A report by the UN Conference on Trade and Development highlights “North-South divergence” in combating the COVID-19 pandemic.
The report argues that “international responses have been inadequate for recovery of the South,” and identifies three key areas for action: 1) scaling up South-South finance; 2) building South-South cooperation for trade and industrial recovery; and 3) strengthening regional integration and value chains.
A Trade and Development Report Update by the UN Conference on Trade and Development (UNCTAD) discusses how developing countries can build solidarity to weather the interconnected economic and public health crises.
The report titled, ‘South-South Cooperation at the Time of COVID-19,’ highlights “North-South divergence” in combating the pandemic. UNCTAD points to developing countries as being more vulnerable, given significant differences in underlying economic conditions such as higher levels of informality, the lack of diversity in the formal economy, and the heavy reliance on external markets and sources of finance. As such, the report highlights that developing country economies are expected to take more time to recover than those of developed country peers.
The report argues that “international responses have been inadequate for recovery of the South,” and makes the case for bolder action. Emphasizing that South-South cooperation and solidarity are essential for developing countries’ recovery, UNCTAD identifies three key areas for action: 1) scaling up South-South finance; 2) building South-South cooperation for trade and industrial recovery; and 3) strengthening regional integration and value chains.
Developing countries will need at least USD 2.5 trillion over the next two years to meet their external financing needs.
Examples of scaling up South-South finance include “southern liquidity funds” that can help address emergency balance of payment needs and enable countries to engage in intra-regional trade, as seen in Latin America in the 1980s. Similarly, the report highlights the role of export-import banks in providing trade finance for scaling up import of medical products and other essential needs. UNCTAD points to the African Export-Import Bank’s creation of a USD 3 billion credit facility to help African countries to meet trade and other foreign currency payments as an example. Overall, UNCTAD has estimated that developing countries will need at least USD 2.5 trillion over the next two years to meet their external financing needs.
On trade and industrial recovery, the report suggests a temporary WTO “peace clause” to use industrial subsidies for reviving developing countries’ industrial growth. It further notes “the need for the South to show solidarity in preserving the special and differential status for all developing countries in the WTO as a means to ‘harnessing the developmental benefit of international trade’.”
To achieve strengthened regional integration, the report underscores the importance of self-reliance in terms of food, health, and related products. More broadly, it calls for the forging of regional trade pacts, which can be used to avoid trade bans on certain product categories in times of global and regional shortages. Pointing to COVID-19 as revealing the importance of health cooperation and scientific research for human welfare, the report notes that medical discoveries should be shared widely, referencing Article 64.2 of the Trade-related Aspects of Intellectual Property Rights (TRIPS) Agreement.
UNCTAD notes that in recent years, South-South cooperation has “gone beyond the traditional aid agenda” to include a variety of cooperation modes in finance, investment, trade, and infrastructure construction, as well as mutual learning and capacity-building initiatives. Accordingly, the report closes by recognizing the potential for “countries of the South … to build a strategic partnership” that translates to common positions in international affairs that yield more inclusive global governance. Moving forward, this could include solidarity that carves out policy space in multilateral trade agreements, among other areas. [Publication: South-South Cooperation at the Time of COVID-19: Building Solidarity Among Developing Countries] [UNCTAD News Release]