While international trade can contribute to development, inadequate infrastructure, adverse trade policies and low competitiveness prevent low-income countries from participating in and benefiting from that trade. Sida supports initiatives to simplify trade, develop trade policies and strengthen small businesses.
Progress has been made
Trade important for development
The exponential growth of international trade over the past 30 years has played a central role in global development, creating jobs and raising wages, and thereby reducing poverty. Trade can also contribute to disseminate environmentally friendly technologies and increase demand for sustainable production.
More women engage in trade
Companies engaged in international trade employ more women than those that only sell on the domestic market. Digitalisation and legislative reforms have made it easier for women to start a business and engage in trade.
Sustainability in focus
Sustainability issues have become increasingly important to global trade, both thanks to governments that prioritise sustainability and companies that recognise the profit in improving production due to consumer demand for sustainability.
The benefits of participating in international trade are not evenly distributed, either between or within countries. It is easier for large and multinational corporations to benefit from global trade than for small businesses, which often lack the requisite financial resources, knowledge and contacts to break into new markets.
Negative impact on environment and climate
The global increase in production and consumption has a negative impact on the environment and climate, among other things by increasing greenhouse gas emissions from transportation, creating more waste and placing higher demands on natural resources.
Limited infrastructure slows growth
The lack of reliable energy, infrastructure, transport and communications slows the growth of trade in many countries. The digital divide separating developed and developing nations and the fact that women are less likely to have access to the internet and smartphones also present challenges.
Sida's work with trade
The world’s least developed countries are marginalised in global trade, accounting for only 1% of exported goods, according to the World Trade Organization
In recent years, more and more countries have raised the threshold for international trade in order to protect domestic products and services from competition from abroad, using tools such as import duties, customs duties and import quotas. This makes trading more expensive and more complicated and creates uncertainty on the market, not least for low-income countries.
Trade policy and free trade agreements
Many of the countries with which Sida conducts development cooperation are finding it difficult to develop their trade policies and have little opportunity to participate in or influence negotiations regarding international trade agreements. For many countries, this is a major obstacle to playing a larger role in global trade.
Increasing regional influence over trade in Africa
The countries of southern and eastern Africa are largely excluded from regional and international trade negotiations. They are also being badly affected by climate change. The NGO Consumer Unity and Trust Society International (CUTS) brings together policy-makers and grassroots stakeholders on issues related to climate and trade policy and food security, increasing regional influence over trade and climate negotiations. The South African non-profit organisation Trade Law Center in Africa (Tralac) develops technical expertise in trade governance to increase marginalised stakeholders’ influence on trade policy and the knowledge of small businesses regarding trade law.
Strengthening Liberia's participation in international trade
Countries that are not members of multilateral organisations such as the World Trade Organisation (WTO) or signatories to international trade agreements find it more difficult to attract investors and participate in global trade. Among other initiatives, Sida supports cooperation between the National Board of Trade in Sweden and the Liberian Ministry of Commerce & Industry, aimed at strengthening the country’s participation in international trade. This collaboration resulted in Liberia becoming the 163rd member of the WTO in record time in 2016.
Simplified trade procedures
International trade procedures include recommendations and standards for the flows and administration required for a company to export or import its goods or services, such as customs, taxation, transport and payment procedures. In many parts of the world, regulations and administration can be complicated and fees expensive, making participation in global trade difficult for low-income countries.
Supporting small businesses in low-income countries
Small and medium-sized enterprises (SMEs) account for a large proportion of the business sector in low-income countries but often find it difficult to break into an international market. The International Trade Centre supports SMEs in low-income countries to become more competitive and resilient to climate change, with a specific focus on companies managed by women and young people.
Simplifying trade within and with the Middle East and North Africa
The Middle East and North Africa (MENA) region has the lowest participation in global trade, in part due to political instability, high trade costs and a lack of common rules and standards. The United Nations Industrial Development Organization (UNIDO) has assisted in establishing the Arab Accreditation Cooperation (ARAC), a regional body that among other things inspects, tests and certifies goods and services. This is intended to simplify trade within and with the region, strengthen consumer protection and promote environmental sustainability. UNIDO continues to support the development of ARAC, which will become an important stakeholder in trade in the MENA region.
Scope of Sida's work with trade
Trade is included in Sida’s support within the international agenda Aid for Trade, in which also private sector development is included. the support within the agenda amounts to SEK 4,1 billion in 2019.
The largest part goes to multilateral organisations, for example, the World Bank and International Trade Center (ITC).
Updated: 17 December 2020