© GIZ/Dirk Ostermeier

Trade is a driver of economic development. GIZ promotes a fairer form of global trade that supports the Sustainable Development Goals.

Trade makes a major contribution to economic development and poverty reduction. Integration into the global economy provides access to new export markets and makes it easier to import inputs and technology. This, in turn, boosts productivity, economic growth and employment.

To bring about these effects, trade regulations must be geared to development and implemented. It is important in this context to have regional and global trade agreements that offer opportunities for development and minimise adverse effects on the local markets and people. Furthermore, trade, agricultural and development policies need to be coordinated in both emerging and industrialised countries.

Another factor is that many developing and emerging countries are unable to utilise the potential of trade for their own development. There are many different reasons for this. Customs clearance processes and the necessary documentation for importing and exporting goods are slow and complicated. This is an aspect that should be improved by the WTO’s Trade Facilitation Agreement. In addition, countries often specialise in exports with little local value addition. Local products and services are not competitive, productive capacities are insufficient and technology is antiquated. Many developing countries have difficulty satisfying market requirements. International standards, in particular, present huge challenges. For example, many countries lack the quality infrastructure needed to comply with international quality standards or to provide evidence of doing so.

Economic diversification – that is, expanding production to include new products and sectors and opening up new markets – enables integration into regional and global value chains and boosts local value addition. This is regarded as an important tool for deriving long-term benefit from globalisation.

Regional economic integration can foster development through increased trade with neighbouring countries. Regional agricultural trade helps to compensate for seasonal fluctuations in production and poor harvests resulting from extreme climatic conditions. It also helps to improve the availability and variety of foodstuffs, keep food prices affordable and limit price fluctuations. To add to this, regional trade can be an important instrument for increasing value addition and economic diversification. Establishing regional value chains in industrial and service sectors makes it possible to exploit economies of scale on regional markets and achieve greater efficiency through specialisation.

New opportunities are also offered by digital trade. This provides brand new mechanisms for integrating producers in developing countries into value chains and global markets. Digitalisation also offers new solutions for facilitating customs procedures and logistics services. However, the world’s poorest countries lack the basic prerequisites needed to utilise this potential.