How can international trade be used as a genuine engine of growth and development of developing countries? This important question is at the heart of innovative suggestions offered by .

While there are no easy answers, UNCTAD suggests vigorous and thoughtful efforts to increase developing country participation in dynamic and new sectors of world trade. It finds that these sectors can provide valuable opportunities to developing countries, including Least Developed Countries and other commodity-dependent economies.

These issues will be discussed at an interactive thematic session entitled, "Policy Options and Strategies to Support Developing Countries&apo; Competitiveness in the Most Dynamic Sectors of International Trade", on 16 June 2004 at UNCTAD XI in Sao Paulo. The new opportunities can help to accelerate growth, increase domestic value added to exports, raise productivity and competitiveness, create employment and improve the quality of jobs. Strengthening such participation can also make significant contributions to achieving the goals of the UN Millennium Declaration.

Developing countries are already moving forward on their own to take advantage of dynamic and new trade sectors. They account for 30 per cent of world exports of the 20 most dynamic product categories but export only 10% of technologically complex products. Only in optical instruments do they account for nearly one quarter of world exports.

Why the most dynamic sectors of world trade are important

There is a lot of scope for progress. The value of world trade grew at more than 8% per year in 1985-2000 but the 240 most dynamic products grew at 12% a year and raised market share to nearly 15%. Among those, 40 products moved fastest, including 25 from four manufacturing categories: electronic and electrical goods; automotive; engines and parts; and apparel. Together, they accounted for over 10% of world trade growth in 1985-2000 and more than 25% of the total export value in 2000.

The fastest-growing category of products - electronic and electrical goods - accounted for more than 16 per cent of world exports. In this category, the three fastest-growing product groups increased their share in world exports almost four times, from 2.76 per cent in 19850 to 9.7 per cent in 2000. They include computers; transistors and semiconductors; telecommunication equipment and parts of computers and office machines. Products in the chemicals category grew by over 13 per cent annually.

The share of commodities in world trade declined over time, but several commodities that have shown market dynamism. For example, silk, cereal preparations and non-alcoholic beverages and certain fruit and fruit preparations scored annual growth rates of over 10%; while cashew nuts, kiwi fruit, mangoes and poultry meat grew at 13.7%, 17.0%, 15.3% and 10.4% respectively.

A key lesson of successful experiences is that developing countries must themselves take the initiative to make the appropriate strategic policy choices. Those must be based on a realistic assessment of the actual and potential comparative advantage of each country, not only in each sector but also in the entire value chain.

Experience points to the importance of three basic policy thrusts:

• Create a good investment climate where corporate and national development interests are mutually compatible
  
  
• Build supply capacity and competitiveness
  
  
• Effectively manage integration with the global economy

There is no single road map for success, but several basic prerequisites are clear. They include the quality of economic and financial governance and the degree of political stability and efficiency of public administration. It is also important to ensure coherence of various policies to maximize synergies. Many developing countries do not have the range of options that were available to the early industrializers among them, making the issue of policy space highly relevant.

Other important issues include adequate development financing, meaningful debt reduction and international market structures that improve the competitiveness of developing countries&apo; exports. Donors should give high priority to recalibrating development cooperation programmes to support participation in new and dynamic sectors. At the same time, protectionist pressures, which are currently evident in the case of agriculture, textiles and clothing, services and outsourcing, should be effectively confronted. (Please see Rio Trade Week background note #3.)