Transcript Strategy for Quantum Jump in Exports Focus on Africa

IPC SEMINAR & MEETING
The Role of Trade:
South-South and Global
EXIM BANK
Presentation by
T. C. Venkat Subramanian
Export-Import Bank of India
New Delhi, November 13, 2003
Structure of Presentation
 GLOBALISATION
 ROLE OF INTERNATIONAL TRADE
 THE GLOBAL TRADING SYSTEM
 GLOBAL TRADE – AN OVERVIEW
 GLOBAL TRADE – RECENT TRENDS
 TRADE AND DEVELOPING COUNTRIES
 SOUTH-SOUTH TRADE
 INDIA’S EXTERNAL TRADE
 ACHIEVING GLOBAL INTEGRATION
 INDIA’S AGRICULTURE EXPORTS
 WORLD AGRICULTURAL TRADE
 AGRI TRADE LIBERALISATION
 OUTLOOK & PROSPECTS
Globalisation
 Globalisation – growing interdependence of countries
resulting from increasing integration of trade, finance,
people, and ideas in one global marketplace
 Main elements of this integration –
 International Trade
 Cross-border Investment Flows
 Globalization – has potential to advance development
 Expediting economic growth
 Creating jobs
 Raising incomes
 Challenge – equitable distribution of economic growth
Role of International Trade
 International Trade – An indispensable engine of
economic growth
 Trade – Expands markets, facilitates competition,
increases productivity & disseminates knowledge
 Trade openness – Spurs economic growth and
technological progress; Growth raises living standards
 Countries that have grown fastest have done so with
rapid increases in their participation in world trade
 Trade liberalisation must be complemented by other
policy measures
The Global Trading System
 Global trading system – allows a country to increase
the benefits of openness
 Entails global trading system to have clear rules,
flexibility, effective enforcement of rules
 World Trade Organisation (WTO) – the only
multilateral institution governing international trade
 Provides institutional context for increased cooperation
 Standardisation & harmonisation of domestic policy
 Although increasing trend toward Regionalism, RTAs
are no substitutes for multilateral trading system
Global Trade: An Overview
 Between 1952 & 2000 merchandise trade increased by
6% p.a. vis -à-vis global output growth of 4% p.a.
 Global trade grew more rapidly than world GDP in all
but a few years of cyclical downturns
 During the decade of the 1990s, growth rate of world
trade was more than twice that of the GDP growth rate
 The ratio of global trade in goods & services to global
GDP increased from 8% in 1950 to 29.5% in 2000
Contd…
Global Trade: An Overview
Contd…
 Volume of world trade in goods & services increased by
3.2% in 2002
 Both exports & imports of developing countries outpaced
those of advanced nations
 Trade growth in 2003 likely to slow down marginally
1996 1997 1998 1999 2000 2001 2002 2003*
Trade Growth in volume (%)
7.0 10.4
4.4
5.8 12.6
0.1
3.2
2.9
Advanced countries
6.1 10.6
4.2
5.5 12.0 -0.8
2.2
1.6
Developing countries
9.5 13.5
5.5
5.4 14.4
2.7
6.5
4.3
Advanced countries
6.4
6.0
8.1 11.9 -1.0
2.2
2.8
Developing countries
9.9 10.5 -0.8
2.4 16.1
6.0
5.1
Export volume growth (%)
Imports volume growth (%)
* Projections
9.4
1.6
Source: World Economic Outlook, IMF
Global Trade: Recent Trends
Merchandise exports (2002) – US$ 6424 bn – growth 4%
Service exports (2002) – US$ 1540 bn. (growth 5%)
Major players – US, UK, Germany & Japan
Merchandise trade recovered more strongly than output in
2002
Growth (percent)




Source: International Trade Statistics, WTO
Contd…
Global Trade: Recent Trends
Contd…
 Trade growth was strong in Asia and the transition
economies
 Recovery of global trade retarded by stagnation of
Western Europe’s imports and contraction of Latin
America’s imports
Source: WTO
Growth (%)
Trade & Developing Countries
 Developing countries embrace globalization since it:
 Expands the range of choices for consumers
 Places downward pressure on prices
 Raises real value of workers’ earnings
 Developing countries – benefited from
intensification of
trade in manufactures & associated productivity gains
 More than three-quarters of WTO members are developing
nations
 Export-led growth has a proven record of success, while its
alternative – protectionism – has failed where it has been
tried
Contd…
Trade & Developing Countries
 Reverse Linkages – increasing impact of developing
nations on industrial countries
 During 1990s, developing countries’ merchandise exports
increased at an annual rate of 8.5%
Merchandise exports, % of GDP
 Export-GDP ratios risen
sharply within a decade in
developing countries from
less than 15% to 25% in
2002
 Drastic changes in sectoral
and regional composition of
Source: World Bank
trade
Contd…
Trade & Developing Countries
Contd…
 Change in composition of exports – major factor
underpinning export growth
 Manufactures grew to 80% of exports from South Asia
 Growth fastest where share of manufactured products in
total exports was already large
Driving forces:
 Policy reforms
 Structural
changes
in
global production process
 Economic trends related to
increases in real per capita
incomes
Source: World Bank
South-South Trade: Snapshot
South-South merchandise exports expanded strongly in
all developing regions between 1990-2001
(Value in US$ billion)
Source: WTO
Contd…
South-South Trade
 South-South trade promoted as:  Means to reduce the dependence of developing countries
on markets of developed countries
 Enhance diversification of Southern exports beyond
primary commodities
 South-South trade rose from US$ 219 bn. in 1990 to US$
640 bn. in 2001 – twice as fast as world trade (10% versus
5%)
 Share of intra-developing country trade in world
merchandise exports rose from 6.5% to 10.7% during this
period
 Primary reason – Positive growth performance of
developing nations in the 1990s
Contd…
South-South Trade
Share of developing country exports to other
developing countries rose from 28% to 37% of
their total exports during the same period
The figures in case of imports were 31% &
41%
Much of the expansion in South-South trade
took place in developing Asia
This high share reflects the relatively large size
of the developing markets in Asia
Contd…
South-South Trade
 Share of developing Asia in intra-developing country
exports rose from 60% in 1990 to 66% in 2001
 Developing Asia accounted for more than two-thirds of
percentage
total intra-developing country imports
Source: WTO
Contd…
South-South Trade
Contd…
 Trade in manufactured goods – most dynamic
component of intra-developing country merchandise
exports – expanded by 12% annually during 1990s
 Agricultural trade expanded at only half that rate;
mining products (mainly fuels) averaged 9%
 Impediments still exist – high levels of tariff protection
& non-tariff barriers
 Persistence of these barriers suggests the potential for
further trade liberalization and consequent expansion of
South-South trade.
India’s External Trade
 Increasing importance of international trade for India
 Trade-GDP ratio increased from 13% in 1990-91 to over
22% in 2002-03
 Unit value index of exports increased from 292.5 to 618.0
during the same period (1978-79=100)
 Share in world merchandise exports increased from 0.6%
in 1995 to 0.8% in 2002
 Share in world services trade increased to 1.3%
 Exports in 2002-03 amounted to US$ 52.2 bn. while
imports stood at US$ 61.3 bn. (growth of 19.2 % each)
Contd…
India’s External Trade
 India’s exports increased from less than US$ 25 bn. in
1993-94 to over US$ 50 bn. in 2002-03
 Imports during the same period increased from US$ 23
bn. to over US$ 60 bn.
70
60
61.3
US$ billion
49.7
50
36.7
40
30
20
28.7
23.3
31.8
39.2
33.5
41.5
35
50.4
51.4
52.2
42.4
44.6
33.2
43.8
36.8
26.3
22.2
Imports
10
Exports
0
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
Source: Ministry of Commerce & Industry
Contd…
India’s External Trade
 India’s export basket – 2000-01 to 2002-03
Contd…
India’s External Trade
Contd…
 Asia & Oceania – share of 43% in 2002-03
 Western Europe & America – share of 48%
45.0
Percent
40.0
35.0
1998-99
30.0
1999-2000
25.0
2000-01
20.0
2001-02
15.0
2002-03
10.0
5.0
200
200
a
a
er
ic
fr
ic
2 -0
0 -0
8 -9
3
1
9
m
A
er
ic
So
ut
h
A
A
m
C
IS
199
a
e
es
W
or
th
N
A
si
a
an
d
O
ce
tE
ur
op
an
ia
0.0
Source: Ministry of Commerce & Industry
Achieving Global Integration
 The study outlines an analytical approach for achieving a
significant increase in India's exports
 Focuses on Africa, Latin America & China which together
imported about US$ 760 bn. in 2001 (about 12% of global
imports)
 Estimates that India could aim to achieve cumulative
exports of US$ 24 bn. to these regions by 2007 – up from
US$ 4.7 bn. in 2001; Agriculture to account for US$ 7 bn.
of this incremental export
 Free Trade Agreement (FTA) with Thailand – significant
step towards global integration
 Reported FTA with China would further reinforce this
India’s Agri Exports
India's Exports of Agriculture & Allie d Porducts
Ye ar
Value (US$ bn) Grow th (%)
2000-01
2001-02
2002-03
Share (%)
5.92
5.63
13.29
5.89
-0.56
13.44
6.40
8.64
12.25
 India’s share in global agriculture exports – 1.1%
 Marine products have led the way in India’s agri exports
 Value addition in India is low at 7% as against 23% in China,
45% in Philippines and 188% in U.K. respectively (Source:
CII-McKinsey)
 The emerging WTO regime offers considerable scope for
export of Indian agricultural products to the global markets
Contd…
India’s Agri Exports
AGRI EXPORT ZONES
 AEZ – centered around a cluster approach



Identifying the potential products,
Geographical region in which these are grown
Adopting an end to end approach of integrating the entire
process right from the stage of production till it reaches the
market
 52 AEZs already notified; e.g.
PROD UCT
S TATE
D urum Wheat
Madhya Pradesh
Mango
Maharashtra
Potato
Punjab
Medicinal Plants
Uttaranchal
Flow ers
Tamil N adu
Ginger
Sikkim
World Agriculture Trade
 About 73% of poor in developing countries live in rural areas –
rural development central to alleviating poverty
 During the 1990s 56% of the growth of developing country
(DC) agri trade accounted for by sales to other DCs
 DCs lost export market share during the 1980s, but reversed
that trend in the 1990s
 International markets important to sustained income growth in
DCs
 High
border
protection
in
rich
countries
frustrates
development
 Evolving structure of agri trade: toward nontraditional
products with lower rates of protection
Contd…
World Agriculture Trade
Share of global agricultural and manufacturing exports by source
and destination, 1980–2001 (%)
D eveloping countries
D eveloped Countries
1980–81 1990–91 2000–01 1980–81 1990–91 2000–01
Agriculture exports
35.9
32.9
36.9
64.1
67.1
63.1
To developing
To industrialized
Manufacturing exports
To developing
To industrialized
9.9
26
19.3
6.6
12.7
9.2
23.7
22.7
7.5
15.2
13.7
23.2
33.4
12.3
21.1
15.3
48.8
80.7
21.7
59
11.9
55.3
77.3
15.2
62.1
14.7
48.4
66.6
19
47.6
 DCs maintained, but did not expand, their one-third share of world
agricultural trade over the last two decades
 Steady decline in DC’s share of agricultural exports to industrial
countries over the period was counterbalanced by an increase in their
share of exports to other DCs
Contd…
World Agriculture Trade
Global GDP, Total Exports & Agricultural Export Growth Trend
25.0
Tot al Export s
Agricult ure Export s
GDP
20.0
15.0
Percentf
10.0
5.0
0.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
-5.0
-10.0
Source: International Trade Statistics 2003, WTO
Agri Trade Liberalisation
 Static Gains from Agriculture trade liberalisation
Liberalizing region
D ecomposition of static impacts
Low & middle
High Income
Income Countries Countries
All
Countries
Gains to low - and middle-income countries
Agriculture and food
80
20
101
Manufacturing
33
25
58
114
44
159
Agriculture and food
23
64
91
Manufacturing
44
–3
41
All merchandise trade
67
63
132
103
84
193
77
22
181
107
98
291
All merchandise trade
Gains to high-income countries
Global gains
Agriculture and food
Manufacturing
All merchandise trade
Source: World Bank
Contd…
Agri Trade Liberalisation
 Dynamic Gains from Agriculture trade liberalisation
Liberalizing region
D ecomposition of dynamic impacts
Low & middle
High Income
All
Income Countries Countries
Countries
Gains to low - and middle-income countries
Agriculture and food
167
75
240
95
9
108
265
85
349
Agriculture and food
19
100
117
Manufacturing
36
13
48
All merchandise trade
55
115
169
Agriculture and food
185
174
358
Manufacturing
131
22
All merchandise trade
321
199
156
518
Manufacturing
All merchandise trade
Gains to high-income countries
Global gains
Source: World Bank
Contd…
Agri Trade Liberalisation
Long-term Impact of Full Trade Liberalisation
Contd…
5
900
800
4
700
600
3
500
400
2
300
200
1
100
0
0
Low & Middle
Income Countries
High Income World Total
Countries
Low & Middle
Income Countries
High Income
Countries
World Total
Source: World Bank
 Developing countries could reap income gains of over US$ 500 bn.
from full trade liberalisation – a 5% boost in incomes
Agri Trade Liberalisation
Contd…
 Reduction of trade barriers in agriculture & food
yield US$ 193 billion in 2015
 More than 50% of these gains in agriculture and food
are reaped by developing countries
 Reform of agriculture & food in rich countries would
lead to a gain of US$ 20 billion for developing
countries as a whole
 South-South trade to become a strategic necessity for
the countries of the South
 For India, broad-basing the market canvas becomes
imperative
Outlook & Prospects
 Medium-term outlook for developing country exports
is encouraging
 Agriculture & processed foods – the future stars
Change in export volumes in 2015 relative to baseline
(US$ billion – 1997)
Source: World Bank
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