shahidyusuf

Slide1: 

Trade and the Southern Engines Shahid Yusuf DECRG World Bank March 2nd 2006

Trade: Major Developments Over the Past Two Decades: 

Trade: Major Developments Over the Past Two Decades Growth in trade of lower and middle income countries. Increasing share of manufactures in total trade. Large proportion of trade linked to global production networks. Sharp increase in intra-regional trade especially in East Asia.

Trade: Major Developments Over the Past Two Decades: 

Trade: Major Developments Over the Past Two Decades China and other East Asian countries raising shares of all categories of traded goods: resource-based, low tech, medium tech, and high tech.

East Asian GDP and Trade: 

East Asian GDP and Trade

Export Shares: 

Export Shares

China’s Exports of Manufactures: 

China’s Exports of Manufactures

Export Categories: Growth and Shares: 

Export Categories: Growth and Shares

Export Categories: Growth and Shares: 

Export Categories: Growth and Shares

Export Categories: Growth and Shares: 

Export Categories: Growth and Shares

Export Categories: Growth and Shares: 

Export Categories: Growth and Shares

Export Categories: Growth and Shares: 

Export Categories: Growth and Shares

Composition of East Asian Trade: 

Composition of East Asian Trade Figure 2. Composition of Exports and Imports of Asian Countries by Types of Goods (2003) Unit: million US$

Intra-regional Trade: 

Intra-regional Trade

What Accounts for Trends: 

What Accounts for Trends Success of global and regional trade liberalizing agreements and concomitant reduction in barriers. FDI plus codification of technologies together with accelerating diffusion plus advances in IT and organizing of dispersed production activities have permitted offshoring and outsourcing of production. Industry has become more footloose, home production bias has diminished, and this has facilitated geographical redistribution.

What Accounts for Trends: 

What Accounts for Trends This is the flipside to the international integration of capital and labor markets and declining barriers to technology diffusion and assimilation. Falling transport costs—especially of surface transport—and improved trade facilitation in some regions also boosting trade. Capacity to manage and integrate dispersed production leading to vertical specialization and intra-industry trade.

Who are the Big Beneficiaries and Why: 

Who are the Big Beneficiaries and Why China, other East and Southeast Asian economies, to a lesser extent, India, Mexico and Brazil. East Asians leveraged low wage costs, attracted FDI (using incentives and SEZs), absorbed manufacturing technologies, invested heavily in production capacity, and strongly promoted exports to establish commanding lead.

China and India’s Trade: 

China and India’s Trade

Trade of Southern Engines and Share of Manufactures: 

Trade of Southern Engines and Share of Manufactures

Trade of Southern Engines and Share of Manufactures: 

Trade of Southern Engines and Share of Manufactures

Who are the Big Beneficiaries and Why: 

Who are the Big Beneficiaries and Why Latin America’s protectionist resource-based growth strategy hindered development of broad-based, export-oriented manufacturing. Dutch disease may have had a role as well. At current wage rates and given East Asia’s commanding lead, Brazil and Mexico confront severe competitive pressures.

Who are the Big Beneficiaries and Why: 

Who are the Big Beneficiaries and Why China, India, and some East Asian economies consolidating lead in all categories of manufactures because of: (i) elastic supplies of low wage workers; (ii) rapidly growing supplies of skilled and technical people; (iii) huge expansion in industrial capacity; (iv) massive increase in R&D; and (v) development of infrastructure to further reduce logistics costs.

Likely Trends and Their Implications: 

Likely Trends and Their Implications Continuing shift of key industries to China, Vietnam, Thailand and Indonesia. India also likely to expand shares in certain manufactures (e.g., autos, pharmaceuticals, engineering products, metals). Big test will be whether advanced industrialized countries (e.g., U.S., Germany, Japan, etc.) can maintain lead in complex manufactured products, high tech manufactures, and design and fashion intensive products.

Likely Trends and Their Implications: 

Likely Trends and Their Implications Another big test will be whether Brazil, Mexico, South Africa and Russia can increase their global share of medium and high tech manufactures and reduce reliance on energy, agricultural products, and natural resources. A third big test will be in the competition in tradable services. Asia will begin moving massively into these as the employment elasticities for manufacturing are small or negative. India has demonstrated competitiveness. So, increasingly, has China. Other East Asians will follow. Unless Latin American countries, South Africa and Russia move quickly, this trade will also come to be dominated by East Asian countries.

Services Export Shares: 

Services Export Shares

Likely Trends and Their Implications: 

Likely Trends and Their Implications A fourth test could come from a shift in component manufacture to China and India from elsewhere in Asia, Europe and North America because of advantages in co-location of intermediate production with final assembly. The final and biggest test will be whether and for how long the world can accommodate the seismic shifts in industrial geography and trade associated with the trade performance of China, India, and some of the smaller East Asian economies.

Thank You: 

Thank You