The Global System of Trade Preferences among Developing Countries (GSTP), an international trade agreement, is on the brink of coming into effect following Brazil’s recent ratification. This development has garnered global attention and could potentially unlock significant economic opportunities in a $16 trillion market, encompassing more than 4 billion people.
As of the conclusion of 2022, Brazil formally committed to the GSTP, leaving the agreement just one ratification away from becoming operational. The GSTP boasts 42 member nations from Africa, Asia, and Latin America, collectively representing a market worth $16 trillion, which constitutes roughly 20% of global merchandise imports. The Group of 77, a coalition of developing nations, established this agreement over three decades ago to foster trade among its member countries.
UNCTAD Deputy Secretary-General Pedro Manuel Moreno addressed the prospects of the GSTP at the UN Trade Forum 2023, emphasizing the current opportunity for the agreement. The GSTP promotes trade among developing countries, commonly referred to as South-South trade, by reducing tariffs on imported goods between member nations. These tariff reductions have the effect of lowering consumer prices and enhancing competitiveness.
UNCTAD estimates that if member nations adhere to the tariff cut commitments outlined in the latest round of negotiations, known as the “São Paulo Round Protocol,” they could collectively enhance their prosperity by approximately $14 billion. The products covered by these tariff concessions span a wide range, from food and fish to clothing and machinery components, contingent on each country’s specific commitments.
Notably, South-South trade has experienced more robust growth than global trade. Over the last two decades, it has evolved from a mere aspiration into one of the primary drivers of growth and development. Developing countries have seen an average annual increase of 9.8% in trade between them since 2000, reaching $5.3 trillion in 2021. During the same period, global trade expanded at a slower pace, with a growth rate of 5.5%.
Furthermore, South-South trade has been significant in high-value products, accounting for nearly 60% of high-tech exports from developing nations in 2021, as noted by Mr. Moreno.
The GSTP’s potential for promoting trade cooperation is particularly evident in the agricultural sector. Member nations’ diverse agricultural productions complement each other rather than compete. For instance, while South American countries primarily export oilseeds, meats, and cereals, India focuses on rice, crustaceans, tea, and spices, while Morocco’s primary exports include fish products, vegetables, sugar, and honey. Increased agricultural trade among member nations is likely to benefit all parties and contribute to bolstering food security.
Additionally, the GSTP could serve as a platform for addressing shared challenges among developing countries, including climate change and pollution. Despite contributing the least historically to global CO2 emissions, developing countries disproportionately bear the consequences of climate change. The GSTP’s highest decision-making body, the Committee of Participants, has the capacity to explore new negotiations related to trade integration in areas such as renewable energy and natural products. Reducing tariffs on renewable energy goods and services could facilitate the energy transition in developing countries and assist them in fulfilling their climate commitments under the Paris Agreement.
Furthermore, the agreement could stimulate a larger market for natural alternatives to plastics, such as seaweed, bamboo, and agricultural waste, which many GSTP members possess in abundance. These materials could be used to create eco-friendly substitutes for straws, food packaging, and other plastic consumer products, representing a promising avenue for exploration within the GSTP framework.
Federico Villegas, Argentina’s ambassador in Geneva and the current president of the committee, expressed his intentions to breathe new life into the agreement by revitalizing its intergovernmental processes, potentially implementing initiatives with a significant impact to help developing countries address global challenges.
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