South contracted to 6 percentage points in 2021 and remained constant in the following year. During the period 2002-22, the Global South saw its exports multiplying by 4.6 times globally, by 6.1 times within the South, but by just 3.4 times with the North. This trade revival is seen not just in the Global South as a whole, but also in the specific subgroups like emerging economies, developing countries (excluding the merging ones), and Least Developed Countries (LDCs).
In the periods of global economic expansion and the early phase of the global recession (2008-15), LDCs showed notably stronger trade progress than most of the other major subgroups of the Global South. During the buoyant global period of 2002-07, trade in the Global South grew by 16 per cent globally and by close to 17 per cent within the Southern region. Although the Global South’s trade with the North increased significantly during the same period, it did not match the higher growth rate of its trade with the world.
The Global South’s growing role in Global Value Chains (GVC) is driven by its manufacturing dynamism and increasing access to capital through foreign direct investment and trade. The growing influence of Global South companies in the global value chain sector is marked by their control over core activities and strategic involvement in the most profitable segments of production fragmentation. GVC trade reached $4.2 trillion in 2022, marking a nearly five-fold increase from 2002 to 2022, with exports growing at a faster pace than imports.
Tech-intensive goods
The export profile of the Global South is steadily shifting towards technologyintensive goods, reducing its dependence on primary commodities. Over the period from 2002 to 2022, exports surged ahead of imports in all levels of technology-intensive trade with the world, including low, medium, and hightech sectors. During the same period, low technology-intensive exports from the South saw a 4.2-time increase, while medium technology-intensive exports experienced a 5.7-time growth.
The Global South’s increasing dependence on technology-intensive trade decelerated during the global recession, in contrast to the rapid growth observed during global economic buoyancy. The table below shows that the trade composition of the low technology-intensive sector in the overall technology-intensive trade demonstrated a fall during the recession. The share of low technology-intensive goods imported from the Global South in total world imports declined from 18.3 per cent in 2008 to 16 per cent in 2022.
The most significant increase was observed in the imports of high technology-intensive goods, where the sector’s share rose from 34.2 per cent in 2008 to 41.9 per cent in 2022. A significant reduction was observed in the share of medium-technology imports, which decreased from 47.5 per cent in 2008 to 42.1 per cent in 2022, marking a net loss of 5.4 percentage points during the global recession. The export dynamics of the Global South exhibited similar patterns of change but the gap was low.
Trade as second pillar
The Prime Minister underscored the importance of enhancing South-South Cooperation through an inclusive Global Development Compact. In the Development Compact, five core pillars are outlined, with trade as the second pillar – a focus on reinforcing trade promotion activities to confront challenges in the sector.
A strong financial commitment from the Global South was identified as crucial for promoting SSC, with India’s active participation being particularly emphasised. The Global South Excellence Centre’s efforts in enhancing skills and facilitating knowledge exchange with the South were also acknowledged
