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Tuesday, 22 April 2014 00:03 - - {{hitsCtrl.values.hits}}
Global trade patterns have changed dramatically in the last two decades. Emerging markets now account for 42% of world exports, up from 19% in 1990, or 52% excluding intra-EU trade. Asia has firmly established itself as the centre of the ‘made in the world’ vertical global supply chain, with China emerging as a mega-trader.
Trade is increasingly “unbundled” with countries no longer trading in goods so much as in “tasks”, such as design or assembly. Services trade is expanding faster than goods trade driven by improving communications; it cannot easily be measured at the border and some estimates put services at 40% of total trade now.
Historically trade growth has averaged about 1.4 times GDP growth. But since the 2008 peak, world exports have risen only 5%, while nominal GDP has grown more by than10%. Some fear that this slowdown is structural. We, however, believe trade growth will pick up and this ratio can be restored.
Growth in developed countries is accelerating while manufacturing, still the driver of goods trade, is coming out of the doldrums. Constraints such as lower trade finance availability and rising protectionism are fading. New multilateral trade pacts are in the works.
The next leg up in trade is likely to be fuelled by a further unbundling of the supply chain, by continuing growth and opening in emerging countries and by increasing horizontal trade in both intermediate and finished goods.
The report’s main findings include:
Emerging markets now account for around half of global trade; most countries have seen a big rise in the share of their trade with EM. From 1990-2012 the share of US trade with EM rose to 46% from 25%, Brazil’s to 57% from 25% and Korea’s to 60% from 16%.
Goods are increasingly ‘made in the world’, with global supply chains; the import content of exports has risen from 20% of total exports in the 1990s to 40% of total exports currently and is expected to rise to 60% by 2030.
Services trade is growing fast and is more important than it looks; trade in services has grown at an average 9.0% since 1990, higher than the 8.0% for goods trade.
The slowdown in trade growth since 2008 is mostly temporary; the ratio was highest in the 1990s - a golden decade for trade fuelled by the creation of the WTO and liberalisation in China and India.
Trade is set to accelerate but patterns will change; China is now a mega-trader - a position last held by colonial Britain, with trade significant not only as a share of world trade (11.5%) but also of its own GDP (47%).
Madhur Jha, Senior Global Economist at Standard Chartered, commented: “Trade is unlikely to grow as rapidly as it did in the 1990s or 2000s but we think that concerns about the lack of trade finance and a sudden end to supply chain expansion are overdone; we believe the trade-GDP ratio can regain the 1.3 to 1.5 range longer term.
“South-South trade and services trade are likely to gain importance over the coming years; in the WTO’s ‘high’ scenario, South-South trade balloons to around 43% of total world trade, more than doubling from current levels. China would augment its position as the mega-trader of this century, raising its share from a tenth to about a quarter of total trade.
“Asia remains the centre of inter-regional trade and we expect it to maintain its importance in world trade over the coming years, with the fastest growing trade routes likely to remain centred on Asia.”
