Magazine article International Trade Forum

Promoting Intraregional Trade: A Strategic Approach for Developing Countries

Magazine article International Trade Forum

Promoting Intraregional Trade: A Strategic Approach for Developing Countries

Article excerpt

Trading patterns in the world change continuously in terms of both composition and direction. While current trends point to an increasing globalization of world trade, trading links are also being strengthened in some cases at the regional and subregional levels, through efforts by groupings of countries to reinforce commercial ties with neighbouring markets. Although this pattern has been the most noticeable among certain groups of developed countries, the same phenomenon has been apparent in several developing areas.

In many instances trade among developing countries in the same region is negligible and amounts to only a fraction of those countries' total foreign trade. Does that mean that neighbouring countries lack the necessary complementarities in economic structures for trade to develop? Or that the regional trading environment is more restrictive than the global one? Not necessarily. The potential for trade expansion among developing countries is considerable, as has been evidenced through research and field work conducted by ITC. This potential is an important basis for developing economic cooperation among developing countries based on mutually beneficial trade and investment opportunities.

This article describes some of ITC's experiences in developing trade among countries and enterprises in a given developing region. The methodology that has been used in this work may be applicable to trade promotion organizations and chambers of commerce in other areas interested in expanding mutual trade at a regional or subregional level.


The reasons for limited trade among neighbouring countries differ from one region to another. One factor is common to all such situations, however: information on existing market opportunities is insufficient and not easily accessible. Because of this lack of information it is generally believed that regional market potential is negligible. Foreign trade development initiatives thus tend to have a bias towards more transparent but also more competitive global markets.

What can be done to develop regional market potential in a systematic way? A three-step approach has been successfully applied in several ITC projects that could have a more general application, with suitable adaptation. It starts with a trade flow analysis. This is followed by a series of supply and demand surveys. A third step is organizing buyer-seller meetings.

This approach has most recently been used by ITC in projects in the African region, with the Preferential Trade Area for Eastern and Southern African States (PTA) and the Economic Community of West African States (ECOWAS). The activities have been successful in generating extensive new business among the participants (see the box on page 21). (Box omitted) The potential for similar intraregional trade development exists in other developing areas as well.


The first and most important step in this approach is to identify the products that, in theory, could be traded among countries in a given region. Such a product inventory sees as a basis for planning further trade promotion action. It is also essential for demonstrating that quantifiable trade potential exists and for convincing all relevant parties, both public and private, that efforts for intraregional trade promotion are justified.

An effective way of identifying such products is through a trade flow analysis, scanning the import and export trade between a group of countries and the rest of the world, or between the group and another group of significant trading partners, to identify specific products currently traded. Such an assessment is carried out on the assumption that if the same products that the group as a whole imports from third countries are likewise exported by the group to the rest of the world, trade potential among members of the group theoretically exists. In other words, the fact that such products are imported into the region indicates existing demand, and their export reflects a possible surplus availability under competitive conditions.

A trade flow analysis can be carried out in various ways. ITC usually uses the database of the UN Statistical Office as the source of trade figures for this purpose. This source ("Comtrade") provides import and export statistics for about 200 countries and customs territories, derived from records supplied by government authorities but converted, where required, into Standard International Trade Classification (SITC) codes and U.S. dollar values. The harmonized presentation of these statistics makes comparison and aggregation of them relatively easy for a given group of countries and for the world as a total.

Although "Comtrade" is freely accessible, the database is so large that manual interpretation of the information is impractical. ITC has developed computer programmes for this purpose, which it uses for its own research and also for trade flow analysis undertaken at the request of developing countries and intergovernmental organizations.

Another useful but more limited set of data for comparative analysis of trade flows is provided by the Statistical Office of the European Communities (Eurostat). This information is available on CD-ROM (compact discs used to store information) covering up to five years of foreign trade statistics for all members of the European Community (EC). These statistics are expressed in the Harmonized System (HS) product codes and European Currency Units (ECU). The CD-ROM includes a companion software for data "manipulation" and can be used with a medium-size personal computer.

The major outcome of the trade flow analysis is a list of products that are both imported from and exported to the rest of the world by the group of countries being studied, but that are either not or are only infrequently traded among these countries. These products are commonly referred to as "matching products." Such a listing can be further refined by ranking the items according to their trade value and their export performance over a period of time.

Before any further action is taken to promote intraregional trade in "matching products," however, the governments and/or business organizations of the countries in the region need to agree to cooperate in a multilateral programme for this purpose. Such cooperation involves two actions. First the countries have to review carefully the outcome of the trade flow analysis and "shortlist" those products (both import and export) that are relevant to their overall national economic development policies and priorities. Second the trade promotion organizations and chambers of commerce in these countries have to cooperate in undertaking market surveys, so that pertinent information on the respective supply and demand conditions can be exchanged. For this purpose, for example, ITC conducts special workshops in its intraregional trade promotion programmes in which the product selection is finalized and the methodology for undertaking the supply and demand surveys is introduced.

SUPPLY AND DEMAND SURVEYS After agreement has been reached on the product selection for intraregional trade promotion, the potential trading partners are also determined. By this stage all participating countries have expressed either an import or an export interest in one or more shortlisted products. Subsequently, and on a product-by-product basis, the participating countries collect, analyze and present detailed information on either the supply or demand conditions of the product concerned.

Supply surveys are usually carried out by national trade promotion organizations, while the demand surveys are frequently conducted by chambers of commerce and industry.

The methodology for the surveys was initially developed by ITC in the 1970s and has since been regularly adapted and refined to suit the particular needs of a given region. While the technical approach is not fundamentally different from conducting basic market research, ITC's methodology is unique in the sense that supply and demand surveys are carried out simultaneously with the pre-established purpose of exploring "matching" trading opportunities.


The major objective of the supply survey is to provide information, in the form of "profiles," on products available for export as well as on the companies producing them. Such profiles include pertinent data for each company on each product, the product's description, its technical features, packaging, export availability, prices and commercial conditions--in essence, the information that is most likely to be of interest to potential buyers of the product. (See the forms on these pages.) (Pages omitted)

The supply surveys also aim at:

* Describing the characteristics and structure of that industrial sector.

* Identifying obstacles to exports of that product.

* Indicating possibilities for increasing supply capacity and new investment opportunities in the product line.

Determining specific support requirements at the enterprise level in product development, packaging, sales promotion, joint export marketing, costing and pricing, training in marketing techniques and so on.

While the product and company profiles are prepared for potential buyers in other participating countries, the analysis of prospects and problems of the export sector concerned is undertaken for "internal" use by the government.

The guiding factor in interpreting the above objectives and in designing the research project for the collection and analysis of the data is the exploration of trade expansion possibilities among the participating countries. Thus, supply surveys see an immediate practical purpose, unlike export potential studies, which describe business sectors in more general terms.

To facilitate the collection, processing and presentation of the data for the supply survey, a detailed questionnaire can be used. It is made available to the national cooperating institutions. One that has been developed by ITC consists of three parts.

The first part of the questionnaire relates to company-specific information and will ultimately produce a "company profile."

The second part covers the products or product groups that the company can supply for export and results in a "product profile." The company and product profiles are annexed to the summary report of the supply survey.

The third part has been designed to enable the national cooperating institutions to survey, in a structured and uniform manner, the problem areas related to the development of export trade, at both enterprise and national levels. This last part forms the basis for a summary report on the product sector, which provides background material for recommendations on follow-up activities. The summary report presents the findings according to the outline on page 18.


The demand surveys provide the mirror image of the supply surveys and describe in detail the import requirements of a participating country for the product or product group concerned. They also contain "company profiles" with details on importing enterprises and their requirements. The demand surveys more specifically aim at:

* Describing the characteristics and structure of the market, including details on individual importers and end-users.

* Assessing the potential for increasing demand and/or diversifying sources of supply.

* Identifying obstacles to imports.

* Outlining areas in which specific measures are required, with reference to customs procedures, payment arrangements, licensing, and other rules and regulations.

In addition to describing market characteristics for the benefit of potential suppliers in other participating countries, the surveys analyze existing import constraints in the product sector concerned and include recommendations for actions to be taken by the government.

The information that is obtained through desk and field research is compiled in a summary report, the outline of which is represented in the box on page 19.


It is obvious that information contained in the supply and demand surveys will be of no use unless it is widely disseminated to all parties who have a potential interest in intraregional trade expansion. ITC uses two main approaches for publicizing the findings of the surveys.

The first one consists of a series of workshops, usually held in potential supply countries, in which the demand surveys are extensively discussed with the producers and exporters of the product concerned. At such sessions a comprehensive strategy is worked out to take advantage of the opportunities identified.

The second approach, which achieves a more immediate impact, is increasingly being used by ITC in the promotion of intraregional trade and concerns the organization of "buyer-seller" meetings.


The most effective way of obtaining immediate results from existing intraregional trading opportunities is to bring the potential trading partners together in a buyer-seller meeting. These meetings first and foremost serve the purpose of promoting business negotiations and transactions through direct personal contacts between importers and exporters. As these meetings focus on one product group at a time, they also provide an opportunity for identifying and analyzing existing obstacles to trade expansion in that product category and for proposing follow-up action.

The success of these meetings depends, of course, on the "matching" qualities of the participants. The supply and demand surveys are therefore important tools for ensuring that the most relevant enterprises are selected to attend. The surveys are also discussed in detail during the meetings, providing an excellent starting point for negotiations between potential business partners.

As mentioned above, the buyer-seller meetings are usually organized in one of the "supply" countries, which gives potential buyers the opportunity to visit manufacturing facilities and obtain firsthand information on all aspects of the production process. Potential suppliers from other participating countries are encouraged to bring samples of the product concerned to the meeting along with information on their own product specifications.

Unlike "sellers," who consider their participation in the meeting an investment, to be recovered through an increase in sales turnover importers may not readily recognize the immediate benefits of attending these meetings. A special effort therefore sometimes has to be made to ensure the presence of key importers.

Experience shows however that once an importer has taken part in a buyer-seller meeting, that company is convinced of the commercial benefits and often readily agrees to participate at the next opportunity.

The programme of a buyer-seller meeting consists of three parts: a general overview of the trading practices in the product group concerned based on the supply and demand surveys, individual consultations between participants and formulation of proposals for follow-up action.

The general presentations include a review of the various trade-related subjects such as transport, insurance and banking. Frequently new initiatives in these areas originate from the trade expansion opportunities discussed in the meeting.

The individual consultations between enterprises located in different countries of the region are scheduled on the basis of the specific interests expressed by the participants. Such consultations are the first step in the negotiation process, not only for trading transactions but also for establishing joint ventures, concluding licensing agreements and arranging other forms of cooperation.

The evaluation of the meeting gives an account of the results obtained and leads to the formulation of recommendations for further action. Follow-up activities frequently consist of study tours and marketing missions to importing participating countries. In some cases the need for further product and market development work at the enterprise level is identified. In most instances the meeting brings out specific bottlenecks that can be removed only through government action. But as the participants discuss only one product or product group, recommendations to governments can be very specific, facilitating necessary government follow-up.


The undertaking of supply and demand surveys and the organization of buyer-seller meetings with relevant follow-up action at the regional and national levels is an in-depth approach to the promotion of intraregional trade in specific products between selected countries. Complementary action is required to make the regional marketing environment more transparent and to provide information on the whole range of tradable products available in the region. For this purpose the establishment of a trade information network can be considered. A network of this type can link national trade promotion offices and chambers of commerce or similar organizations. It is serviced by a central unit, based at a suitable location, which is responsible for the regular updating of the databases.

Such databases can consist of foreign trade statistics of the participating countries, a directory of the most important enterprises in the region, and an inventory of tariffs and nontariff measures applicable in the participating countries. The network is also an effective vehicle for the regular transmittal of information on current trading opportunities.


The potential for trade expansion among developing countries at the regional level is considerable, usually surpassing by far the current trade flows among the countries. Existing opportunities can be identified through a systematic analysis of trading complementarities, followed by product-and enterprise-specific action designed to take advantage of these opportunities.

The approach described above for promoting intraregional trade has been tested in a number of developing country groupings and has demonstrated its effectiveness. Regional organizations, such as federations of chambers of commerce and industry and associations of trade promotion organizations, as well as, in certain cases, secretariats of economic integration groupings and regional development banks, which have the required organizational network in place, can make an important contribution to intraregional trade expansion by implementing, in a systematic manner, the three-step approach outlined above.

Hendrik Roelofsen is a trade promotion adviser in ITC's Office for Africa.

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