Trade marginalization of LDCs and its reversal: What impact of international support?

Abstract

Behind the possible specificity of LDCs in their trade performance, the main issue addressed in this chapter (as in the other ones) is the impact of SDT on their trade performance. This impact is difficult to assess because the LDCs as a group share not only the possible benefit of the SDT—of the policies implemented by their partners for the group—but also some structural handicaps to trade and growth. Moreover, the relative trade performance of the LDCs as a group may be influenced by their own policies. LDC specificity may then be the result of three kinds of factors: the structural factors they face, the trade policies of their partners and their own trade policies.

The paper is organized as follows. The first section presents stylized facts about LDC trade performance in comparison with other developing countries. It questions the reversal in the long-term marginalisation of LDCs in world trade that occurred since 2000 and finds it to be mainly a result of oil and mineral exports. The section also deals with measures that affect this ambiguous performance by influencing trade costs. 

The second section uses a gravity model to assess trade costs and their lower decline than in other developing countries and then to show the limited extent to which preferential market access has helped boost LDC exports. 

The third section gives some stylized facts on export diversification, seemingly lower than in other developing countries, but not when it is assessed relative to the LDC’s GDP per capita. 

The fourth section explains why trade preferences to LDCs through the SDT measures did not have the expected impact on LDCs exports, while their reform is likely to improve their trade prospects. More specifically, it analyses market access actually granted to LDCs after taking into account potential preference erosion, restrictiveness of the origin requirements associated with market access, and non-tariff measures. 

The fifth section, besides LDC access to the market of developed countries, briefly explores how SDTs can facilitate the integration of the LDCs in the multilateral trade system (through, say, LDC accession to the WTO). It also presents some international trade–related measures not  exclusively adopted for LDCs but of interest for increasing their capacity to export (such as Aid for Trade or aid facilitation agreements). And it recalls the importance of LDC domestic policies for expanding their exports. The sixth section concludes.

Citation

Carrère C. (2019) " Trade marginalization of LDCs and its reversal: What impact of international support?”, Chapter 6 in  Guillaumont P. (ed), Out of the trap: Supporting the least developed countries, Economica-Ferdi, 324 p.