Volume 5, Issue 1 - Special Issue (2012): Microtrade - A New System of International Trade for Poverty Alleviation

Introduction to 2012 LDR Special Issue (No. 1). The 2012 special issue of the Law and Development Review features articles on microtrade, which have been presented at the 2011 Law and Development Conference held in Seattle, USA.

The conceptualization of a new form of trade, microtrade, is visualized to hold great promise in economic development of the producers belonging to LDCs and developing countries. In order to meet the goal of poverty reduction at a sustainable pace, the institutional, financial and logistical mechanisms for facilitating microtrade both at the international and national level needs to be built in a manner which ensures maximum efficiency. The paper deals with two fundamental aspects of development of microtrade. First, it delineates different aspects which would provide a strong substratum to the proposed microtrade regime. It explores the legal and institutional framework required for conduct of microtrade, which can be structured under the existing WTO regime and proposes necessary amendments to the WTO regime. Second, the paper explores financial aspects of the proposed microtrade regime. A case study of operation of micro-credit in the Indian scenario is undertaken in order to highlight the problems which have recently emerged in the microfinance sector. The scale of these problems has led the Indian government to propose a bill, regulating microfinance in India. Cue from this experience needs to be taken in order to move towards a foolproof system of financing microtrade at the local level.

This empirical study investigates the impacts of Information and Communication Technology (ICT), educational attainment, the rule of law and other determinantal variables on the growth of Gross Domestic Products (GDP) among 35 Least Developed Countries (LDCs) in Africa and Asia. The results of this empirical analysis on archival data from 1997 to 2007 show that while ICT expansion in LDCs has many positive impacts on GDP growth in these countries, the differences between countries in terms of the level of citizens’ educational attainment, the rule of law, governmental intervention in economic activities and the level of Foreign Direct Investment (FDI) can both enhance and restrict the relationship between ICT and GDP growth. This study proposes an e-commerce model called Virtual Bazaar. The model is adapted to the existing level of ICT infrastructure in LDCs in order to enable the micro-trade owners to sell their products directly to potential customers across the globe, hence increasing their level of incomes.

The present paper aims to illustrate an alternative trading regulation currently assumed by The Fair Trade Movement and a newly established concept of Microtrade in curving global poverty. The fair trade movement reflects microtrade activities by asserting voluntary initiatives to create mutual benefits between customers from the North and producers from the South. It has established a form of microtrading networks between impoverished producers and Northern importers/retailers oversaw by FLO (The Fair Trade Organization). While claiming to have achieved a certain level of poverty reduction, debate arises whether such appraisal renders a real impact. Both positive and negative feedbacks of the fair trade movement will be explored as well as its future proposal which aligns with microtrade activities.

Drawing on two action-research projects conducted between 2007 and 2011, this paper compares the benefits of pro-poor microtrade arrangements for smallholder litchi growers in northern Thailand and small-scale vanilla growers in northwestern Tanzania. The case studies combine various qualitative and participatory research methods with an in-depth analysis of the underlying social, economic and knowledge networks. Theoretically, our research is grounded in the concept of strategic niche management, which emphasizes networking, experiential learning, and the convergence of expectations among producers, exporters, consumers and supporting agencies. Our findings suggest that community-based microtrade with high-value agricultural products can be particularly beneficial for small producers and marginalized groups, such as women and the elderly. Evidence from the comparative study of the two cases further underscores the importance of external knowledge and innovation intermediaries in the formation of community-based and pro-poor microtrade arrangements. We conclude that long-term knowledge and innovation partnerships need to be established to successfully connect smallholder farmers to international markets and to carefully balance the power differentials among all actors along the supply chain.

As a new international economic policy, microtrade will face a whole host of issues, including potential legal cultural obstacles. Those legal cultural issues will arise as a result of the different and sometimes conflicting legal cultures of the varied participants within the different fora and communities involved in microtrade from the LDCs to the NGOs to the artisans within the exporting entities. This paper identifies many of the legal cultural issues involved in microtrade, with such identification ideally then permitting the amelioration of the negative impact on microtrade of those legal cultural issues. Many legal cultural issues will be explored, including the legal cultures associated with rural communities, women, international trade law, the microtrade organization, and the legal culture associated with small entities.

The concept of Microtrade is noteworthy because it can be a realistic policy alternative for poverty reduction in least developed countries (hereinafter LDCs). For the successful implementation of this concept, the following issues must be addressed: 1) the creation of demand, 2) supply and demand matching, and 3) shipping and distribution. In addressing these issues, public procurement can be a useful tool.In relation to creating demand, the preference for Microtrade products should be actively implemented. Public entities in developed countries can set targets for the purchasing of microtrade products and make efforts to meet these targets.For supply and demand matching, an e-procurement system should be executed. Technical assistance for strengthening the e-procurement system in LDCs and registration assistance for local producers are necessary. In this process, donor countries' international development institutions can take an active role.Incentives can be given to shipping companies which ship locally produced products (hereinafter LPPs) with very low costs. In the tendering stage of choosing shipping companies by donor countries' aid agencies, additional points can be given to enterprises which actively participate in providing shipping services for microtrade products.Aid and trade should complement each other, and “Aid for Trade” should be integrated with public procurement. In the long term, establishing certification of microtrade products will definitely facilitate this integration.