The State of Global Trade in 2024: How Developing Countries Can Navigate Stagnation and Embrace Services and South-South Trade

International trade is entering a period of profound structural change. Projections for 2024 indicate that global merchandise trade will grow by only about 2% in real terms—a notable slowdown from the historical average of roughly 4-5% per year. Yet beneath this modest headline lies a more complex reality: trade in services is expected to expand at nearly 5%, outpacing goods trade and signalling a fundamental shift in how the world exchanges value. For developing countries, the question is no longer whether to adapt, but how.

The trade-to-GDP ratio, which peaked at 25% in 2008, has stagnated ever since and levelled off in 2023. This figure represents a structural decoupling: trade growth is no longer outpacing economic output as it did for decades. Meanwhile, South-South trade has more than doubled from $2.3 trillion in 2007 to $5.6 trillion in 2023, offering an alternative pathway for economies that can no longer rely on the traditional export-led manufacturing model. The United Nations Conference on Trade and Development (UNCTAD), in its 2024 Trade and Development Report released on October 29, explicitly warns that lower-income economies find this old model increasingly constrained.

This article analyses these converging trends, explores the rise of services and intra-developing country commerce, and offers policy recommendations for strengthening domestic industries, fostering regional integration, and reforming global trade rules to build a more resilient framework for the Global South.

[IMAGE: Bar chart comparing merchandise vs services trade growth rates for 2024, with a line overlay of trade-to-GDP ratio since 2000.]

Why the Old Model Is Failing

Between 1995 and 2007, international trade grew at roughly twice the rate of global GDP—a golden era for export-led manufacturing. Developing countries, particularly in East Asia, rode this wave, lifting hundreds of millions out of poverty by producing goods for consumers in North America, Europe, and Japan. Yet that model, which served as the primary development strategy for a generation, is now showing clear signs of exhaustion.

UNCTAD’s 2024 Trade and Development Report lays out the diagnosis in stark terms: job creation, productivity gains, and economic transformation through manufacturing exports face rising barriers that were not present two decades ago. Three forces are primarily responsible.

First, protectionism has escalated sharply. Tariff and non-tariff measures by major economies have multiplied since the 2008 financial crisis, and the trend accelerated after 2020. Trade-restrictive measures affecting developing country exports—especially in sectors like textiles, electronics, and basic manufacturing—have increased by over 60% since 2015, according to Global Trade Alert data. Second, supply chains are being restructured. Reshoring, near-shoring, and friend-shoring initiatives in advanced economies are pulling production closer to home, reducing the opportunities for low-cost manufacturing hubs in the Global South. Third, technological change—automation, robotics, and artificial intelligence—is eroding the comparative advantage of cheap labour. A factory in Bangladesh or Vietnam can no longer compete on labour cost alone when a robot in a German plant can assemble products at a fraction of the human labour cost per unit.

The result is that for many lower-income economies, the manufacturing export path to development has narrowed. The share of manufacturing in GDP for low-income countries has stagnated or declined since 2010. Even the garment sector, a traditional entry point for industrialisation, faces headwinds from automation and sustainability requirements that favour larger, capital-intensive producers.

[IMAGE: Infographic showing the decline of manufacturing export contributions to GDP in selected low-income countries from 2000 to 2023.]

South-South Trade: A New Engine for Growth

If the old north-south trade model is faltering, a newer one is rising in its place. South-South trade—commerce between developing countries—has more than doubled from $2.3 trillion in 2007 to $5.6 trillion in 2023, according to UNCTAD statistics. This growth reflects not only rising demand within developing countries themselves but also a deliberate shift in trade policy and infrastructure investments.

The rise of intra-developing country commerce offers several advantages. First, it reduces dependency on traditional Northern markets, which are increasingly volatile due to geopolitical tensions and cyclical demand shocks. Second, the composition of South-South trade is often more diversified: it includes not just raw materials and commodities but also intermediate goods, machinery, and increasingly services. Third, cultural and geographic proximity can lower transaction costs and facilitate business relationships that are more resilient than those mediated by distant markets.

However, significant challenges remain. Infrastructure gaps—ports, roads, customs systems, and digital connectivity—between developing countries remain large. Non-tariff barriers, such as differing standards, cumbersome customs procedures, and limited mutual recognition of certifications, can add up to 20-30% to the cost of trade in some regions. Financial integration is also weak: cross-border payment systems, banking networks, and credit insurance for trade among developing countries are less developed than those linking developing to developed economies.

Regional trade agreements are beginning to address these bottlenecks. The African Continental Free Trade Area (AfCFTA), which entered into force in 2021, aims to create a single market of 1.4 billion people with a combined GDP of $3.4 trillion. Early results are promising: intra-African trade in services has grown 15% since the agreement’s launch, driven by fintech, logistics, and business process outsourcing. Similar initiatives in Southeast Asia (ASEAN Economic Community) and Latin America (Pacific Alliance) are lowering barriers and building cross-border digital infrastructure.

Digital platforms are also accelerating South-South flows. E-commerce platforms like Alibaba’s AliExpress, Jumia in Africa, and Mercado Libre in Latin America—while still dominated by domestic sales—are increasingly facilitating trade between developing countries in intermediate goods and services. The growth of mobile money systems (M-Pesa in East Africa, GCash in the Philippines) is enabling small and medium enterprises to participate in cross-border trade without traditional banking infrastructure.

[IMAGE: Map with arrows showing increasing trade volumes between Africa, Asia, and Latin America from 2007 to 2023, with bubble sizes representing trade value.]

The Services Revolution: Opportunities for Developing Countries

While merchandise trade stagnates, services trade is surging. The World Trade Organization (WTO) estimates that global services trade grew 9% in 2023 and is on track for 5% growth in 2024. Even more striking, transport and travel services—both labour-intensive sectors—posted double-digit growth in the first quarter of 2024. This shift opens a new frontier for developing countries, many of which have untapped potential in services exports.

Services trade currently accounts for about 25% of global commerce by value, but its share is rising. Unlike manufacturing, which often requires large capital investments in factories and equipment, services can be exported with relatively low entry barriers—a laptop, an internet connection, and a skilled workforce can generate significant export revenue. Business process outsourcing (BPO) in India and the Philippines, IT services in Kenya and Rwanda, and tourism in Thailand and Costa Rica are well-known examples. But new opportunities are emerging in digital services: telemedicine, online education, creative industries (animation, game development), and professional services (accounting, legal, engineering).

For the Global South, the services revolution offers several strategic advantages. First, services are less vulnerable to tariff barriers than goods, since most services are traded through digital channels or through the movement of people (Mode 4 under the General Agreement on Trade in Services). Second, services can be both exported and consumed domestically, allowing economies to develop capacity that serves both markets simultaneously. Third, services often have higher value-added per worker than low-end manufacturing, offering the potential for faster wage growth and skills development.

Yet capitalising on this shift requires deliberate policy action. Developing countries need to invest in digital infrastructure—broadband, data centres, payment systems—to ensure reliable connectivity. They also need to reform education and training systems to produce graduates with the digital and soft skills demanded by global services markets. Visa policies, both for business travel and for temporary movement of service providers (Mode 4), remain a major barrier; estimates suggest that liberalising visa rules for services could boost global GDP by $1.5 trillion annually.

The UNCTAD 2024 report highlights a further dimension: services trade can complement and strengthen manufacturing. For example, logistics services, quality assurance, and design services are essential inputs for manufacturing exports. By building services capabilities, developing countries can upgrade their participation in global value chains without necessarily moving into heavy industry.

Policy Recommendations for a Resilient Global South

The convergence of trade stagnation, the services revolution, and the rise of South-South commerce demands a new policy framework for developing countries. Based on the analysis above, five priority areas emerge.

First, prioritise regional integration. South-South trade offers the most realistic pathway for growth in the near term. Governments should accelerate the implementation of existing regional trade agreements (AfCFTA, ASEAN, Pacific Alliance) by reducing non-tariff barriers, harmonising standards, and investing in cross-border infrastructure. Customs modernisation and single-window trade facilitation systems can cut transaction costs by 15-20%.

Second, build services export capacity. This means targeted investments in digital infrastructure, vocational training for services sectors, and regulatory frameworks that enable e-commerce and cross-border data flows. Countries should also negotiate Mode 4 commitments in trade agreements to facilitate the temporary movement of service professionals.

Third, diversify away from primary commodity dependence. Many developing countries still rely heavily on a few mineral or agricultural exports. South-South trade can help diversify markets, but domestic value addition—processing raw materials before export—must be a priority. Policies that encourage local processing through tax incentives and special economic zones, coupled with services links (logistics, quality control), can create more resilient economies.

Fourth, reform the multilateral trading system. The WTO’s current rules, designed in the 1990s, do not adequately address the needs of developing countries in a services-driven, digital economy. Developing countries should push for binding disciplines on digital trade, e-commerce, and services liberalisation, as well as for special and differential treatment that recognises their constraints. The upcoming WTO Ministerial Conference is a crucial opportunity to advance these issues.

Fifth, strengthen domestic industries through strategic industrial policy. The old export-led manufacturing model may be fading, but that does not mean abandoning industry altogether. Instead, countries should pursue a "services-and-industry" hybrid: using services (digital platforms, logistics, finance) to support manufacturing that serves regional markets and domestic demand. Government procurement, targeted subsidies for R&D, and partnerships with multinational firms can help build domestic capacity in strategic sectors like agribusiness, renewable energy components, and pharmaceuticals.

The path forward for the Global South is not about returning to the past, but about embracing a new structural reality. Trade stagnation in goods is not a disaster—it is a signal that the centre of gravity is shifting. Developing countries that invest in services, deepen South-South ties, and modernise their trade policy frameworks can not only navigate 2024’s headwinds but build a more resilient foundation for the decades ahead.

[IMAGE: Stylised world map with glowing trade routes connecting developing regions (Africa, Asia, Latin America) in green and blue. Arrows flow predominantly between Global South countries, with icons representing services (airplane, laptop, digital cloud) and small factories. Background fades to soft gradient. No text or watermark.]