LLDCs face steep trade losses amid global tariff surge: UNDP
For every one per cent increase in global tariff rates, LLDCs suffer an additional four per cent decline in trade volumes compared to non-LLDCs, compounding already significant income losses and structural disadvantages, according to 'An Economic Diversification Push for LLDCs: Achieving the Awaza Programme of Action,' a new policy paper.
LLDCs, which rely heavily on neighbouring transit countries, face longer transit times and greater exposure to commodity price volatility. These challenges have left their GDP levels approximately 20 per cent lower than comparable coastal economies. With US tariff hikes now adding to the strain, without proactive measures, LLDCs risk being locked into cycles of economic stagnation and marginalisation, the policy paper released at the start of the Third UN International Conference on Landlocked Developing Countries (LLDC3), concluding today in Turkmenistan, cautions.
'A strategic push to diversify products and access new markets would allow LLDCs to navigate evolving trade dynamics. These include a mix of proactive and defensive strategies,' the paper said.
The report presents two future scenarios. Under a business-as-usual trajectory, LLDCs will remain trapped in a narrow economic model, currently contributing just 1.3 per cent to global exports, 82 per cent of which are unprocessed primary commodities. Trade costs for LLDCs are on average 1.4 times higher than those of coastal developing countries, leaving them highly vulnerable to commodity price swings and external shocks.
Alternatively, a strategic economic diversification scenario envisions LLDCs strengthening regional trade ties and expanding partnerships beyond the US. The shift is expected to increase engagement with the European Union and China, which has emerged as a critical player through its Belt and Road Initiative (BRI). The BRI continues to provide vital infrastructure and digital connectivity, offering LLDCs access to alternative global markets and greater opportunities for investment in value-added sectors.
'To overcome geographic and economic constraints, LLDCs must make deliberate policy choices. When governments adopt reforms that reduce reliance on traditional transit arrangements, LLDCs can systematically address their unique challenges, turning geographic adversity into opportunities for inclusive and sustainable growth', stated Ivana Zivkovic, UN assistant secretary-general and director of UNDP's Regional Bureau for Europe and the Commonwealth of Independent States.
The UNDP's policy recommendations align with the Awaza Programme of Action (APoA), calling for bold reforms in regional integration, South-South cooperation, and investment in infrastructure and economic diversification.
'Global trade is rebalancing; traditional patterns are shifting as major players adjust their roles. Regardless of the final trade policy landscape, rebalancing presents a chance for LLDCs to secure a more favourable position if strategic policies are enacted,' the paper suggested.
LLDCs face worsening trade risks amid tariff hikes, with UNDP cautioning of disproportionate impacts. A new policy paper urges economic diversification, regional trade, and stronger China-EU ties. Released at LLDC3 in Turkmenistan, it aligns with the Awaza Programme of Action, calling for reforms to turn geographic constraints into growth opportunities.
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