‘Is there any hope for the LDCs in global trade?’

Are Least Developed Countries (LDCs) destined to remain "marginalized"?  This is a common thought that runs through the mind of any person living in these countries.  In 2013, the LDCs had a total population of 898.3 million, which is about 12% of the global population of 7.2 billion.  However, their combined GDP was $ 775 billion, which is barely 1% of the global GDP of about $ 74,910 billion.  Perhaps, marginalization is a mild term to use.  In this article, we examine the role of LDCs in global trade as well as some related issues.
In 2013, LDCs' total export of goods & services increased by 4.1% to $ 250 billion, this increase was much less than their imports of $ 311 billion (increase of 8.0%), leading to a higher trade deficit. In some cases, remittances provided some cushioning.  The share of LDCs in world trade increased to 1.17% in 2013, which is roughly double that of 2000 when their share was only 0.58%.  Most of the increase is on account of fuels and minerals.
LDC Export Destinations: Of the total LDC merchandise exports of over $ 218 billion in 2013, roughly 12% was agricultural products, while 65% was fuel and mining products and only 28% was manufactured goods.  
Asia dominates the destination market for primary commodities, both agricultural and fuels and mining products. Fifty-seven percent of LDC exports of fuels and mining products were destined to Asia in 2013. For manufactured products, Europe (38%) and Asia (21%) are the major destination markets. Asia overtook North America in 2013 as the second-most-important destination for LDCs' manufactured products.

Textile and clothing products accounted for 64% of LDC manufactures' exports to the world in 2013. Over the last thirteen years, LDC exports of clothing registered average annual growth of 12% compared to the world average of 7%. The other important exports of manufactures include leather and rubber, diamonds and footwear, etc. Table 1 shows the exports of manufactures to selected regions.
It is also interesting to note the rapid change in the country-destinations of LDC-manufactured goods.  The emergence of China as the export destination of choice has completely changed the pattern of trade.  If one looks at the exports to six selected destinations in 2000 and in 2013, the change is quite dramatic, as shown in Table 2 below.

Cost of Sending Goods Abroad: Studies have revealed that in 2012, it took an LDC on average 33 days at a cost of about $1,900 to export a container, compared to 18 days and about $1,200 on average for other developing countries.  The differential - which translates into a loss of competitiveness - is even higher for landlocked LDCs where it took more than 40 days and cost almost $4,000.  Each additional day that a product is delayed prior to being shipped is estimated to reduce trade by more than 1%.
Export bottlenecks reduce the competitiveness of LDC goods. They are like a tax on the income of the exporters who are "price takers" and cannot include the higher transaction costs into their bidding prices. The problem is compounded when LDCs intend to diversify their exports by joining global value chains. Delays in delivery and the necessity of maintaining high inventory levels to cope with them run against the core management model of international supply chains, based on just-in-time and minimum buffer stocks.
Non-Tariff Measures (NTMs) affecting LDC exports: With the lowering of tariffs in developed and - increasingly - developing countries, attention has been focusing on other barriers to trade - NTMs in particular. The WTO reports that over the last 20 years, some 37 measures have been identified as specific to the LDCs.  Seven of these 37 are anti-dumping measures; five of them are not in force today.  NTMs have been on the rise since 2008, and increased dramatically lately: in 2013 and during the first quarter of 2014, 12 measures have been taken against LDCs.
Interestingly, the LDCs are also subject to the full range of measures applied on an MFN basis, that is, to all countries.  This would give an idea of the barriers that LDCs face, and what they have to overcome in order to export.
Some Observations: LDC exports remain highly concentrated on a few products. Primary commodities (which include fuels and minerals) accounted for 71% of LDC merchandise exports in 2013. In fact, there has been a consistent rise in the share of fuels and mining products in LDC exports as new oil fields are exploited, and mineral resources extracted.
The direction of merchandise trade is undergoing rapid transformation.  Developing countries are absorbing 55% of LDC exports, while China is the top destination for LDC exports, accounting for 23% of LDC exports in 2013.
After significant improvements in market access opportunities for LDC exports to developed countries over the past decade, additional progress remains limited. The United States remains the only developed country to deny full duty-free market access to Asian LDCs.  An increasing number of developing countries have taken concrete steps to improve market access opportunities for LDC exports.
The WTO's Bali Ministerial Conference adopted decisions aimed at improving the market access opportunities for LDCs: in DFQF market access, rules of origin and in services.  The developed and developing countries do not seem to be in a hurry to implement these decisions.  On the other hand, they are eager to implement the Trade Facilitation agreement and obtain other concessions of interest to them.
CONCLUSIONS: Wherever possible, LDCs have adopted the philosophy of export-led economic growth.  And, economic history reveals that it is not just any exports - it is export of manufactured goods from which a country benefits most.  Herein lies the most difficult task for LDCs - one has to be competitive against established producers in the global marketplace.  In addition, LDCs have to overcome numerous hurdles of tariff and non-tariff barriers and additional transport costs.
Bangladesh's performance in the RMG sector is a remarkable story.  In fact, as a consequence, Bangladesh's exports constitute roughly 14% of total LDC merchandise exports (this percentage is much higher if one considers manufactured goods only, and exclude fuel and mineral resources).  
For Bangladesh to achieve the goal of over $ 50 billion in exports in 2021, transportation costs for export must be reduced.  Diversification of both export destination as well as products for export is a vital necessity.  Dramatic changes in the pattern of global trade are already visible on the horizon, and Bangladesh must take advantage of its location in selecting export destinations.  
LDCs are recognized as the weakest link in the global world of trade.  Despite all their efforts, they are yet unable to compete with the rest of the developed and developing world on account of structural bottlenecks.  Recognizing their particular weaknesses, and with a view to encouraging their growth, most developed and many developing countries are providing them concessional market access.  If the world wants LDC exports to grow, they must do much, much more to remove the barriers against their exports.  
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Dr. Toufiq Ali is a former Ambassador to World Trade Organisation and is currently the Chief Executive of the Bangladesh International Arbitration Centre. He can be reached at [email protected]