Economic research and trade policy analysis
Executive summary
Cambodia the Lao People’s Democratic Republic (PDR) and Viet Nam – referred to here as the Mekong-3 – have established themselves as one of the most dynamic and trade-led regions of the world. In 2022 the value of trade flows surpassed GDP in all three economies. The trade-to-GDP ratio was particularly high in Cambodia and Viet Nam at over 210 and 185 per cent respectively – several times higher than the global average of 62 per cent. The value of total trade flows has tripled in Cambodia and Viet Nam and more than doubled in the Lao PDR in the past decade.
Conclusions
The Mekong-3 – Cambodia the Lao People’s Democratic Republic (PDR) and Viet Nam – are deepening their trade integration increasing the volume and value of their exports and strengthening their participation in global value chains (GVCs). This expansion of opportunities for new traders in new markets generates expectations of growing demand for trade finance in the coming years.
Acknowledgements
This publication is the result of a joint effort of the IFC and the WTO and was prepared under the guidance of Susan Lund Vice President of Economics at the IFC and Ralph Ossa Chief Economist of the WTO. Nathalie Louat and Denis Medvedev of the IFC and Marc Auboin of the WTO provided leadership for the research. Marcio Cruz Maty Konte Francesca de Nicola Alexandros Ragoussis and Trang Thu Tran of the IFC and Eddy Bekkers and Alexei Timofti of the WTO managed the project teams across the two organizations. Working team members included: Karlygash Dairabayeva Milagros Deza and Gianluca Santoni of the International Bank for Reconstruction and Development (IBRD); Stephanie Annijas Gbenoukpo Robert Djidonou Sarah Hebous Ibrahim Nana Alexander Vanezis and Ariane Volk of the IFC; and Kirti Jhunjhunwala Saptarshi Majumdar and Ruoyi Song of the WTO.
Foreword
The expansion of trade depends on reliable adequate and cost-effective sources of trade financing which help to fill the time gap during which goods are produced shipped and paid for. Trade finance is routinely supplied to exporters and importers by banks and other financial intermediaries which mitigate the financial and payment risk involved in crossborder trade. While developed countries can often rely upon large and advanced economic sectors mobilizing sophisticated trade finance instruments such as supply chain finance significant shortages exist in developing countries. These shortages can have many reasons both international (inflation availability of correspondent banking relationships country risk) and local (level of development and expertise of the financial sector cost access to finance by local firms).
Introduction
In June 2022 at the WTO’s 12th Ministerial Conference (MC12) the entire WTO membership recognized that the world is facing “global environmental challenges including climate change and related natural disasters loss of biodiversity and pollution”. It also noted “the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in its economic social and environmental dimensions in so far as they relate to WTO mandates and in a manner consistent with the respective needs and concerns of Members at different levels of economic development”. This acknowledgement came after an increased level of discussions at the WTO’s Committee on Trade and Environment (CTE) and other WTO bodies and initiatives on how trade and trade-related policies could be harnessed and better aligned with climate objectives.
Foreword by Director-General Ngozi Okonjo-Iweala
Even though trade is indispensable for both climate change mitigation and adaptation it has too often been overlooked in the global response to the climate crisis. This is set to change at COP28 where under the presidency of the United Arab Emirates trade will feature prominently on the agenda.
Trade Policy Tools for Climate Action
Trade Policy Tools for Climate Action a publication by the WTO Secretariat looks into the trade policies that governments could consider as part of their strategies for climate change mitigation and adaptation. The publication covers ten policy areas where governments have introduced measures to support the transition to a low-carbon economy improve the flow of climate-friendly goods and services decarbonize supply chains and build resilience to extreme weather events and climate change. Launched at COP28 the publication is intended to shed light on how trade policy actions for climate could accelerate the transition to a climate-friendly global economy as part of the WTO Secretariat’s efforts to encourage the full use of the power of trade to deliver on collective sustainable development objectives including those in relation to the climate crisis.
Executive summary
Trade has an important role to play in the global response to climate change providing economies with tools to draw on in their efforts to mitigate climate change and to adapt to its consequences.
Acknowledgment
This report was approved by Kenneth Kang (Deputy Director Strategy Policy and Review Department IMF) Marion Jansen (Director Trade and Agriculture Directorate OECD) Shamika Sirimanne (Director Division on Technology and Logistics UNCTAD) Mona Haddad (Global Director Trade Investment and Competitiveness The World Bank) Ralph Ossa (Director Economic Research and Statistics Division WTO).