Trade Dimensions in the Impact of the Global Financial Crisis in Developing Countries : Are the Policy Responses Overlooking Them?

This chapter argues that while the bulk of the policy response to the crisis has focused on the financial measures, the trade dimensions of the crisis tend to be overlooked, except for measures intended to limit protectionism and restore trade finance. It argues for looking at trade and trade policy as an integral part of a wider development strategy. Coming after decades of reform in developing countries that placed export-led growth as the central paradigm, it examines the role of trade in developing economies during the boom and recession phases and makes two observations. The first is that focus on an improved export performance, without an equal emphasis on the mechanisms by which such exports would yield increased and stable financial gains to the source countries, cannot take the developing countries very far. The second is that the success of a trade-led development model hinges not so much on market access or on trade policy reforms per se, but on redrawing the role of trade in developing country economies and its linkages to a number of external and internal financial structures in those economies. For instance, he points out that sub-Saharan Africa delivered its peak export performance of the last three decades between 2003 and 2008, a period that registered no movement in the WTO Doha Round. This would seem to suggest that lack of market access is not really the central issue it appears to be in official responses, except maybe at the margins. His main suggestion is that trade can be and ought to be seen as a development finance tool; a tool that helps countries weather, rather than place them at the mercy of, financial cycles. He makes the plea that, therefore, the crisis could be seen as an opportunity to address longstanding issues that have prevented developing countries from a more beneficial trade engagement in the global economy, not only during crises but during more benign times, when it is business as usual