Building a Resilient Trade Architecture in the Global South

The following excerpt is from Chapter 7 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.

Over the past few years, tariffs, export controls, and regional conflicts have disrupted global trade, and Trade Policy Uncertainty (TPU)^[1] has led to supply chain shocks. From food supply chains impacted by the Russia-Ukraine war to TPU caused by the United States’ (US) tariff policies, and most recently, the war in the Middle East which has created an oil and gas crisis as a result of the closure of the Strait of Hormuz and continued attacks on infrastructure in the region. Moreover, traditional trade routes have struggled to accommodate the typical volumes that traverse them, making the search for new routes and new markets a defining feature of the past decade. These disruptions have exposed the fragility of existing trade architecture and accelerated efforts to build more resilient and diversified alternatives.

As estimated by the UN Trade and Development (UNCTAD),^[2] nearly two-thirds of global trade takes place within value chains. However, policies have not adequately recognised that the next frontier of trade that must be unlocked is South-South Trade. A BCG analysis shows that countries in the Global South are the fastest growing consumer markets with their growing and increasingly aspirational populations.^[3] Fulfilling this potential requires addressing deep connectivity gaps—whether physical, institutional, or digital—that have implications for the speed and cost of doing business.

The focus of global industrial policy—which includes economic diversification, technological sovereignty, or job creation—has shifted to the Global South. These countries are going through rapid industrialisation in a rapidly digitising world. They must address the traditional brick-and-mortar industrial issues of hard manufacturing while also keeping up with the age of internet technology. This transformation is unfolding even as some of these countries, particularly in Africa, experience significant political shifts.

South-South Trade: The Future of Growth

UNCTAD’s Trade and Development Report 2025 found that exporters in the Global South are diversifying their sourcing and destinations in tandem. The first came as a response to the COVID-19 shocks that revealed the fragilities created by overdependence on Chinese imports of critical goods. The urge to diversify export destinations came from the shock of the rate at which the US started looking inwards. The same report found that the old hub-and-spokes model of trade flows was being rapidly replaced by web-like patterns. This decentralisation of trade has been driven by moves toward regional integration and growth. However, as UNCTAD notes, while the value of South- South merchandise trade increased from US$505.6 billion in 1995 to US$6.17 trillion in 2024; North-North Trade still maintains a lead at US$9.11 trillion in 2024.

There are several reasons why more trade finance needs to move toward the Global South. First, it is competitive in terms of production costs. The costs of land and labour have become prohibitive and are not ideal for scaling production and industrialisation in the Global North. For instance, the cost of production of a smartphone in India is US$408 compared to US$3,5005 in the US. This is a systemic issue that cannot be addressed by traditional capitalist means. In terms of value-chain creation, this implies that lead firms in the Global North are drawn to production markets in the Global South where there is a cost advantage and they can continue production at scale. At the same time, lead firms in new sectors of the digital economy tend to be in the Global South, providing momentum to South-South trade.

Second is the sustainability dimension. Countries in the Global South have the additional responsibility of ensuring that trade and development take into account the environmental impact of growth. Sustainable trade practices often increase the costs of trade and also slow scaling of production. However, ignoring environmental considerations would entail heavy long-term risks that the Global South cannot afford.

Critical Minerals, Industrial Policy, and a New Trade Architecture

In terms of the most tangible potential for future growth, countries in Africa stand out compared to those in Asia and Latin America. Policymakers and leaders in the continent themselves recognise this, as evidenced by the signing of the African Continental Free Trade Area (AfCFTA) agreement in 2018 which entered into force in 2021. It is also a crucial part of the conversation around critical mineral use and supply which has become a cornerstone of modern geoeconomic considerations. Disruptions in critical mineral supply have a domino effect on a wide range of sectors, from semiconductors and batteries to downstream industries like machine manufacturing. The specific geographic endowments that the continent enjoys are unique compared to other regions. The demographic dividend that Africa benefits from further strengthens this position. At present, no other continent offers conditions of economic productivity as closely aligned as Africa, making it an ideal case study.

As owners of upstream value chain products, African countries should be reaping the benefits of this resource ownership. The AfCFTA is part of an effort to ensure this outcome and provides the basis for modern economic interaction with the African continent. Analysis conducted by an African trade union collective shows that following the implementation of the AfCFTA, intra-African trade grew from US$69 billion in 2019 to US$81 billion in 2023 within just two years.^[6]

The next piece of this conversation concerns BRICS, a project now under stress due to the conflict that Iran and the UAE, both new members of the grouping, are embroiled in albeit by extension. The bloc has made progress in conversations related to customs cooperation and energy (ownership, processing, and consumption). UNCTAD estimates that the group accounts for 27 percent of global GDP, and 68 percent of the GDP of the Global South.^[7] In 2024, intra-BRICS trade accounted for only 5 percent of world trade but still accounted for 20 percent of South-South trade. This implies that 10 countries accounted for 20 percent of South-South trade, excluding petroleum which is not traditionally included in merchandise trade calculations.

Countries in the Global South have the additional responsibility of ensuring that trade and development take into account the environmental impact of growth.

In addition, the Global South countries are coordinating their industrial policy responses. There is a similarity in positions on issues of supply chain diversification and job creation. The overdependence on source markets, and in recent times, specific consumer markets—as seen in the upheaval caused by the US’s unilateral use of tariffs to disrupt international trade—has spurred this effort. There is a push for greater integration of Global South economies through value-chain integration.

The failure of the World Trade Organization’s 14th Ministerial Conference has only underlined the urgency of improved policy coordination in the Global South, independent of the international system. This is evident in new regional agreements that aim to address near-shoring and friend-shoring, as well as the move towards more bilateral and regional trade agreements within the Global South. Countries are working closely on industrial policy issues of economic diversification. Examples include India’s Production Linked Incentives Programme and the new allocations in China’s 2026 Five-Year Plan.

While the economic rationale for South- South trade is unequivocally robust, its realisation remains physically and institutionally constrained. The 2026 Middle East crisis has exposed the reality that Global South commerce remains dangerously dependent on maritime infrastructure and strategic chokepoints. This is discussed in detail in the following section.

Connectivity Conundrums and Potential Solutions

The disruption of the Strait of Hormuz, which facilitates roughly 20 percent of global oil flows, has transformed theoretical supply chain vulnerabilities into immediate macroeconomic shocks.^[8],^[9] This overdependence on a limited number of maritime chokepoints is now universally recognised as a massive structural risk, prompting leaders of ASEAN (Association of Southeast Asian Nations) and GCC (Gulf Cooperation Council) to accelerate multilateral discussions on volatile corridors and complementary land-sea infrastructure.^[10]

Compounding this maritime exposure is the chronic structural penalty borne by landlocked economies—some 32 of them, nearly all located in the Global South across Africa, Asia, and Latin America. These developing countries face structurally higher trade costs, acute dependence on transit neighbours, and vulnerability to politically motivated border closures.^[11] The Programme of Action for Landlocked Developing Countries for the Decade 2024–2034 emphasises the need for South-South cooperation and highlights the significance of international development cooperation in fostering economic resilience, trade facilitation, and technology transfer.^[12]

Attempts have been made to address these challenges by developing alternative corridors. However, the proliferation of competing corridor architectures represents both an opportunity and a fragmentation risk. Multiple initiatives now target Global South connectivity, including China’s Belt and Road Initiative,^[13] the EU’s Global Gateway,^[14] the India-Middle East- Europe Economic Corridor (IMEC),^[15] the Trans-Caspian Middle Corridor,^[16] and the Lobito Corridor.^[17] These reflect competing visions of who anchors Global South connectivity, making coordination between systems politically costly even when it is economically rational. The risk therefore is that cargo halts at the boundary between competing blocs not as a result of lacking infrastructure but because of geopolitical rivalries.

Multimodal connectivity considerations also extend across the African continent, as the Cape of Good Hope has emerged as the preferred alternative to the Suez Canal. This is due to the reduced threat of conflict along the route and the ability of larger vessels to navigate it. Industrial and trade policy on the continent has become increasingly relevant for the rest of the world, creating openings for the harmonisation of trade, investment, and customs rules.

The digital dimension of connectivity further complicates this picture due to information security concerns. Physical infrastructure alone is insufficient to enable the kind of deep South- South commerce that the economic logic of integration demands. Digital trade platforms and AI-enabled logistics optimisation now serve as the connective tissue of regional commerce.

In short, the connectivity challenge requires simultaneous investments in resilient physical, institutional, and digital systems.

Across the Global South, governments are investing in infrastructure to improve connectivity. A new generation of corridor investments and institutional architectures has demonstrated both significant achievements and persistent challenges.

There have been institutional advancements across continents. The AfCFTA now encompasses 54 of 55 African Union member states, covering a combined market of 1.3–1.4 billion people and a GDP of over US$3.4 trillion.^[18] Physical corridor construction is proceeding in parallel: the 1,300-kilometer Lobito Corridor linking Angola, the Democratic Republic of Congo, and Zambia is expected to play a crucial role in reshaping Africa’s critical-mineral supply chains.^[20] The Trans-Caspian Middle Corridor recorded total container traffic of 76,900 TEUs, marking a 36-percent increase in 2025 compared to 2024.^[21] In South America, the 2,300-kilometer Capricorn Bioceanic Corridor will connect Brazil, Paraguay, Argentina, and Chile, potentially reducing freight costs by up to 40 percent and cutting shipping times by 15 days.^[22] In the Middle East, the GCC Rail Network aims to link all six Gulf states.^[23] Yet the gap between what is being built and what is needed remains formidable, and three structural deficits stand out.

The first structural deficit is the financing gap. The African Development Bank estimates that US$32 billion must be invested annually in connectivity infrastructure to support AfCFTA’s goals, against a continent-wide infrastructure financing gap of US$130–170 billion.^[24] Africa also faces an additional estimated US$100 billion trade finance gap.^[25] Similar financing shortfalls are observed across other connectivity projects.

The second structural deficit is institutional fragmentation. Corridors without regulatory harmonisation create new inefficiencies and can increase transaction costs rather than reduce them. The Middle Corridor, for example, lacks coordinated governance, applies tariff structures disproportionate to the distances involved, and faces significant delays during customs clearance.^[26] Divergent technical standards, incompatible digital systems, and the absence of mutual-recognition agreements mean that goods frequently undergo multiple inspections, redundant documentation requirements, and prolonged dwell times at border crossings.

The third structural deficit is a speed mismatch between geopolitical disruption and infrastructure delivery. The surge in Middle Corridor traffic amidst the 2026 crisis in the Middle East places considerable pressure on existing infrastructure: cargo volumes at the ports of Aktau and Baku have surged, and container processing times have increased roughly threefold.^[27] Corridors that take years to build are unable to scale at the speed of the crisis. The primary lesson is that a resilient trade architecture requires anticipatory investment and pre-positioned capacity, rather than reactive interventions after chokepoints have already collapsed.

There are three possible remedies. First, it is important to explore how various multilateral banks can move toward coordinated financing pools, deploying blended finance structures that combine concessional and commercial capital at the scale that the challenge demands. Second, digital single-window customs platforms, mutual recognition of standards, and harmonised transit protocols must advance in tandem with physical construction. Third, participating states should coordinate to collectively underwrite corridor risk, replacing ad-hoc sovereign balance-sheet exposure with pooled multilateral instruments.

A resilient trade architecture requires anticipatory investment and prepositioned capacity, rather than reactive interventions after chokepoints have already collapsed.

Conclusion

The Global South now accounts for 40 percent of global output and 44 percent of merchandise trade.^[28] From trade policy uncertainty and regional conflicts to the 2026 crisis in the Middle East that closed the Strait of Hormuz, the vulnerabilities that have defined this decade have exposed how precariously the Global South’s integration remains tethered to fragile infrastructure, chokepoints, and institutions. The response is underway, and it is no longer aspirational. The question before policymakers is not whether South-South integration will accelerate—that trajectory has become structurally inevitable. The question is whether the new architecture will be designed with the institutional depth that genuine resilience requires.

Physical corridors must be accompanied by institutional infrastructure: customs harmonisation, digital trade facilitation, and shared insurance frameworks, because hardware without institutional ‘software’ merely replicates the transaction cost penalties it seeks to overcome. The new corridors must be designed from inception for resilience. Corridors built without diversified routing and security architecture will simply reproduce the fragility of the system they are intended to replace.

Global and regional value chains must also reflect the realities and needs of the Global South. The move toward web-like patterns of value chains implies that local capabilities and competencies are being created across multiple stages, with no neat distinctions between upstream and downstream countries.

The architecture to match the economic weight of the Global South is under construction. The task is to ensure that what is built is not merely an infrastructure of trade and connectivity but an infrastructure of sustainability and resilience.

Jhanvi Tripathi is Associate Fellow, Observer Research Foundation.

Samriddhi Vij is Associate Fellow, ORF Middle East.

Endnotes

^[1] Feiyun Sha, Changxu Ding, Xiaoyu Zheng, Jun Wang, and Yafang Tao, “Weathering the Policy Storm: How Trade Uncertainty Shapes Firm Financial Performance Through Innovation and Operations,” International Review of Economics & Finance 102, no. 104274 (September 2025), https://doi.org/10.1016/j.iref.2025.104274.

^[2] “10 Trends Shaping Global Trade in 2026,” UN Trade and Development (UNCTAD), January 15, 2026, https://unctad. org/news/10-trends-shaping-global-trade-2026#:~:text=6.,up%20from%2038%25%20in%201995.

^[3] Aparna Bharadwaj, Cristián Rodríguez-Chiffelle, Leandro Urbano, Suncica Zdunic, and Daniel Azevedo, “In a Multipolar World, the Global South Finds Its Moment,” Boston Consulting Group, April 22, 2025, https://www.bcg. com/publications/2025/in-a-multipolar-world-global-south-finds-its-moment.

^[4] “Trade and Finance: Reshaping the Global South Amid Uncertainty,” Trade and Development Report, 2025, https://unctad. org/system/files/official-document/tdr2025ch4_en.pdf.

^[5] Kif Leswing, “Here’s How Much a ‘Made in the USA’ iPhone Would Cost,” CNBC, May 23, 2025, https://www.cnbc. com/2025/04/11/heres-how-much-a-made-in-the-usa-iphone-would-cost.html.

^[6] Nelly Nyagah, “A Five-year Review of the AfCFTA Through a Trade Union Lens,” AfCFTA | Social Justice and Decent Jobs in One African Market (blog), July 4, 2025, https://tradeunionsinafcfta.org/a-five-year-review-of-the-afcfta-througha- trade-union-lens/.

^[7] “Trade and Finance: Reshaping the Global South Amid Uncertainty”.

^[8] Candace Dunn and Justine Barden, “Amid Regional Conflict, the Strait of Hormuz Remains Critical Oil Chokepoint,” U.S. Energy Information Administration, 2025, https://www.eia.gov/todayinenergy/detail.php?id=65504.

^[9] Al Jazeera Interactive Map, “The World’s Most Strategic Straits and Channels,” Al Jazeera, 2026, https://interactive. aljazeera.com/aje/2026/mapping-oil-hormuz-chokepoint/.

^[10] Abdulwahed Jalal Nori, “Cooperation in Global South is on the Rise,” China Daily, 2025, https://global.chinadaily.com. cn/a/202512/12/WS693b6ab0a310d6866eb2e3e0.html.

^[11] “International Day of Awareness of the Special Development Needs and Challenges of Landlocked Developing Countries,” United Nations, 2025, https://www.un.org/en/observances/landlocked-developing-countries-day.

^[12] “South-South Cooperation Plays a Critical Role in the New Programme of Action for Landlocked Developing Countries for the Decade 2024–2034,” United Nations Office for South-South Cooperation, 2025, https://unsouthsouth.org/2025/02/20/south-south-cooperation-plays-a-critical-role-in-the-new-programme-of-action-for-landlockeddeveloping- countries-for-the-decade-2024-2034/.

^[13] James McBride, Noah Berman and Andrew Chatzky, “China’s Massive Belt and Road Initiative,” Council on Foreign Relations, 2023, https://www.cfr.org/backgrounders/chinas-massive-belt-and-road-initiative.

^[14] European Commission, “Global Gateway,” 2021, https://commission.europa.eu/topics/international-partnerships/ global-gateway_en.

^[15] Afaq Hussain and Nicholas Shafer, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty,” Atlantic Council, 2025, https://www.atlanticcouncil.org/in-depth-research-reports/report/ the-india-middle-east-europe-economic-corridor-connectivity-in-an-era-of-geopolitical-uncertainty/.

^[16] Karel Valansi, “Why the Middle Corridor Matters Amid a Geopolitical Resorting,” Atlantic Council, 2025, https://www. atlanticcouncil.org/content-series/ac-turkey-defense-journal/why-the-middle-corridor-matters-amid-a-geopoliticalresorting/.

^[17] Prithvi Gupta, “The Lobito Corridor: The West’s Bid Against Chinese Domination in Central Africa,” Observer Research Foundation, 2023, https://www.orfonline.org/expert-speak/the-lobito-corridor-the-west-s-bid-against-chinesedomination- in-central-africa.

^[18] Matthew Goosen, “$10B on the Table: AfCFTA’s High-Stake Industrial Gamble,” Energy Capital & Power, 2026, https:// energycapitalpower.com/10b-on-the-table-afcftas-high-stake-industrial-gamble/.

^[19] “The Lobito Corridor,” OECD Emerging Markets Forum Background Note, 2025, https://www.oecd.org/content/ dam/oecd/en/events/2025/04/oecd-emerging-markets-forum/Panel%202_OECD%20EMF%20Background%20 Note%20-%20The%20Lobito%20Corridor.pdf.

^[20] A TEU or Twenty-foot Equivalent Unit is the unit of measurement used to determine cargo capacity for container ships and terminals.

^[21] Tural Heybatov, “Middle Corridor Faces New Crisis: Key Challenges Ahead,” Caspian Post, 2026, https://caspianpost. com/analytics/middle-corridor-faces-new-crisis-key-challenges-ahead.

^[22] “The Capricorn Bioceanic Corridor in South America,” OECD Emerging Markets Forum Background Note, 2025, https://www.oecd.org/content/dam/oecd/en/events/2025/04/oecd-emerging-markets-forum/Panel%202_ OECD%20EMF%20Background%20Note%20-%20The%20Capricorn%20Bioceanic%20Corridor%20in%20 South%20America.pdf.

^[23] Samriddhi Vij, “The Gulf Railway Project: Bridging the Gaps between Vision and Reality,” Observer Research Foundation Middle East, 2025, https://orfme.org/expert-speak/the-gulf-railway-project-bridging-the-gaps-betweenvision- and-reality/.

^[24] “Africa’s Infrastructure Investment Horizon,” Highways Today, 2025, https://highways.today/2025/11/18/africasinfrastructure- investment-horizon/.

^[25] “Afreximbank Launches 2025 Report on African Trade in a Shifting Global Financial Landscape,” African Export- Import Bank, 2025, https://www.afreximbank.com/afreximbank-launches-2025-report-on-african-trade-in-a-shiftingglobal- financial-landscape/.

^[26] “Middle Trade and Transport Corridor: Policies and Investments to Triple Freight Volumes and Halve Travel Time by 2030,” World Bank, 2023, https://thedocs.worldbank.org/en/doc/6248f697aed4be0f770d319dcaa4ca52-0080062023/ original/Middle-Trade-and-Transport-Corridor-World-Bank-FINAL.pdf.

^[27] Tural Heybatov, “Middle Corridor Faces New Crisis: Key Challenges Ahead,” Caspian Post, 2026, https://caspianpost. com/analytics/middle-corridor-faces-new-crisis-key-challenges-ahead.

^[28] “First Meeting of the Council of the Global South Research Center,” UN Trade and Development, 2025, https://unctad. org/osgstatement/first-meeting-council-global-south-research-center.