WT/COMTD/SE/W/35  
 
2 May 2017 
(17-2390) Page: 1/5 
Committee on  Trade and Development  
Dedicated Session  Original: English  
 
OUTCOMES FROM DISCUSSI ONS ON THE " CHALLENGES AND OPPOR TUNITIES 
EXPERIENCED BY SMALL  ECONOMIES WHEN LINKI NG INTO GLOBAL VALUE  CHAINS  IN 
TRADE IN GOODS AND S ERVICES"  
The following communication, dated 25 April  2017, is being circulated at the request of the 
delegation of Guatemala on behalf of the Group of the Small , Vulnerable Economies (SVEs).  
 
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1  INTRODUCTION  
At the Ninth Ministerial Conference in Bali, Ministers reaffirmed their commitment to the Work 
Programme on Small Economies and instr ucted the WTO Secretariat to provide relevant 
information and factual analysis for discussion among Members in the CTD’s Dedicated Session on 
“The challenges and opportunities experienced by small economies when linking into global value 
chains in trade in  goods and services”.  
At the Tenth Ministerial Conference in Nairobi, Kenya, Ministers instructed the WTO Secretariat to 
continue its work on this subject.  
In accordance with this mandate, the Secretariat prepared the Background Note contained in 
documen t WT/COMTD/SE/W/31. The Committee of Trade and Development agreed to discuss the 
background document in different sessions that would deal with the different sectors d iscussed in 
the paper, mainly: a grifood, seafood, textiles and apparel in the goods value  chains; and Tourism, 
IT, business process outsourcing and trade logistics in the services value chains.  
Five meetings were organized throughout years 2015 and 2016, to discuss these topics. 
International organizations, such as UNCTAD and ITC, participate d in the discussions. SVE 
representatives also made several presentations on the topics and substantial discussions and 
exchange of experiences took place during the meetings.  
As a result of these fruitful discussions, the SVEs where able to identify spec ific challenges they 
face when linking into Global Value Chains in Trade in Goods and Services, and where able to 
gather some recommendations on how to mitigate such challenges. The following is a document 
that presents a summary of the outcomes of the dis cussions. With this basis, the group will 
continue its work and present proposals or support existing initiatives in the different committees 
in WTO, in order to facilitate the implementation of some of the recommendati ons contained in the 
document.  
2  OUTCO MES OF DISCUSSIONS  
In this section, the SVEs group presents the results of the discussions during the CTD Dedicated 
Session on Small Economies, emphasizing the challenges that SVEs face when linking into global 
value chains, and making some recommendation s that the group sees as necessary to overcome 
such challenges.  WT/COMTD/SE/W/35  
 
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  2.1  Agrifood and Seafood value chains  
Challenges  
 
 The implementation of measures for the control, inspection and approval procedures may 
disrupt trade more than necessary.  
 Small Economies or s mall islands with unique bio -diversity systems are now being affected 
by invasive alien species and the spread of pests.  
 One of the main challenges of joining a value chain is to meet the req uired sustainability 
standards. This is particularly when there has been a proliferation of these standards with 
their increasing number resulting  in a degree of confusion amongst exporters.  
 There are many challenges in identifying the gaps towards integration and moving up the 
value chains.  
 The main obstacles for SV E exporters were the increasing number of public and private 
standards.  
 The lack of institutional capacity and technical know -how in small economies to integrate in 
GVCs.  
 The difficulty in accessing funds for investment and technology in GVCs. The underde veloped 
and inappropriate technology for product development and packaging.  
 External fluctuations in supply and demand.  
 Poor Research and Development capacity . 
 Disorganized production chains -i.e. increase in fragmentation of production . 
 Lack of Transparenc y on NTMs.  
 Access to transportation . 
 Low economies of scale . 
 Lack of competitiveness . 
 
Recommendations  
 
 In developing SPS measures, governments should e nsure that SPS measures are 
non-discriminatory and based on scientific risk assessment to ensure that th e measure is 
not more trade restrictive than necessary, and they should be transparent.  
 In implementing the Trade Facilitation Agreement, Members should facilitate the control, 
inspection and approval procedures, so that they may be undertaken without del ay. The  
information should be limited to what is necessary and the fees should reflect the actual 
costs of the services provided.  
 There are measures to cut costs in the agricultural area, such as streamlining and 
simplifying regulations, by implementing a  risk-based approach with inspections at the 
borders.  
 The coordination has to be improved between SPS agencies and customs officials.  
 Strengthen capacity building program mes for S VEs, with an in creased focus on the use of 
non-tariff measures.  
 Long-term i nvestment is needed to control plant pests and animal diseases such as avian 
influenza, foot and mouth disease and fruit fly pests.  
 There should be a focus on increasing the institutional capacity of countries by international 
and regional organizations, bilateral donors and development banks. Partnership with 
relevant institutions such as the ITC and UNIDO to improve standards and conformity is 
also important.  
 Harmonization of NTMs at a regional level is advisable in order to facilitate trade among 
actors .  
 Consideration of harmonization of standards in relation to product s of export interest.  
 More focus shall be given to work on international trade and invasive alien species, which is 
a critical area of work, especially for small economies an d small islan ds with unique 
bio-diversity systems.  
 Funding assistance for hard infrastructure that improves transportation and logistics in small 
economies . WT/COMTD/SE/W/35  
 
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   Better coordination between suppliers at  the national level in SVEs (farm to market).  
2.2  Textiles and Apparel valu e chains  
Challenges  
 
 Most of the foreign investment to S VEs was attracted by labo ur-intensive activities and low 
wages . When these wages increased over a period of time because sectors sought to add 
more value, foreign investors would relocate.  
 The indus try is capital intensive and this makes it difficult for vertical integration, since the 
production is concentrated in a few countries, given that not all countries are capable of 
making significant investment s.  
 Working conditions are often o verlooked  by companies  trying to be competitive by reducing 
costs.  
 Challenges of preference erosion and relocation of investors to cheaper markets.  
Recommendations  
 
 In spite of  relocation due to increases in costs related to labo ur, the best way to stay 
competitive is by enhancing productivity, updating equipment, improving the business 
environment and upgrading product quality.  
 In reference to the challenges related to vertical integration, it is recommended to shift to 
other high value -added sectors, rather than t rying to integrate in the upward value chain.  
 From a development perspective, some recommended that S VEs should diversify away from 
the assembly stage, by moving up in the "smiley curve " to the left towards purchasing and 
research and design, or to the ri ght, towards distribution and marketing. Case stories 
showed that some SVEs  were successful in trying to diversify to the finishing stages of 
clothing production such as washing and painting and aspects of logistics operations. Some 
SVEs have been able to enter into niche markets by diversifying their production in design, 
such as traditional customs and carnival clothes.  
 In terms of regional integration, small companies should partner with other companies at a 
national or regional level.  
 Attention should  be paid to the development of partnerships along the value chain, either by 
partnering with major buyers in the target markets or with multinationals established in 
the domestic market.  
2.3  Tourism Value Chains  
Challenges  
 
The following challenges were ident ified in the Secreta riat’s report and by presenters:  
 
 Low labour skills and limited training opportunities . 
 Complicated or difficult regulatory business environment . 
 Problems with access to finance.  
 Poor or inadequate airport or port capacity and infrastru cture. 
 The inability to meet international hospitality standards . 
 The lack of dialogue with authorities . 
 Lack of skills in the private sector . 
 Accessibility.  
 
The following additional challenges w ere identified by Member States:  
 
 Small population base and small local markets.  
 Lack of competitivenes s 
 High transportatio n costs and limited connectivity.  
 Low levels of critical mass and limited economies of scale . 
 Economic and currency fluctuations . 
 Rising input prices . 
 Distortion effects of government taxation and other regulations . WT/COMTD/SE/W/35  
 
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   Limited domestic capital for investment . 
 High costs of infrastructure and services . 
 Complex land tenure systems . 
 Other socio -economic considerations such as economic volatility and epidemics and even 
terrorism . 
 Frequent natural disas ters and specific challenges posed by climate change . 
 Lack of ecommerce policy, infrastructure and skill . 
 "A disconnect" between trade and tourism. Poor institutional links between the ministries of 
trade and ministries of tourism.  
 
Recommendations  
 
 FDI to help upgrade the size and quality of infrastructure . 
 Conservation of the natural resources . 
 An engaged and active private sector through tourism associations or working groups . 
 Harnessing IT technology, ecommerce and social media to allow internet -based marketing 
and online reservation systems . 
 Putting in place necessary ecommerce infrastructure and appropriate regulatory frameworks.  
 Deepening or expanding tourism products as well as diversifying to new markets . 
 Strengthening the specific institutions dea ling with the tourism sector . 
 Invest in staff training . 
 A transparent and predictable FDI regime to attract investors to develop tourism 
infrastructure.  
 Upgrading of tour operator’s services from being local guides and excursion operators to 
becoming loca l or national organizers for incoming agent s.  
 Deepening or expanding tourism products as well  as diversifying to new markets . 
 Strengthening the specific institutions dealing with the tourism sector . 
 
Possible Multilateral Solutions  
 
 A transparent and predi ctable FDI regime to attract investors to  develop tourism 
infrastructure . 
 More statistics and better data including undertak ing tourism satellite accounts to measure 
export diversification, employment creation, rural development and the participation of 
micro- and medium sized enter prises . 
 Strong and coordinated action towards developing tourism export strategies and sustainable 
tourism programmes . 
 Proper coordination of tourism policy and aid for trade across different ministries and 
implementing agencies . 
 Establishing secure access to markets.  
 
2.4  Trade Logistics and Business P rocessing Outsourcing Services  
Challenges  
 
Regarding logistics services , some challenges were identified such as:  
  The volume of goods in transit due to connectivity issues:   
o This is a difficult area for many small economies which lack the necessary 
economies of scale.  
o Other factors involved: geography, port ef ficiency and trade facilitation.  
 Freight costs due to:  
o Distances . 
o Low shipping volumes.  
 The size of the containers : 
o Container s hips becoming larger this implies more investments to acquire 
additional equipment and port infrastructure in order to service such ships.  
 Difficulties to link into Global Value Chains : 
o The presence of transnational corporations which account  for 80% of g lobal trade.  
o Challenges to compete against them due to their sophisticated and high 
technology.  
o Difficulties in meeting standards or rules concerning quantity, quality, speed of 
delivery and intellectual property protection.  WT/COMTD/SE/W/35  
 
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  o Lack of basic infrastructure an d limited connection between the production chain 
which causes inefficiencies, high costs and loss in competitiveness.  
 Vulnerability to external factors : 
o Loss of market access due to external factors such as trade measures, preference 
erosion or non-divers ified markets.  
 Absence or scattered legal framework over various institutions . 
 Lack of external investors and little investment from the private sector . 
 Shortage of human resources at a  technical level . 
 Lack of Information Communication Techno logies (ICT ) services to support the business 
sector.  
 Lack of financial institutions and access to capital flows.  
 Inefficient customs systems.  
Recommendations  
 
 SVEs should concentrate their efforts to be better integrated into global value chains.  
 Provide incentives a nd legal security for investors to attract FDI . 
 Business promotion - develop business process outsourcing industry (call centers and back -
office processing of transactions).  
 Develop highly skilled human resources . 
 Use technological advances and transparent  business processes to promote and increase 
global distribution.  
 Upgrade educational and skills level s. 
 Offer diverse financial instruments.  
 Privatizing port operations could help lower transportation costs and enhan ce connectivity . 
 Diversify  industries with strategies  that could involve the creation of special economic zones.  
 Modernization of custom in order to speed up export transactions.  
 Private, public co-operation.  
 Increase large -scale production through partnership s and proper logistics .   
 Elaborati ng plans to improve potential of export products.  
 Increase regular market data to optimize product marketing.  
 Establishment of policies encouraging  decentralization to avoid the concentration of 
development of the sector only in the cities.  
 Promote innova tion.  
 
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