level 2 Recent trends in trade Marc Bacchetta ERSD - WTO
Trends in trade Dramatic increase in both the volumes and values of trade between 1980 and 2011, mostly manufactured goods. World trade grew much faster than GDP. New protagonists have emerged in world trade. Developing countries and in particular Asia s share of world trade have significantly risen over time. Both developing and developed countries have become less specialized in exporting particular products. Trade has become more regionalized in most parts of the developing world but this trend is most pronounced in Asia. Trade is mainly driven by a few big firms.
Volume of world merchandise exports and gross domestic product, 1950-2012 (Annual percentage change)
World merchandise trade volume and real GDP, 1980-2011 (annual percentage change) Regional Trade Policy Course
Asia: total merchandise exports and imports in volume, 2005-2012 (Annual percentage change) Exports Imports
Shares of selected economies in world merchandise exports, 1980 (percentage share) Regional Trade Policy Course
Shares of selected economies in world merchandise exports, 2011 (percentage share) Regional Trade Policy Course
Regional shares in world merchandise exports, 2005 and 2012 Regional Trade Policy Course
WTO Members share in world merchandise trade, 2012 Regional Trade Policy Course
WTO Members share in world merchandise trade, excluding intra-eu(27), 2012 Regional Trade Policy Course
WTO Members share in world commercial services trade, 2012 Regional Trade Policy Course
WTO Members share in world commercial services trade (excluding intra-eu(27)), 2012 Regional Trade Policy Course
Volume of world merchandise exports by major product category, 1980-2011 (index, 1980=100) Regional Trade Policy Course
Shares in world merchandise exports by product, 1990 (percentage) Regional Trade Policy Course
Shares in world merchandise exports by product, 2011 (percentage) Regional Trade Policy Course
Intra-regional trade (excluding fuels), 2000 North America 49% 26% Europe* 28% Middle East Commonwealth of Independent States South and Central America 23% 12% Africa 10% 53% Asia Legend Extra trade share Intra trade share X% Intra trade / total trade * Excludes intra-eu trade 16
Intra-regional trade (excluding fuels), 2011 North America 42% 26% Europe* 27% Middle East Commonwealth of Independent States South and Central America 24% 15% Africa 16% 56% Asia Legend Extra trade share Intra trade share X% Intra trade / total trade * Excludes intra-eu trade 17
Intra-regional and extra-regional merchandise exports of WTO regions, 1990-2011 (billion dollars and percentage) 18
Selected intra- and inter-regional merchandise trade (excluding fuels and intra-eu), 2011 (Billion dollars and percentage in world trade) 108 billion $ 1.0 % 909 billion $ 8.5 % North America Europe 782 billion $ 7.3 % Africa Europe 272 billion $ 2.5 % 618 billion $ 5.6 % CIS Europe 274 billion $ 2.6 % 84 billion $ 0.8 % Middle East Asia 348 billion $ 3.2 % 2526 billion $ 23.6 % Asia North America 1347 billion $ 12.6 % C/S America North America 262 billion $ 2.4 % 140 billion $ 1.3 % 54 billion $ 0.5 % Europe Asia 1525 billion $ 14.2 % : regional intra-trade 19
level 2 Recent trends in developing Asia s trade
Asia progressively emerged... Japan: export success in the 1950s and 1960s Hong-Kong, China; Korea; Singapore; Chinese Taipei: exports of labour-intensive products In the late 1980s: rising labour costs, real currency appreciation and import restrictions in industrial countries blunt export expansion
as the third hub of world trade Reacting to falling profitability at home, Japan and the NIEs begin to move their production platforms to Southeast Asia Southeast Asian countries attract investors because of their relatively favourable macroeconomic conditions and favourable trade and investment policies An export boom in labour-intensive manufacturing products follows
With an increasing number of participants At the same time, falling transaction costs allow production processes to be sliced into tasks that can be located where it is most advantageous Production costs fall Southeast Asian countries start exporting electronics and other more technologically sophisticated products
China joins in in the early 1990s Production lines move to the PRC, attracted by its large pool of cheap labour, its rapidly improving infrastructure and its policies favouring exporters
Shift towards manufactures From the beginning, NIEs relied heavily on exports of manufactured products Shift towards manufactured exports continues across most countries in the region Endowment of resources determines comparative advantage Governments adopt export oriented strategies
Machinery and transport equipment dominate manufacturing exports Machinery & transport equipment exports account for more than half of Asia s manufactured exports Very high for East and South East Asia, lower for South Asia Information and communications technology account for 70% of Dev. Asia s exports of machinery & transport Share of textiles, clothing and footwear decreased in most countries
Trade seems to facilitate industrialisation Shift in the composition of exports from labour intensive towards higher skill- and technology-intensive products is similar to that observed in Japan and suggests that trade contributes to industrial development and structural change
But there are differences between countries Shift towards skill intensive products is observable in most countries but speed and intensity varies Low-income countries in South and Southeast Asia have seen their share in world exports of labour intensive products increase Concentration in ICT, less in clothing
Trade in parts and components Another trend in Asian trade is the increase in the share of parts and components in the region s total manufacturing trade Trade in these goods is concentrated in ICT and electrical machinery The rapid growth of trade in parts and components is part of a wider process of global production sharing
Share of parts and components in total manufactured exports 1992 2006 Philippines 35% 70% PRC 4% 19% India 7%
Also in imports The share of parts and components in developing Asia s imports is also growing In the PRC, p&c account for a larger share of imports than exports In other developing Asian economies, it is the opposite This suggests that the PRC is playing an important role in final product assembly
Asia has become increasingly integrated... As shown previously, the share of intra-regional trade has increased over time to reach half of total trade Intra-regional trade is mainly concentrated in East and Southeast Asia and it is mainly trade in parts and components The share of the PRC s intraregional exports of p&c has remained constant while its share of intraregional imports of p&c has increased For others, the PRC is a key export destination
...but has also become more dependent on the rest of the world Developing Asia has become relatively dependent on non regional markets for its final products The rise of the PRC as a final assembler has contributed to this increased dependence The dependence on foreign markets is even stronger for exports of labour intensive products such as clothing
What s driving the change? Three mutually reinforcing developments: Technological progress allows companies to slice the production process into different tasks that can be performed in different places Technological innovations in transportation and communication reduces transaction costs and facilitates coordination of fragmented production process Trade and investment policy liberalization
Ratio of custom duties collected to imports 1990 2006/2007 Indonesia 5.7 1.7 India 47.8 6.8 China 7.5 2.3 Thailand 11.1 1.8
FDI policy in Asia General, region-wide liberalization, with no significant case of backtracking East Asia in aggregate more open than South Asia South East Asia generally more open than Northeast Asia, but with exceptions Source: Athukorala and Hill (2008)
What are the effects of all this? Broad measures of development in East Asia have improved at a pace similar to that of trade Since the 1970s, Asia and in particular East Asia has been the region with the fastest rate of economic growth Poverty has decreased substantially But inequality has mildly risen in a number of countries And the gap between the richest and the poorest economies in the region has widened
Since 1990, poverty has declined East Asia, Pacific 2$-a-day Headcount index in % 2$-a-day Number of poor (million) 1990 81.0 1299.1 2008 32.4 637.2
Measures of poverty in East Asia (2$-a-day headcount index in %) 1990 2008 East Asia, Pacific 81.0 32.9 EAP, excluding China 70.7 40.7 South East Asia 66.3 39.1 Lower income East Asia 87.8 47.0