Deep reliance on commodities persists, emerging nations need to enhance value to reverse the trend
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In the span of a decade, the world has witnessed a shift in the global trade landscape, with commodity exports accounting for a decreasing share of international trade. According to recent data, commodity exports accounted for 32.7% of international trade in value terms between 2021 and 2023, a drop from 35.5% a decade earlier.
This decline is particularly prevalent in structurally weak and vulnerable economies, affecting more than 80% of least developed countries, landlocked developing countries, and roughly 60% of small island developing states. Africa, Middle and Western Africa countries, Central Asia, and South America are regions where resource wealth plays a central role in trade, with many countries earning over 80% of their export revenues from primary commodities.
Energy products continue to dominate global commodity trade, making up 44.5% of the total value during 2021-2023. However, this share was significantly smaller than a decade before at 52.1%. Africa's total earnings from commodity exports fell by over US$25 billion from a decade before, offsetting growth in the agricultural and mining sectors. The decrease in energy products from Nigeria, Angola, and Algeria was a major factor in Africa's weakening position in commodity exports.
The value of world trade in goods went up 25.6% during the same period, while that of commodity trade expanded relatively slowly at just 15.5%. Despite this, mining products' export value increased by 33.4% during 2021-2023, averaging US$1.65 trillion annually.
The decline in Africa's commodity exports was not matched by growth in other sectors, leading to a net loss in earnings. This situation highlights the need for developing countries to reduce their reliance on primary commodity exports and foster more diversified, resilient economies.
Various strategies have been proposed to address this issue. Key among these are regional integration and cooperation, digital transformation, trade facilitation and targeted reforms, industrial diversification and value addition, strategic investments and technology adoption, broad-based economic diversification, and commodity market reforms.
These approaches aim to transform the geographical and structural constraints of least developed countries, landlocked developing countries, and small island developing states into opportunities for sustainable and inclusive growth. By reducing their reliance on primary commodity exports and fostering more diversified, resilient economies, these countries can build economic resilience in the face of rising global trade uncertainties and tariffs.
The United Arab Emirates and Saudi Arabia were responsible for more than half of the Western Asian sub-regional total in commodity exports. Interestingly, according to the latest edition of The State of Commodity Dependence report, two thirds of developing countries, or 95 out of 143, remained commodity dependent during 2021 and 2023. This underscores the global concern surrounding commodity dependence, as it hinders industrial development and threatens countries' fiscal stability when global prices go volatile.
In conclusion, while the global trade landscape has shifted, commodity dependence remains a significant challenge for many developing countries. The strategies proposed aim to transform this challenge into an opportunity for sustainable and inclusive growth.
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