A new United Nations Conference on Trade and Development (Unctad) report offers a decidedly different approach to how the world, and developing countries in particular, could escape the current low-growth reality.

The ‘Trade and Development Report 2014’ argues that, given the insufficiency of global demand, it is highly unlikely that international trade alone will be able to kick-start economic growth. It notes that, six years after the onset of the global financial crisis, international trade remains “lacklustre”, with merchandise trade having grown at around 2% in volume in the first few months of 2014 – a rate that remains below the growth of global output.

The report was published as South Africa’s current account deficit widened to 6.2% of gross domestic product in the second quarter, owing substantially to a fall in exports as a result of a five-month platinum- sector strike. It also comes as government seeks to stimulate exports as part of an agenda to narrow the deficit and spur industrialisation.

Presenting the contents of the report in Johannesburg, Unctad econo- mist Alex Izurieta said that international trade had slowed as a result of weak global demand. He also argued that demand was unlikely to strengthen materially in the near term, owing to a still weak global recovery. Unctad expects global growth of between 2.5% and 3% in 2014.

The way to expand trade at global level is through a “robust domestic-demand-led output recovery at national level”, rather than through the current emphasis on the cost of trade.

In the report, Unctad outlines a “balanced-growth scenario” pre- mised on: income policies that support growth of demand; growth- enhancing fiscal policies; industrial policies to promote private investment and structural transformation; regulation of finance and capital controls to stabilise global financial markets; and development- orientated trade agreements.

Such policy prescriptions mesh with South Africa’s current deliberations on the introduction of a national minimum wage, as well as using public infrastructure investment programmes to stimulate demand for locally made manufacturing inputs.

However, there is less alignment in the area of trade policy, where South Africa aims to bolster the competitiveness of its tradeables sectors in a bid to materially increase exports, particularly the export of manufactured products.

“It is possible to achieve higher levels of global growth of above 6% to 7% continuously over the next ten years through a coordinated effort to press the accelerator on fiscal support,” Izurieta, who co-authored the report, argues.

Such support would be in the form of higher government spending on infrastructure, raising private-sector investments in productive activities and income policies that help bolster wages and, in so doing, create new demand.

To support such an outcome, Unctad says developing countries should be allowed sufficient “policy space” to pursue proactive trade and industrial policies as part of the Post-2015 Development Agenda, currently under consideration.

It also cautions developing countries not to enter into multilateral and bilateral agreements that will further erode their policy space to protect domestic industries, or to limit government’s ability to maximise the rents they are able to extract from the resources sector.