Global Development Institute Blog

By Dr Rory Horner

In a new article published via Territory, Politics, Governance, Rory Horner reviews emerging evidence of the growth of South-South trade and argues for the need to move beyond win-win notions from development cooperation to highlight the commercial realities and very uneven geographies and development outcomes associated with this new economic landscape. Rory has synthesised the article for us below.

The new geography of trade
More than a decade ago, UNCTAD declared that “a new geography of trade is emerging and reshaping the global economic landscape”. In 2012, a milestone was passed with the value of trade between developing countries (South-South trade) overtaking developing country exports to the global North.

Various indicators confirm this shifting geography as demonstrated in the below table. Claims such as those outlined in the UNDP’s The Rise of the South or the increasingly widespread notion of an “Africa Rising” are reflected in the growing share of global GDP generated in the global South. South-South trade is growing significantly, while the geography of demand is also changing – with import demand increasing rapidly within the global South. Notably, these trends are led by the rising power economies of Brazil, India, China and South Africa.

Summary indicators of the shifting geography of income and trade in the world economy:

Then 2012
South % of global GDP 21.7 (1980) 35.8
Export as % of GDP for Southern countries 16.7 (1981) 29.5
South % of world exports 29.6 (1980) 44.7
South-South % of global trade 11.7 (1995) 25.5
North-North % of global trade 51.2 (1995) 33.9

Source: Horner (2015, 7)

South-South trade raises the exciting prospect of moving beyond the more unequal and hierarchical North-South trade relationship. Specifically, South-South trade has been heralded as “vital for development” (OECD, 2006) and such trade integration viewed as “key to rebalancing the global economy” (UNCTAD, 2011). Much of the excitement in relation to South-South trade draws on “win-win” ideas of horizontal, more equal interaction drawn from the arena of development cooperation. Given that North-South trade has been characterised by high levels of inequality and hierarchy, the implicit suggestion is that South-South may offer at least some better opportunities.

Many of these optimistic viewpoints are somewhat speculative, however. It is questionable whether and how the intended “win-win” notions of South-South development cooperation translate into the commercial realities of South-South trade. The now quite significant body of research on China, and to a lesser extent India, in Africa suggests that while trading relationships may overlap with some of the intended aims of South-South cooperation, the associated impacts are not necessarily win-win. New hierarchies can characterise these relationships, leading to some suggestions of forms of neo-colonialism.

An emerging agenda on South-South value chains and production networks
Research on global value chains (GVCs) and global production networks (GPNs) can move beyond some more macro-scale, geopolitical interpretations to take an actor-centric approach to understand the variegated, region and industry-specific development implications of trade. However, such research has, to date, largely had a North-South orientation, focussing on those firms and farms in the global South participating in chains and networks mostly governed by lead firms from the global North.

Emerging evidence on South-South value chains also highlights two competing possibilities. As summarised in the table below, nascent empirical evidence has charted the potential for easier access to South-South markets in comparison to those of the global North, but also the new competition and unevenness within the South.

Emerging evidence on South-South value chains and production networks:

Pros: More accessible markets Cons: Greater competition
Volume/price Greater volumes Lower prices, more competitors
Standards Lower requirements Lower requirements may be short-lived
Upgrading Learning and functional upgrading opportunity Uneven capabilities among firms to benefit
Dependency Diversification of end-market risk Potential new dependency

Source: Author’s construction

Governance of, and upgrading within, South-South value chains and production networks are two issues which deserve particular attention. In relation to private governance, new lead firms from the global South are playing increasingly prominent roles in coordinating trade. With firms from outside the global North comprising an increasing share of the world’s largest firms, it is necessary to understand the forms of governance these firms exert, including through private standards requirements. Public governance, a less focussed-on topic within GVC and GPN research, is also crucial to understand in terms of the varying capacity of state policymakers to shape South-South GVCs and GPNs. Upgrading opportunities deserves attention, including in relation to the possibilities arising from different end markets and the associated strategies required. With increasing heterogeneity within the South, the differential possibilities for upgrading, but also the possibilities for downgrading and negative outcomes from South-South trade warrant attention.

In June 2015, I organised an early career conference on this theme of “Global production networks and new contours of development” at the University of Manchester. We had 20 presentations from early career scholars moving beyond the North-South orientation of much research on GVCs and GPNs.

In two ongoing projects, I am now researching more deeply the nature of South-South production networks and their development implications, through an investigation of the economic, social and political relationships that constitute India’s “pharmacy to the developing world”. In South Africa, funded by a British Academy small research grant, I am exploring the various engagements of Indian firms and their local development implications. In East Africa (specifically, Uganda, Kenya and Tanzania and with the support of a Regional Studies Association early career grant), I am investigating the challenges for local pharmaceutical production and its viability vis-à-vis competition from Indian supply. The initial stages of these projects confirm comparatively lower entry barriers in such production networks, and find quite diverse implications for local stakeholders – with key differences, for example, between local industrial and consumer interests. Such outcomes fall in various positions along the spectrum between the two polar extremes of the discourse on South-South relations – as “win-win” development cooperation or neocolonialism.

Ultimately, new research can move beyond the win-win notions often drawn from an earlier era of South-South cooperation to unveil the commercial realities, varied outcomes and very uneven geographies of expanding South-South trade.


Rory lectures on globalisation, trade and industry at the University of Manchester. Follow him on Twitter, and via his blog.

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