MARKET ANALYSIS TOOLS AND CAPACITY BUILDING FOR LDCs AND DEVELOPING COUNTRIES2011 AID FOR TRADE GLOBAL REVIEW: CASE STORY

Date of submission: 31January2011

Region: GlobalCountry: DevelopingandLeastDevelopedCountriesType: ImprovingtransparencyininternationaltradeandmarketaccessAuthors: HelenLassenandMondherMimouni,MarketAnalysisandResearch

Section(MAR),ITC,Photography: istockphoto.com(cover),fotolia.de(p.3)Contact details: HelenLassen,Manager,CapacityBuildingProgrammes,MAR

InternationalTradeCentre,www.intracen.org,GenevaPhone:+41227300552E-mail:lassen@intracen.org

MondherMimouni,Chief,Ad-Interim,MARInternationalTradeCentre,www.intracen.org,GenevaPhone:+41227300371E-mail:mimouni@intracen.org

EXECUTIVE SUMMARY

Developingcountries’exportsaretypicallyconcentratedinafewmarketsandproducts,leavingthecountriesvulnerable tospecificshocks.Thecountriescan lessen their riskbydiversifying theirmarketsandproducts,however,theyhavehistoricallylackedaccesstotimelyinformationaboutalternativeexportopportunities.

ITCrecognizedthesebarrierstoexportdiversificationandexpansionandsetouttodevelopcomprehensive,accessible,user-friendlytoolsthatwouldenabledevelopingcountriestomakerelevanttradedecisions.In1999and2005, respectively, ITCdeveloped two tools:TradeMapandMarketAccessMap.Bothweresignificantinnovationscomparedwithexistingtraderelatedtoolsavailableonthemarketforusebydevelopingcountries.Theoverallobjectivewastoimprovethetransparencyoftrade-relatedinformationandthedecisionsbasedonit.

ThiscasestorydescribesITC’sexperienceinlarge-scaledisseminationoftradeinformationthroughthemarketanalysistools.Itoutlinestherationalefortheirdevelopment,namely:tohelpdevelopingcountriesdiversifytheirproductsandexportmarkets;aligntheirmarketaccessnegotiatingpositionstotheneedsofcompanies;andensurethattradepoliciescapitalizeonnationalexportpotentialandaddressmarketaccessimpediments.

ThecasecontainsthreekeymessagesforAidforTradeprogrammesanddonors:

1. Companies,tradesupportinstitutions,policymakersandtradenegotiatorsindevelopingcountriesallneedaccesstoaccuratetradedataaswellasanalysistools.Thisallowsthemtooptimizetheirexportstrategiesandtoensurethatpoliciesandtradenegotiatingpositionstakeintoconsiderationtheconcernsofallthoseinvolvedinthetradeprocess.ITC’stoolshaveprovedsuccessfulresponsestothisneed.

2. Developingandleastdevelopedcountriesshouldhavefreeaccesstotradedataandanalysistoolstohelpovercomeinformationasymmetriesbetweenpoorandrichcountries.

3. Providingtechnicalassistanceandcapacitybuildingintradeandmarketaccessanalysistousersimprovesthechancesofbettertradedecisions.

ISSUES ADDRESSED

Exportgrowthandadiversifiedtradeprofileareimportantcontributorstoeconomicgrowthandpovertyreductionforleastdevelopedanddevelopingcountries.Oneoftheobstaclestopoorcountriesdiversifyingtheirproductsandmarketshasbeentheirlackofaccesstorelevantinformation.Thisisduetoanumberoffactors:

Thecostofaccuratemarketinformationcanbeprohibitive; Collatingandcomparinginformationaboutmarketsistimeconsumingduetothemultiplicityofsources; Technical knowledge isneededasdataaccuracyandmethodologiesvaryand,nomenclaturesand timeperiodsoftenneedharmonizing;

Governmentsofwealthy, information-richeconomieshave the resources and knowhow to produce andpublicly disseminate trade related information andthere isa readymarket for relateddecisionsupporttools. Many developing countries, however, do notenjoysuchconditions.

Prior to ITC’s development of its market analysistools Trade Map and Market Access Map (www.intracen.org/marketanalysis),thedatabasesandtoolsavailablegloballydidnotadequatelyservethespecificneeds of developing countries – particularly of theprivatesector.Existingdatabasesdidnotsufficientlycoverdevelopingcountries,becausemanycountriesdonotsystematicallycollectandself-reportdata.

Theexistingdatabases / analysis systemsavailablewerealsonotuserfriendly.Thedatareceivedrequireduserstohaveanadvancedtechnicalknowledgeinordertointerpretit.Theinformationtypicallypresumedtheanalysisneedsofhighlytrainedeconomists.Mostimportantlythedatawerenotparticularlycurrentordetailedunlessuserswereprepared to turn tohighcostdatabasesavailableinadvancedeconomies(butthesestillhadverypoorcoverageofdatafromLDCs).

Forcompanies,thetimelinessofdataanditslevelofdetailcanhaveimmediatefinancialimplications.Anincorrecttariffcanmeanthedifferencebetweenaproductbeingcompetitiveinamarketornot.Thelatestfiguresemergingfrommonthly,tarifflinelevelimportstatisticsinaparticularmarketcanmeanthedifferencebetweenexportingthevarietiesandpackagesizesofproductslikelytoattractthebestpriceornot.

DevelopingcountriesandLDCswerealsoatadisadvantageintradenegotiationswithoutaccesstodatabases,toolsandmethodologies.Formultilateralnegotiationsinparticular,negotiatorsneedtoconsidertheircountry’stariffandtradedatainthecontextofallothercountries’datainordertoweightheirnegotiatingstrengthanddetermineoffersandrequests.

Whiledevelopingcountries’internationaltradeperformanceandtheirbargainingpositionsaredependentuponaclearunderstandingoftheglobalpictureoftradeandtariffs,manylackthetechnicalskillstoanalyseexportperformance, exportpotential andmarketaccessconditions.Furthermore, theyneedassistance inbringingtogether private and public sector stakeholders for consultations to ensure that negotiating positions servethecountry’sbroadereconomicinterests.Andfinallytheyneedassistanceintrainingexportersonusingandinterpretingtradeandmarketaccessdata.

We conducted a study of the Russian market for export of Cubita roasted and ground coffee beans. The tools that you offer have allowed us to understand the growth of coffee imports in Russia, their main suppliers, growth trends and import duty levels. This study culminated last February in a concrete order to the value of US $500,000.

A Cuban coffee exporter, responding to ITC’s mid-2010 survey of tools users.

OBJECTIVE PURSUED

ITCsoughttoaddresstheissuesbycollectingthemostrecentdata,developingtoolstoenableprivateandpublicsectoractorstomakeinformeddecisions,anddevelopingcapacitybuildingservicesintradeandmarketaccessanalysis.Theoverallobjectivewastoimprovethetransparencyoftrade-relatedinformationandthedecisionsbasedonit.

Thetwodecision-supporttoolsdevelopedbyITCwereTrade Map and Market Access Map.

ITCsetupadatacollectionteamtosourcedatadirectlyfromcountries.InitiallyITCreliedalmostentirelyontradedatafromotherUNdatabasesfordisseminationthroughTradeMapandMarketAccessMap.Howeverasthetoolsusagegrew,sodiddemandfordatathatwasmorecurrent,thathadbettergeographicalcoverageandmoredetail.Theseissueswereparticularlyimportanttotheprivatesectorforwhomtimelinessanddetailwascritical.

Thetoolshavetwouniquevaluepropositions.Theybroughttogetherdatainoneplacethatwaspreviouslyeithernotavailable,affordableoreasilyaccessiblefordevelopingcountries;Secondlythetoolswerebuiltspecificallytoaddresstheneedsandquestionsfacingdevelopingcountries.Vastamountsofcomplexdatawerebroughttogetherandpresentedineasytounderstandtables,graphsandmaps.

ThemarketanalysistoolshadanimmediateappealtomanyLDCswhoseprivatesector–SMEsinparticular–forthefirsttimecouldobtainaviewoftheircountry’stradepositionandperformancevis-à-visothercountriesandselecttheirexportmarketsonamoreinformedbasis.

Queryoptionsweresegmentedfortheusergroups(rangingfromSMEswithalmostnotechnicalbackgroundintrade,tohighlytrainedpolicymakersandresearchers)toensurethateachgroupcouldfindanswerstothequestionsmostpressingforthem.Theseincluded:

EXPORTERS (PARTICULARLY SMES):

a. WhichcountriesimporttheproductthatIexport?b. Inanyoneofthesemarkets,withwhichothersuppliercountriesamIcompetingformarketshare?Howare

exportsfrommycountryperformingrelativetocompetitors–i.e.whoisgaining/losingmarketshare?AmIexportingtothemarketsthatofferthebestgrowthprospects?

c. Doesmycountryfacepreferentialtariffconditionsinaparticularmarketcomparedwithcompetingsuppliersfromothercountries?

TRADE SUPPORT INSTITUTIONS AND TRADE POLICY MAKERS

a. Whatexportedproducts/marketscurrentlycontributemosttomycountry’sincomefromtrade?Areexportsconcentratedinjustafewproducts/marketsordiversified?

b. Whichexportedproductsaregrowingthefastest?c. Whatismycountry’sbalanceoftradeoverallandbyproductgroup?d. Onwhichproductsandmarketsshouldwefocusourlimitedtradepromotionresourcesformaximumimpact?e. Whatmarketaccessobstaclesseemtobeaffectingmycountry’sabilitytorealizeitstradepotential?

TRADE NEGOTIATORS AND THE PRIVATE SECTOR THAT NEED TO UNDERSTAND THE IMPLICATIONS OF TRADE NEGOTIATIONS

a. Whatisthereallevelofprotectionfacingmycountryworldwide,byproductandbymarket?b. Howdoesmypreferentialtariffaccesscomparewithotherkeycompetitorsinkeymarketsandhowwillthischangeundervarioustariffreductionscenarios?

c. In the context ofmultilateral negotiations, howwill the final bound tariffs ofmy country andmymarketscomparewiththecurrentappliedtariffs?Howwillthataffectmybargainingpowerinfutureregionalorbilateralnegotiations?

DESIGN AND IMPLEMENTATION

ASSESSINGCLIENTS’NEEDSANDCUSTOMDESIGNINGTHETOOLSTOSUITTHESENEEDSITCtookintoaccountwhatneedsvarioususergroupswouldhave,andthendesignedsolutionstomatchtheirspecific needs. Companies in developing countries needed user friendly tools that did not require detailedtechnicalknowledgeandwithsimplequerytypes(e.g.“IambasedinGhanaandproducesheabutter,–whataresomepotentialexportmarkets”?Or“Iwishtoexportt-shirtsfromMauritiustotheUSA–whattariffswouldIface”).Tradepolicymakers,tradenegotiatorsandresearchersneededmoreadvancedfunctionalitywithflexibilitytorunlarge,complexqueriesanddownloadlargedatasets.Functionalspecificationsweretestedontypicaluserprofilestocheckthatdesignswereontarget.

MOBILIZINGRESOURCESITCcollaboratedwithdonors.USAIDplayedakeyroleinsupportingthedevelopment,disseminationandcapacitybuildingonTradeMap,providing$1.6millionsince2002.Switzerland’sStateSecretariatforEconomicAffairs(SECO)committed$700,000 in2005toMarketAccessMap.Thesegrants, togetherwith ITCregularbudgetresourcesforsomestaffpositions,grantsfromITC’sGlobalTrustFundandtheproceedsfromthesaleofnationalandinstitutionallicenses,providedtherequisitefundsupuntiltheendof2007.

BUILDINGNATIONALOWNERSHIPNationallicenseswerecoupledwithnationalsub-sitesandco-brandedwiththenationalinstitutionlicenseholder(typicallytheMinistryofTradeornationaltradepromotionbody).Thiswasdonetobuildnationalownershipanddisseminationandusageofthetools.

BUILDINGCAPACITY&FACILITATINGDIALOGUEBETWEENPRIVATEANDPUBLICSECTORSTAKEHOLDERSTherewasagrowingdemandforITCtoprovidecustomizedtechnicalassistance.ITCrespondedbyprovidingin-depthcustomizedassistanceinmarketanalysistoover70countriesin10years.

COLLECTINGREGULARFEEDBACKANDMONITORINGPERFORMANCEITCregularlycollectedfeedbackandreportedbacktothedonors.Mapsusersweresurveyedonline.Forcapacitybuildingandadvisoryservices, feedbackquestionnaireswereused. ITC’sannualclientsurveyalsoprovidedguidanceontherelevance,usageandusersatisfactionwiththeservices.Basedonthefeedback,TradeMap’sinterfacewascompletelyrevisedin2006andanupgradedversionofMarketAccessMapwillbelaunchedin2011.ThisisbasedonacollaborativeeffortwiththeWorldBanktobringthefunctionalityoftheBank’sWITSandITC’sMarketAccessMaptogetherinonetool.

MOVINGTOAFREEACCESSMODELUsers paid a fee until 2007. This model was financially sustainable but sub-optimal from a developmentperspective:privatesectorusersweremostlylargecompaniesinadvancedeconomiesthatcouldafforduserfeesITC,therefore,movedtofreedisseminationfromJanuary2008.InJanuary2008,theWorldBankcommittedfundingunderitsDevelopmentGrantFacilityforthreeyears,whichtogetherwithresourcesfromdonorstoITC’sGlobalTrustFund,wereenoughtocoverthecostofdatacollection,toolsmaintenanceanddissemination,somecapacitybuildingandongoingresearchtoensurecontinuousimprovementofthetools.

PROBLEMS ENCOUNTERED

Howtoincreaseusageinthepoorestcountries?SomeregionsareusingTradeMapandMarketAccessMapmorethanothers.UsageinLatinAmericaandtheCaribbeanis51%whileontheAfricancontinent,usageis12.5%.Oneofthechallengesisthatthepoorestcountries,particularlySub-SaharanAfrica,typicallyhavepoorinternetinfrastructureandinsomecaseselectricitysupplyisunreliable.A“light”versionofTradeMapwaslaunchedforuserswithlowinternetbandwidth.Otherpossibleoptionsincludedevelopingapplicationstoaccessthetoolsviamobilephones.

ThevariedusergroupsplacedifferentdemandsontheserverTradenegotiators, tradepolicyanalystsandresearcherstendtorunvery largequerieswhensimulatingtariffreductions.DuringpeakWTOnegotiatingperiods, thenumberof simultaneoususers rosedramaticallyandsloweddowntheapplicationresponsetime.Asashorttermsolution,ITCransomeofthequeriesofflineandprovide thedata tousersonCD (for negotiators inGeneva). ITCalso implementedaprocesswhereuserscouldinputtheirqueries,andtheserverwouldnotifytheuserswhentheirquerieswereready.Thisimprovedthequerymanagementsystemandallowedforfasterresponsestouserswhohadsmaller,lesscomplexqueries.Asignificantinvestmentinextraservercapacityandupgradinghostingservicesalsoimprovedresponsetime.

Mobilizing theAid forTradecommunity toactcollectivelyandcommit resourcesover the long term.TheprogrammethatenabledITC’stoolstobedisseminatedfreetodevelopingcountrieswasaclearsuccessbutthegrantthatmadeitpossiblewasoriginallylimitedtothreeyears.Donorsareunderpressuretoensuretheirinvestmentshaveexit-clausesthatrequireprogrammestoeventuallybecomeself-sustaining,andatthesametime,programmesthatgenerateeasilymeasured,quickresultshavethemostappeal.However,theinformationalasymmetriesthatgiverisetothecaseforAidforTradeinvestmentinfreedatadisseminationandanalysistoolsarelongtermproblemsrequiringalongtermresponse.

FACTORS FOR SUCCESS

ThefactorsthatcontributedtothesuccessofITC’smarketanalysistoolsinclude:CAREFULASSESSMENTOFUSERNEEDSduringthedesignofTradeMapandMarketAccessMap,andthenrepeatingtheassessmentonaregularbasisasbeneficiaries’needschangedovertime.

MAKINGACCESSTOTRADEMAPANDMARKETACCESSMAPFREETODEVELOPINGCOUNTRIES–thiswasamoreequitablesolutionandresultedinabigincreaseincompaniesusingthetools.

PROVIDING CAPACITY BUILDING AND CUSTOMIZED TECHNICAL ASSISTANCE (particularly to tradesupportinstitutionsandtradepolicymakers)inmethodologiesfortradeandmarketaccessanalysis.

STRONGSYNERGIESBETWEENTHEDIFFERENTACTIVITYAREAS–datacollection,toolsdevelopmentandcapacitybuilding–resultedinbetteroutcomesineachareathanwouldhavebeenpossiblehadtheybeenperformedbyseparatefunctionalunits.

RESULTS ACHIEVED

USERS INCREASED FROM 18,000 TO 130,000 OVER 3 YEARS AFTER ACCESS BECAME FREE.InJanuary2008,ITCmadethetoolsfreetoalldevelopingandleastdevelopedcountriesthankstograntfromtheWorldBank’sDevelopmentGrantFacilityandfundsfromdonorstoITC’sGlobalTrustFund.Overthenextthreeyearsthenumberofusersgrewsteadilyto130,000bytheendof2010,representingaseven-foldincrease.Thenumberofcountriesandterritoriesusingthetoolsalsogrewsubstantiallyfromaround75attheendof2007to224inDecember2010.Privatesectorusersgrewfromanegligibleshareofusersto28%.ThemarketanalysistoolswereratedITC’smostrelevantandusedservicesinITC’sannualsurveyin2009.

THE FREE-USAGE MODEL REDUCED ITC’S TRANSACTION COSTS IN MANAGING LICENSES.BecauseofITC’sstatusasaninternationalorganization,annuallicensestouseanddisseminatethetoolsnation-widehadtobecontractedbywayofmemorandaofunderstandingwithministriesoftradeandnationaltradepromotionorganizations.Byprovidingthetoolsfree,transactioncostswerereduced,allowingresourcestobeshiftedtoimprovinguser-supportservices,datacollectionanddataquality.

COUNTRY-SPECIFIC DATA, AND TIMELINESS AND DETAIL OF DATA, WERE IMPROVED.ITC’scollectionoftariffdataincreasedfrom178countriesin2007to188in2010.Nomonthlystatisticswereavailable inTradeMap inDecember2007.And in termsofgranularity,only51countriesshoweddataat thenationaltarifflinelevel.ByDecember2010,monthlydatawereavailablefromthemostaggregatedleveltothemostdetailedproductlevelfor81countries,representingaround82%ofglobalimports.Nationaltarifflinelevelreporteddatawereavailablefor157countriesforoneormoreperiods.Asfortimeliness,thelagoftradedataupdatinghasbeenconsistentlyreducedtothepointthatTradeMaphadmorecountrieswithDecember2010datainJanuary2011thanthebestcommercialsubscription-basedtradedatabaseonthemarket.

OneoftheimplicationsofhavingmoredetailedandcurrentdatawasthatITCwasabletomonitorandreportalmostinrealtimetheimpactoftheglobalfinancialandeconomiccrisisondevelopingandleastdevelopedcountries.

APPROXIMATELY 10,000 PEOPLE HAVE BEEN TRAINED IN MARKET ANALYSIS.

THE USEFULNESS OF THE TOOLS INCREASES WHEN USERS ARE TRAINED.Overthepast10years,around10,000peoplehavebeentrained(face-to-face)inareasrangingfromassessingnationalexportpotential topreparingbargainingpositionsformultilateralorregional tradenegotiations.Freeweb-basedtrainingvideosareavailablefortoolsusersnotabletobenefitfromface-to-facecustomizedtraining.

THERE HAS BEEN GREATER COLLABORATION WITH OTHER INTERNATIONAL ORGANIZATIONS.OncetheMapswereavailableforfree,itmeantthatITCwasabletosharedatawithallinternationalinstitutionswithoutaconcernfor“dataleakage”andreductioninITC’sabilitytosellnationalorinstitutionallicenses.Thisledtoincreasedcollaboration on analysis and dissemination of data and indicators through the tools and publications of otherinternationalorganizations,Italsoledtoareductionofduplicatedeffortbydifferentagenciesandthegenerationofbetterandmoreconsistentindicators.AppliedtariffdatacollectedbyITCisnowpublishedbytheWTOonitswebsite.

LESSONS LEARNED

Thebenefitsofmakingthetoolsfreetousersfaroutweighedanynegativefactors.Whilethecostofcollectingthedata,maintainingthesoftwareandprovidingtechnicalassistancewereverysimilarunderboththesubscriptionandfree-usagemodels,the collective benefits under the free dissemination model far exceeded those compared with the user-pay approach.Thetotalnumberofusersincreasedbyseventimesanduptakebytheprivatesector,especiallySMEsincreasedsignificantly.Companiesdirectlyattributeexport/importturnoverof$2.7billiontothehelptheyderivedfromtheiruseofthetools.

International Trade Centre,Palais des Nations, CH-1211

Geneva 10, Switzerland+41 22 730 0111

www.intracen.org

Thefree-accessmodelalsocreatedotherbenefits.Itwasfairer–everyonehadaccessregardlessoftheirabilitytopay-anditresultedinlowertransactioncostsforITCandbeneficiaries.Thefreedisseminationmodelhoweverfacesa“free-rider”challenge.Everyonebenefitsbutonlysomepay.Thechallengethenistoget donors to act collectively and commit long-term.

Anadditionallessonhasbeenthatbeneficiaries’ needs are constantly changing,requiringtraderelatedtoolsandtechnicalassistancetoalsoadaptinresponse.Ascustomstariffshavecomedownaroundtheworld,demandhasgrown for informationonofficialnon tariffmarketaccessmeasuresandprivatevoluntarystandards.MuchalsoneedstobedonetoimproveinternationaltransparencyinservicestradeandrelatedmarketaccessITChasexpandedthescopeofitsdatacollectionandanalysiseffortstomeetdemandintheseareasandwilldisseminateinformationbyadaptingexistingtools(e.g.MarketAccessMap)anddevelopingnewtoolssuchasStandardsMap.

CONCLUSION AND RECOMMENDATIONS

Information about market demand, market access conditions and market trends is critical to developing countries’ trade performance.Exporters,tradesupportinstitutionsandtradepolicymakersfromdevelopingcountrieshave consistently rankedaccess tomarket information among their top three needs in ITC’s annual client surveys.Developingcountrieshavehistoricallyhadfarlessaccesstoinformationcomparedwiththeircounterpartsinricheconomies.

Oneofthemosteffectivewaystogeneratebettertradedecisionsistoprovideaccurate,timelytradeandmarketaccessdata,andtocombinethatwithcustomizeddecisionsupporttoolsandtraining.Thecombinationofthesecanhelpspurgrowthandwealthcreationindevelopingcountries.

AfundamentalobjectiveofAidforTradeshouldbetoprovidereliable,internationallycomparable,currentandcomprehensivedataoninternationaltradetrendsandmarketconditions.Suchinformationformsthefoundationuponwhichsomanyothertrade-relateddecisionsarebased.

Policy makers need data to ensure domestic and trade policies are oriented towards helping the country realize its trade potentialandovercometheobstaclesexporters’facetointernationalcompetitivenessandmarketaccess.Tradenegotiatorsneeddatatoensuretheiroffensiveanddefensivepositionsarecorrectlyalignedtotheircountry’stradepotential,competitivenessandmarketopportunities.Andexportersneedit toidentifyproductandmarketdiversificationopportunitiesandstayabreastofcompetitionintheirmarkets.Theinternationalorganizationsanddonorcommunityalsoneed it toensure theirAid forTradeprogrammesarealignedtomarketdemandandtargetthemostpressingissuesfacingdevelopingcountries.

Tradeandmarketaccessdataisapublicgoodwherebenefitsgainedbyadditionalusersdonotcomeattheexpenseofexistingusers.Over the last10years ITChas tested twoapproaches to fund thecollectionanddisseminationofitstradetoolstodevelopingcountries1)auser-payapproachand2)freedissemination.Itsexperienceisthat the free dissemination approach is superior.

Trade relateddataanddecisionsupport toolsarenecessarybutnotsufficient toensurebetter trade relateddecisions.The data needs to be structured with a particular purpose and with clients’ needs in mind.Justasimportantistheneedtobuildthecapacityofinstitutionstoconductmarketanalysis.

ITC’sexperiencehasbeenthatdecisionmakers,whenarmedwiththerightinformationandprovidedwithtargetedtechnicalassistance,wereabletosubstantiallyimprovetheirtradedecisions.