RESTRICTED
WORLD TRADE WT/COMTD/W/31
17September 1997
ORGANIZATION(97-3701)
Committee onTrade andDevelopment
PARTICIPATION OFDEVELOPING COUNTRIES INWORLD TRADE:
RECENT DEVELOPMENTS, AND TRADE OFTHE LEAST-DEVELOPED COUNTRIES
Note bytheSecretariat
1. ThisNoteupdates thestudy thatwasprepared in1996 bytheSecretariat, fortheCommittee
onTrade andDevelopment, ofmajor trends andunderlying factors intheparticipation ofdeveloping
countries inworld trade overthepasttwenty years (WT/COMTD/W/15). Following ashort review
ofthetrade performance ofdeveloping countries inthe1990s asagroup andbymajor region, based
onprovisional information thatwillbeconfirmed intheWTO Annual Report laterthisyear, theNote
provides information onthetrade oftheleast-developed countries. TheNote focuses mainly on
merchandise trade flows.
DEVELOPING COUNTRIES
Share inworld trade
2. In1996 thevalue ofdeveloping countries 'merchandise exports grew by7.5percent,faster
thanworld merchandise exports (4percent)forthefifthconsecutive year. Developing countries 'share
ofworld merchandise exports increased to24percent(Table 1).Theshare ofdeveloping countries
inworld merchandise trade hasrisen fairly steadily since thelate1980s when thedecline inworld
petroleum prices bottomed out,andin1996 itroseforthefirsttimebackabove itslevel in1985.
What isstriking, however, isthechange inthecomposition ofdeveloping countries 'trade which has
taken place inthepasttenyears (Table 2).
Table 1
Share ofDeveloping Countries inWorld Merchandise Exports, 1991-96
(Percentage based onvalue figure)
1991 1992 1993 1994 1995 1996
Agricultural products 25 24 25 26 26 28
Mining products 51 52 50 49 48 50
Fuels 59 59 59 58 57 ...
Manufactures 16 16 18 19 19 20
Total merchandise 21 21 23 23 23 24
Note: (1)Excludihg China.
(2)1996 figures areprovisional.WT/COMTD/W/31
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Table 2
Developing Countries: Composition ofExports 1985, 1996
(percentage based onvalue figure)
1985 1996
Share ofdeveloping countries inworld merchandise
exports23 24
ofwhich:
Manufactures 8 15
Agricultural products 4 6
Mining products 11 3
3. Toaconsiderable extent thistrend hasreflected thesuccess ofdeveloping countries in
increasing theirshare ofworld exports ofmanufactured products; ithasrisen from 16percentto
20percentinthe1990s, andstands today atdouble itslevelin1980. Manufactured products have
beenthefastest growing sector ofworld merchandise tradeoverthepasttwenty years, andinthe1990s
growth hasaveraged 8percentperannum. Even though growth inthevolume ofworld exports of
manufactures in1996wasslightly below theaverage forthe1990s, itnevertheless faroutstripped growth
inother sectors ofworld trade. Theincreasing share ofthistradeaccounted forbydeveloping countries
mustbeseenasaverypositive development. Indeveloping countries 'owneconomies, theresult has
been thesteady decline intheshare oftheir exports composed ofprimary products (mining and
agriculture), from around 80percentin1980 tolessthan40percenttoday, andthecorresponding
increase intheshare ofmanufactures from about 20percentofthetotalin1980 to50percentin
1990 andtoover60percentin1995/96.
4. Theshare ofdeveloping countries inworld agricultural trade hasalsogrown inthe1990s,
afterfalling sharply inthesecond halfofthe1980s. In1996itincreased to28percent,butinayear
which sawaslow-down inthegrowth inthevolume ofagricultural exports overall, from 6percent
in1995 to2percentin1996. There wasamoderate increase inaggregate world prices forexports
ofagricultural products, butthechanges inprices ofspecific commodities varied considerably: for
example, export prices ofcereals increased strongly forthesecond yearrunning (17percentin1995
and20percentin1996), while coffee prices fellby24percentin1996.
5. Developing countries 'share ofworld exports ofmining products (including fuels) hasremained
relatively constant ataround 50percent(60percentofworld fuelexports) throughout the1990s.
Growth inthevolume ofworld trade inmining products alsoslowed down in1996, from8.5percent
in1995to2.5percentin1996. Significant export price changes wererecorded forcrude petroleum,
which rosesharply byalmost 20percent, andforother minerals andnon-ferrous metals which fell
by11percentafterregistering anincrease ofalmost 20percentin1995.
Regional developments
6. Onaregional, basisdeveloping countries inAsiaandChina havedelivered thestrongest export
performance inthe1990s, continuing thetrendofthe1980s (Chart 1).Their share ofworld merchandise
exports hasincreased since 1990fromabout 12to16percent,andChina 'sshare alone hasrisenfrom
2to4percent. However, merchandise export growth intheregion slowed substantially in1996, notably
fortwooftheregion 'smajor export product groups, office andtelecommunications equipment andWT/COMTD/W/31
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textiles andclothing. Theshare ofmanufactured products intheexports ofmostcountries inthisregion
hascontinued toincrease inthe1990s, andmanufactures nowaccount forover80percentoftheir
totalmerchandise exports (Table 3).Thegrowth ofdeveloping Asia'sexports ofcommercial services
slowed down significantly in1996, butstillgrew atdouble theworld average rate.WT/COMTD/W/31
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7. Theshare ofcountries inLatin America inworld merchandise exports hasalsoincreased in
the1990s, reversing thetrend inthesecond halfofthe1980s andrising toalmost 5percentofthe
world total. In1996, Latin America again recorded export growth higher thantheworld average.
Latin America hasincreased itsshare inworld exports ofbothmanufactured products andagricultural
products (which account, respectively, forone-half andone-quarter ofLatin America 'smerchandise
exports). Particularly notable developments in1996 werethecontinued sharp growth ofexports of
automotive products andclothing products byLatin American countries, theincrease inmerchandise
tradeactivity within theregion aswellaswithNorth America, andcontinued strong growth inexports
ofcommercial services byLatin American countries.
Table 3
Global Trade andtheProduct structure ofSelected Developing Areas, 1990-95
World Exports:
annual growth
rate1990-96Product structure ofexports
in1995
Developing
Asia*China Latin
AmericaAfrica Middle
East
Manufactures 7.8 80.9 83.9 49.8 27.6 22.7
ofwhich:
-Office andtelecom 13.1 29.0 9.8 5.6 - -
Equipment
-Clothing 7.1 7.1 16.2 3.6 - -
-Other consumer goods 6.7 9.7 20.3 4.8 - -
Agricultural products 5.9 10.3 10.1 26.0 19.8 4.2
Mining products 2.9 7.3 5.7 23.2 44.4 72.3
Fuels 2.6 5.3 3.6 14.4 37.0 69.7
n.e.s 13.6 1.5 0.4 1.0 8.2 0.9
Total merchandise 7.1 100.0 100.0 100.0 100.0 100.0
*Excluding China.
8. Theshare ofworld exports accounted forbydeveloping countries inAfrica andintheMiddle
Easthasdeclined overthepastdecade. Inbothcases, theirexports areconcentrated inmining products,
which hasbeentheslowest growing sector ofworld trade inthe1990s delivering lessthanhalfthe
rateofgrowth ofworld merchandise tradeoverall. However, thisdoesnotprovide afullysatisfactory
explanation oftheirdeclining share ofworld exports, particularly forcountries inAfrica; there, more
thanhalfofmerchandise exports areaccounted forbymanufactured andagricultural products, yet
theregion 'scollective share ofworld merchandise exports hasfallen from about 4percentto2per
centsince 1985. Nevertheless, andinsharp contrast tothislonger-term trend, 1995 and1996 were
farmore successful years forAfrica thanhasbeenthecaseforalongtime. Thevalue ofAfrica 's
exports roseby13percentin1995and11percentin1996, faster in1996thanexports ofallregions
other thantheMiddle East. Even though theincrease in1996reflects inlargeparttheeffects ofrising
world petroleum prices, the4percentgrowth inthevalue ofexports byAfrican countries other than
theregion 'smajor oilexporters wasequal tothevalue ofworld trade growth andsubstantially better
thanAfrica 'saverage annual export growth overall inthe1990s (2.2percent).WT/COMTD/W/31
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TRADE OFTHE LEAST-DEVELOPED COUNTRIES
9. Forty eightcountries aredesignated bytheUnited Nations as"least-developed". Twenty-nine
areWTO Members: Angola, Bangladesh, Benin, Burkina Faso, Burundi, Central African Republic,
Chad, Djibouti, Gambia, Guinea, Guinea Bissau, Haiti, Lesotho, Madagascar, Malawi, Maldives, Mali,
Mauritania, Mozambique, Myanmar, Niger, Rwanda, Sierra Leone, Solomon Islands, Tanzania, Togo,
Uganda, Zaire andZambia. Afurther fourhaveobserver status intheWTO: Cambodia, Nepal, Sudan
andVanuatu. Theremaining least-developed countries are:Afghanistan, Bhutan, CapVerde, Comoros,
Equatorial Guinea, Eritrea, Ethiopia, Kiribati, Laos, Liberia, Samoa, SaoTome andPrincipe, Somalia,
Tuvalu andYemen.
Share inworld trade
10. Trade accounts foronlyasmall share ofGDPinleast-developed countries; onaverage, exports
account forabout 9percentoftheirGDP compared with24percentfordeveloping countries asa
group.
11. Theleast-developed countries account collectively forlessthanfour-tenths ofonepercentof
world merchandise exports ($22billion in1995). Their share ofworld exports today islessthanhalf
whatitwasin1980. Their exports inaggregate havegrown atonlyabout one-quarter oftherateof
developing countries 'exports since 1980, andinthe1990s thevalue oftheirexports hasincreased
bylessthan2percentayearcompared toaverage annual growth ofalmost 8percentfortotalworld
merchandise exports.
12. Theproduct structure oftheleast-developed countries 'exports isfamiliar andhaschanged
verylittleoverthepasttwenty-five years. Itisconcentrated heavily onprimary commodities, mainly
minerals andtropical agricultural products which make upover70percentoftheleast-developed
countries 'totalexports (compared toabout 40percentfordeveloping countries overall). Most are
exported asrawmaterials withverylittleprocessing. Unprocessed rawmaterials accounted forabout
75percentofleast-developed countries 'exports in1995. Mostleast-developed countries aredependent
uponaverysmall range ofexport products, usually justtwoorthree; onaverage, thetopthreeexport
commodities account forover70percentofeachleast-developed country 'stotalexports. The
dependence ofleast-developed countries onanarrow range oflargely unprocessed primary commodity
exports limits considerably thescope forthem toparticipate more extensively inworld trade and,as
hasbeendescribed repeatedly inthepast,points totheneedforthediversification oftheireconomies
andoftheirexports.
13. Manufactured products constitute about 20percentoftheleast-developed countries 'exports
inaggregate, buttheyaresignificant foronlyafewofthem, most notably Bangladesh, where they
areconcentrated heavily ontextiles andclothing products.
14. Ontheimport side,theparticipation oftheleast-developed countries intradehasbeenequally
marginal. Their totalimport billin1995wasequivalent to0.7percentofworld merchandise imports.
Food products (cereals, edible oilsanddairy products) constitute asignificant share oftheimports
ofmany least-developed countries, more than20percentforatleasthalfofthem.WT/COMTD/W/31
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Recent economic developments
15. UNCTAD 'slatest annual Report ontheLeast Developed Countries1brings outthat"Important,
andonbalance encouraging developments havetaken place among theleastdeveloped countries in
themid-1990s", withimproved economic performance inabout halfofthem. ThisUNCTAD attributes
tothedetermined efforts ofthose countries toimplement economic policy reforms. Modest, positive
realpercapita growth rateshavebeenrecorded forthegroup ofleast-developed countries asawhole
inthe1990s (averaging 0.9percentperannum) aftertheeconomic stagnation theyexperienced in
the1980s, andtheUNCTAD Report points totheeconomic revival being mostnotable incountries
inAfrica. Economic performance in1995and1996wasparticularly favourable, withrealGDPgrowth
averaging around 5percentforthegroup ofleast-developed countries asawhole, upfromanaverage
of3percentinthefirsthalfofthe1990s andonly2percentinthe1980s. However, astheUNCTAD
Report makes clear, performance among theleast-developed countries hasbeenverymixed; many
ofthemcontinue toexperience economic stagnation ordecline foravariety ofreasons. Furthermore,
recovery inthose least-developed countries whose economic performance hasrecently improved is
likely toremain fragile andheavily dependent uponsustained policy reform, aswellasbeing vulnerable
toexogenous shocks.
Background totheHigh-Level Meeting onIntegrated Initiatives forLeast-Developed Countries 'Trade
Development
16. Deep concern hasbeenexpressed forsome timeinavariety ofintergovernmental foraabout
thechronically pooreconomic performance oftheleast-developed countries, andthesocial andinsome
cases political problems thathaveensued forthem. AttheWTO Ministerial Conference inSingapore
inDecember 1996, andduring thepreparations fortheConference intheCommittee onTrade and
Development, concern wasexpressed about thevulnerability oftheleast-developed countries tothe
effects oftheprocess of"globalization" andabout theircapacity toadapt theireconomies totake
advantageoftheopportunitiesitprovides.WTOMinisterscommittedthemselvestoaddresstheproblem
ofmarginalization forleast-developed countries, andagreed toassist theleast-developed countries to
improve theiroverall capacity torespond totheopportunities offered bythetrading system. Itis
recognized thatassisting theleast-developed countries tointegrate more effectively intoaglobalising
world economy cannot beviewed onlyasatrade policy challenge. Building theircapacity totrade
isamoregeneral development policy challenge, thatwillrequire thecommitment oftheleast-developed
countries themselves tosustained economic policy reform, theinvolvement oftheprivate sector in
theleast-developed countries andofforeign investors, andthesupport ofother governments bilaterally
aswellasthrough theactivities ofinter-governmental organisations.
17. InlinewiththeMinisters 'agreement inSingapore, theHigh-Level Meeting onIntegrated
Initiatives forLeast-Developed Countries 'Trade Development which willtakeplace on27-28 October
1997willfocus inparticular onpossible improvements thatcanbemade byWTO Members inmarket
access fortheleast-developed countries 'exports, ormore generally forproducts ofparticular export
interest toleast-developed countries, andonassisting least-developed countries toimprove theirtrade
performance through integrated programmes oftrade-related technical assistance, including forhuman
andinstitutional capacity-building, coordinated among acoregroup ofintergovernmental organisations
(IMF, ITC, UNCTAD, UNDP, World Bank, andWTO).
1UNCTAD: TheLeast Developed Countries, 1997 Report. TheReport isembargoed until24September,
andiscited herewiththekindpermission oftheUNCTAD Secretariat.WT/COMTD/W/31
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Market access
18. About 65percentoftheleast-developed countries 'exports aresoldinOECD country markets,
ofwhich 55percentareaccounted forbytheEuropean Union, 30percentbytheUnited States, and
10percentbyJapan. Seventy percentoftheproducts imported intoOECD markets from least-
developed countries2enter freeofduties andother border restrictions either under bound MFN tariffs
(about 30percent) orunder GSPorspecial least-developed countries 'preference schemes. Several
OECD countries offeradditional preferences tosome oftheleast-developed countries under regional
arrangements orotherschemes (e.g.theLomé Convention), which provide virtually unrestricted market
access forthese least-developed countries intocertain OECD country markets. Products exported by
least-developed countries which continue tofaceborder restrictions (high tariffs and/or quantitative
restrictions) inOECD countries fallmainly intothecategories ofagricultural products, textiles and
clothing, footwear, andfishandfishproducts. Forsome least-developed countries, these products
represent animportant share oftheirexports.
19. Anissuewhichhasattractedconcernfromthepointofviewofleast-developedcountries'exports
istheerosion ofmargins ofpreference thathaveoccurred asaresult ofthegeneral lowering oftariff
barriers inOECD markets. UNCTAD calculated that,onatrade-weighted basis, theUruguay Round
resulted inanestimated overall lossofpreference margins forallleast-developed countries 'products
covered bypreferences ofabout 8percentage points forCanada, 3percentage points fortheEuropean
Union andJapan, and2percentage points fortheUnited States3.While theimpact ofpreference erosion
hasnodoubt beenfeltbytheleast-developed countries, particularly forcertain products, several factors
havebeenadvanced tosuggest thatitseffect ontheirtradeisunlikely tobeofgreatsignificance overall4.
Themainoneisthathistorically therateofutilization ofpreferences hasbeenlimited bysupply capacity
constraints intheleast-developed countries andbytheconditions attached tothegranting ofthe
preferences (notably origin rules andinsome cases procedural complexities) which least-developed
countries havefound difficult tomeet. Inaddition, preferential arrangements havenotbeenoffered
bysome OECD countries onproducts which areofmajor export interest toleast-developed countries.
20. Themajor developing country markets forleast-developed countries 'exports (annual imports
fromleast-developed countries of$150million ormore) areBrazil, Chinese Taipei, China, Hong Kong,
India, Indonesia, Korea, Malaysia, Singapore, South Africa, andThailand. Seven ofthese countries
provide preferences which benefit exports fromleast-developed countries under theGSTP, butthese
apply toaverylimited number ofproducts. Some alsoprovide preferential market access under regional
tradearrangements which benefit certain products fromcertain least-developed countries. Byandlarge,
however, least-developed countries facethesame market access conditions inthese countries asdo
allother exporters. Itshould benoted, inthatregard, thatmarket access conditions varyconsiderably
among thedeveloping countries listed above, fromessentially unrestricted access inHong Kong and
Singapore tosignificant restrictions insome other countries.
Supply constraints
21. Improved market access willprovide additional opportunities toleast-developed countries to
increase theirparticipation inworld trade, butitisessential thattheirsupply capacity constraints are
2Products identified atthe6-digit tariff linewhich arevalued at$100,000 ormore peryear; these account
forover95percentofOECD countries 'imports from least-developed countries.
3UNCTAD, TheLeast-Developed Countries 1996 Report
4IbidWT/COMTD/W/31
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addressed iftheyaretobeabletotakefulladvantage ofthese opportunities andimprove theirtrade
performance. From thepoint ofviewoftheleast-developed countries, animportant contribution that
canbemade isacommitment tosustained, market-led economic reform programmes; without this,
there canbelittleexpectation thatefforts toimprove thesupply capacity ofthese countries willyield
enduring results. Recent experience ofseveral least-developed countries inAfrica suggests that
commitment tosustained macroeconomic andtradepolicy reform canlaythebasisforverysubstantial
improvements ineconomic andtrade performance. Equally, however, thesupply constraints have
tobetackled.
22. UNCTADhasdescribedindetailthevarietyofsupply-sideconstraintsandstructuralweaknesses
which characterize least-developed countries 'economies andwhich actasabarrier totheir trade
expansion anddiversification. They include: weak technological capacity, lackofentrepreneurial,
managerial,marketingandtechnicalskills,includingthoseforqualitycontrol,lackofaccesstolong-term
finance,expensivetradecreditandpre-shipmentfinance,deficienciesinphysicalinfrastructure,expensive
international transportation costs, especially inadequate andinefficient transportation systems, storage
facilities andtelecommunications, andlackofatransparent legalandregulatory framework, including
company andbankruptcy lawsandinvestment codes.
23. AnimportantcomponentoftheforthcomingHigh-LevelMeetingwillbeimprovingthetechnical
assistanceprovidedtoleast-developedcountriesbyintergovernmentalorganisationstohelpthemdevelop
theirhuman andinstitutional capacity andmake fuller useoftheirresources. Inaddition, theopportunity
willbeprovidedtodeveloprecommendationstointergovernmentalorganisationsandtheleast-developed
countries 'other development partners, aswellastotheleast-developed countries 'governments, on
howtheleast-developed countries canbeassisted tobuild theircapacity totrade andtoencourage
investment, domestically andfromabroad, intradeable goods andservices sectors oftheireconomies.