There is a correlation between economic growth and rising international trade, making trade development critical for developing economies to raise living standards and eliminate poverty.
Growth-enhancing factors include increased competition from international firms, improving economic efficiency. This leads to under-performing local firms being replaced by more dynamic ones, increased economies of scale that lower costs, and greater learning and innovation through market maturation.
Trade developments three components and the value chain
Trade development seeks to align and develop the necessary infrastructure for trade so that it complements and act symbiotically with national trade policy and local market conditions. To understand trade development, it is necessary to break down its three components, being policy, economics and infrastructure, supported by its underlying value chain.
Policy
In developing trade policy, government must seek to align its mandate with that of local industry, so policy supports sector development instead of inhibiting it through excessive bureaucracy.
Concurrently, industry should where possible seek to coordinate development activities in a way that complements government policy, supports industry development and attracts local and foreign direct investment (FDI). This source of capital is vital to stimulating business and sector development and given how governments are competing with one another for both local and FDI, policy must speak to the concerns of investors in balance with other competing demands.
Economics
While high quality policy can be developed by government in collaboration with industry, without a comprehensive understanding of local market conditions, trade cannot be effectively developed and promoted. Through analysing supply and demand factors, future market opportunities and where growth can be established, supported and sustained, trade can be developed to best suit the local context of any national or regional economy,
Infrastructure
The availability of infrastructure and support services is critical in establishing and developing competitive industries that can spark the growth of national and international trade. Establishing needed infrastructure, and leveraging existing infrastructure and available service capacity provides the basis for the investment and the development of trade.
Examples of vital infrastructure include transport infrastructure – including port capacity, rail linkages, air links, and road infrastructure – and IT and communications infrastructure. Infrastructure is backbone upon which an economy functions, and is vital for creating efficiencies and lowering the cost of doing business.
Value Chain
The industry value chain is a natural accompaniment of the trade development process. It consists of the supply and demand sides of any sector, primarily split into manufacturing and distribution. Understanding the flows, volumes and cost of trade – which is borne out through the value chain – is critical in addressing any internal or external constraints for increased economic value addition and thereby, the development of trade.
The components of trade development – policy, economics and infrastructure – plus the value chain, are supported by the disciplines of programme management, and training and development.
Programme management and training and development within trade development
Given the different moving parts that comprise trade development, having an established and effective programme management framework in place is critical to guaranteeing trade success.
The different components of trade development affect one another as a matter of course. If there blockages within the economy, as an example, or policy has been poorly designed or implemented, the other components suffer. Programme management, in short, seeks to align the different parts of trade development as discussed above so that they operate as a symbiotic ecosystem, with each complimenting the other.
Training and development supports the evolution of national and international trade. This is because without the necessary skills and expertise within a sector or economy, the ability to efficiently execute against trade policy or using available infrastructure, or developing new trade linkages, becomes difficult and inefficient.
In this way, the quality of a state’s education system, and the skills support available within a given sector or industry, as a material impact upon trade development, and thereby, an economy’s potential for growth.
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