Spare developing countries from new US tariffs: UN trade chief

This article is published in association with United Nations.

As governments and global markets struggle to deal with the deep concerns and disruptions caused by volatility overtrade tariffs, Rebeca Grynspan, the head of the UN trade and development agency (UNCTAD), told UN News on Thursday that the poorest countries – whose activities have a negligible effect on trade deficits – should be exempt.

Ms. Grynspan was speaking in the wake of growing UN concern at the effect on-going uncertainty could have on the most vulnerable developing economies.

On Tuesday, the UN Secretary-General, António Guterres, stated that “trade wars are extremely negative,” and warned that the impact of tariffs could be “devastating.”

Tariffs are a tax on imports coming into a country which are usually charged to the exporter as a percentage of value – an extra cost which is normally passed on to the consumer.

In an interview with the Financial Times published on Thursday morning, the UNCTAD chief appealed for the US to reconsider its strategy, noting that the 44 Least Developed Countries contribute less than two per cent of the US’s trade deficit, and that higher tariffs would only make their existing debt crisis much worse.

Speaking to UN News, Ms. Grynspan laid out the ways that UNCTAD is supporting developing nations, and advocated for closer regional trade ties, which can strengthen their hand in international trade negotiations.

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UN News: The world’s two biggest economies, the US and China, are in the process of imposing or threatening huge trade tariffs on each other. How worried do you think we should all be?

Rebeca Grynspan: When you the two main global economies impose tariffs, it will affect everybody, not only the economies engaged in the tariff war. We are already in a “new normal” of low growth and high debt, and we are worried that the global economy will slow down.

Our emphasis has been to put attention on what can happen to countries that are more vulnerable, such as the Least Developed Countries, and small island developing States. What is happening to those countries is what really worries us.

A factory in inner Mongolia, China (file)

UN News: Some experts are saying that this could be the end of the post-war international financial system. Are those fears warranted?

Rebeca Grynspan: We still don’t know where we will end up. One of the things that we are doing is trying to give the public a real account of what is actually taking place, and what is still just talk.

The most important point is the problem of the uncertainty. If we know the final position, we will adjust, we will have strategies and we can see how to live with the decisions that are being taken. But if we have a prolonged period of uncertainty, where things change all the time, this is damaging because we don’t know what to do. Investment is paralyzed because CEOs are deciding to sit and wait, which means investment will not come back at the scale the world needs.

Our first call is for rational decisions to be taken, so we can plan, strategize and adapt to change – but we still don’t know what that change will entail.

UN News: You’ve made the case for poorer countries to be spared tariff hikes imposed by the US administration. Are your concerns being heard?

Rebeca Grynspan: I haven’t seen anybody making the analysis that we have made, proving that these countries really are making no contribution to the US trade deficit. Most of the exports that they send to the US are commodities and many of these are exempt from tariffs under the new rules. These commodities don’t compete with the US, rather they help in production processes.

The point I want to make is that there are a number of countries that don’t really contribute to the deficit, are not important in terms of the revenue [that the US can collect from tariffs] and are not competition or a national security threat to the US.

So, maybe we can avoid starting new bilateral agreements and negotiations and spare them the pain of the tariffs.

ILO Asia-Pacific

Women workers at a textile factory in Viet Nam stitch puffer jackets, destined mostly for Western markets.

UN News: What advice could you give to a manufacturing worker in a developing country like Viet Nam or Madagascar?

Rebeca Grynspan: It’s difficult to say, because some countries are receiving higher tariffs than others, and so you don’t know what competitive impact this will have.

Madagascar is a good example of what we’re talking about, because the country’s main export to the US is vanilla. Their contribution to the US trade deficit is so small it doesn’t even register, so it makes no sense to penalise a country like this.

UN News: Explain the role that UNCTAD plays in supporting developing countries?

Rebeca Grynspan: As an organization, we analyse trade, investment, financing and technology from the point of view of development, which means we help countries to take advantage of the opportunities of trade.

We are not involved in trade negotiations – these take place at the World Trade Organization – but we will help developing countries to get a better deal in trade and help their economies to perform better globally.

UN News: You have advocated for developing countries to trade more within regional blocs where they can have more say in negotiations with richer countries. Would that be useful in this kind of situation?

Rebeca Grynspan: Africa has a huge opportunity with the African Free Trade Area. According to our numbers, this could add around $3 trillion to the African economy.

It’s a huge opportunity, and if they can accelerate the pace, they could take advantage of a bigger market and make economies of scale. African nations need to diversify their economies because, if they continue to be dependent on commodities, they won’t be able to provide their populations with the services and the income they deserve.

There is also a deepening of trade relationships in Southeast Asia with ASEAN (the Association of Southeast Asian Nations) and in parts of Latin America with Mercosur (the Southern Common Market).

These partnerships could be very important, particularly at this precise moment.