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INTRODUCTION
South-South cooperation has always been conceived and promoted as a means to reduce the dependence of developing countries on markets of developed countries and to enhance the collective bargaining power of developing and least developed countries at the international fora. It has been argued that South-South cooperation should be seen more on political terms than on economic terms, because political benefits will be relatively more than economic benefits. This Viewpoint Paper outlines some aspects of South-South trade as a means to promote better South-South cooperation.
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Background
South-South cooperation is one of the major themes in the international development discourse. It has received extensive endorsement in different parts of the world. Some examples are as follows:
· ASEAN (Association of South East Asian Nations) is forging closer economic ties with China and India to create broader Asian economic cooperation.
· In South America, Mercosur (the Southern Cone) is proceeding in line with its objective to form a common market by 2006. The Andean Community, which stands as a customs union, has signed an agreement to form a common market on the lines of EU by the year 2005.
· In Africa, members of the Common Market for East and Southern Africa (COMESA) formed a free trade area in 2000. SADC (Southern African Development Community) also established a free trade area in 2000. Since the establishment of the African Union in 1999, 53 African nations are pursuing a six-stage programme to consolidate smaller regional communities and free trade areas into an African Common Market.
· In South Asia, the framework agreement for SAFTA (South Asian Free Trade Agreement) was signed in 2004.
· India, Brazil and South Africa (IBSA) have initiated a process towards regional cooperation across continents.
The Imperative
Most of these initiatives revolve around closer trade relationship. Between 1991 and 2001, as a percentage of world trade, South-South trade has increased from 6.5 percent to 10.7 percent. Another fact is that the Southern economies are becoming more liberalised. Average tariff rates have come down from 25 percent in 1985 to less than 15 percent in 2000. Several reasons are attributed to this push for South-South cooperation on trade. The important ones are:
· helps diversification of exports (with respect to destinations) and also reduces market uncertainty;
· increase in the share of world trade may provide more (collective) bargaining power to these countries; and
· technologies available in Southern countries are perceived to be more suitable to the needs and requirements of a developing country and there is a huge scope for technology transfer. It is also understood that manpower requirement for utilising these suitable technologies for the Southern countries are readily and more cost-effectively available in other developing countries.
In 2001, the share of developing countries in intra-regional trade was around 20 percent. Therefore, regional trade agreements have not contributed significantly to South-South trade. Many countries have realised the need to go beyond regional boundaries to more expansive South-South cooperation.
It has also been argued that regional initiatives are too narrow in scope to result in desired economic development in developing and least developed countries.
Another important feature is that in 2001 trade in manufactured goods comprised nearly 66 percent of the total trade between and among developing countries. Thus, South-South trade is not restricted to commodities, fuels and other raw materials.
The Strategy
South-South cooperation should be seen as a facilitator and a building block for multilateral cooperation and not an alternative to it. The scope for South-South cooperation needs to be enlarged across continents.
South-South cooperation arrangements should not be perceived as another form of preferential trading arrangements. The framework for such cooperation should be drawn on the larger canvas of economic relationship, including but not limited to technical assistance and capacity building, technology transfer, and temporary movement of workers.
For example, in ASEAN, a concept called “shared growth” has been developed over time. An appropriate mechanism is being put in place for sharing of experience, skills, capital and even labour, with a view to stimulate growth in smaller economies. This, in turn, would result in deeper cooperation. Many countries in the region, having experienced better economic growth and development, are relocating their investments and industries to less developed neighbours while concentrating on more advanced sectors.
The Approach
For better South-South cooperation, there are a few questions: should a South-South free trade area be created or an institutional set-up on the lines of the OECD (Organisation for Economic Cooperation and Development)? Should there be holistic economic cooperation or step-by-step approach (trade, followed by larger economic cooperation)?
Taking into account various political economic aspects, a step-by-step approach appears more appropriate, i.e. trade as a means to achieve better South-South cooperation. The following could be the broad steps:
· Step 1: developing and least developed countries should first try to increase trade between themselves by ironing out differences and increasing procedural efficiency;
· Step 2: forming closer trade cooperation in the form of a trade agreement; and
· Step 3: gradually progressing towards a more inclusive economic cooperation.
The Measures
Focussing on Step 1, some measures for promoting South-South trade are as follows:
· Asymmetries are differences that can be harmonised. These relate to standards, customs procedures, certification processes etc. Appropriate measures should be taken for trade promotion as well as facilitation.
· Poor knowledge of Southern products is another area, which needs targeted intervention. Several Southern products are at least as good as similar Northern products but they lack the financial muscle to engage in large-scale marketing and distribution, even in the domestic market. In most cases, they are value for money for poor consumers. But, most consumers are seldom aware of such products. Southern governments, consumer groups and other civil society organisations should take appropriate steps for better consumer education.
· Better infrastructure facilities need to be developed to overcome supply-side constraints on trade. Transport represents the primary obstacle.
· Trade promotion fairs are increasingly becoming an important medium to promote trade. Some countries such as Singapore, UAE, Hong Kong and of late China have been successful in using this medium for trade enhancement. More such fairs should be organised to promote goods originating from countries at similar level of development.
Conclusions
Only time will tell us whether the recent push towards a more inclusive South-South cooperation is a political rhetoric or a step towards a more concrete and visionary engagement in order for poor countries to reap both political and economic benefits. Some recent initiatives show the promise of taking South-South cooperation beyond continental boundaries.
For example, the IBSA (India, Brazil, South Africa) initiative is perceived as the beginning of inter-continental cooperation. It has a larger scope than just trade cooperation and has the potential to attract other Southern countries into the bloc.
The greatest beneficiary of South-South cooperation would be the least developed countries, provided more advanced developing country neighbours show flexibility in recognising and accommodating their needs and aspirations.
But mere reliance on trade agreements is inadequate. One needs to go beyond the treaded path of preferential trading to achieve more meaningful cooperation. Enhanced South-South cooperation is neither an alternate to North-South cooperation nor to multilateralism. They can operate simultaneously and should be seen as a building block for multilateral cooperation.
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