Subramanian by lanyuehua

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									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
   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
  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,
    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%
                                                 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
Export volume growth (%)
 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
Imports volume growth (%)
 Advanced countries           6.4   9.4   6.0   8.1 11.9 -1.0     2.2   2.8
 Developing countries         9.9 10.5 -0.8     2.4 16.1   1.6    6.0   5.1
* Projections                       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
Source: World Bank                 composition of 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
 Source: World Bank                capita incomes
        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
                                       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 total intra-developing country imports
   percentage




                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
    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
       US$ billion                                                                        61.3
60                                                                               51.4
                                                                 49.7    50.4
50                                                      42.4                                52.2
                                         39.2    41.5                              43.8
40                               36.7                                    44.6
                                                                  36.8
                   28.7                   33.5    35      33.2
30                                31.8
     23.3                 26.3
20          22.2
                                                                   Imports      Exports
10

 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

               40.0

               35.0
                                                                                                         1998-99

               30.0                                                                                      1999-2000
     Percent




               25.0                                                                                      2000-01
               20.0
                                                                                                         2001-02
               15.0
                                                                                                         2002-03
               10.0
                   5.0                                                              200
                                                                                              2 -0
                                                                               200                   3
                   0.0                                                                0 -0
                                                                                               1
                                                                             199
                                                                                   8 -9
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                                                                 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 (%)        Share (%)
2000-01           5.92            5.63          13.29
2001-02           5.89           -0.56          13.44
2002-03           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            9.9       9.2         13.7    15.3     11.9         14.7
 To industrialized         26      23.7         23.2    48.8     55.3         48.4
Manufacturing exports    19.3      22.7         33.4    80.7     77.3         66.6
 To developing            6.6       7.5         12.3    21.7     15.2           19
 To industrialized       12.7      15.2         21.1     59      62.1         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



       10.0
Percentf




           5.0



           0.0
                  1992   1993    1994    1995     1996    1997   1998    1999    2000    2001   2002

           -5.0


                                          Source: International Trade Statistics 2003, WTO
     -10.0
     Agri Trade Liberalisation
 Static      Gains                  from             Agriculture                trade
   liberalisation                                      Liberalizing region
                                                   D ecomposition of static impacts
                                             Low & middle         High Income          All
                                             Income Countries Countries          Countries
Gains to low - and middle-income countries
 Agriculture and food                                        80             20        101
 Manufacturing                                               33             25         58
 All merchandise trade                                      114             44        159
Gains to high-income countries
 Agriculture and food                                        23             64         91
 Manufacturing                                               44             –3         41
 All merchandise trade                                       67             63        132
Global gains
 Agriculture and food                                       103             84        193
 Manufacturing                                               77             22         98
 All merchandise trade                                      181            107        291


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
 Manufacturing                                               95                 9           108
 All merchandise trade                                      265             85              349
Gains to high-income countries
 Agriculture and food                                        19            100              117
 Manufacturing                                               36             13                  48
 All merchandise trade                                       55            115              169
Global gains
 Agriculture and food                                       185            174              358
 Manufacturing                                              131             22              156
 All merchandise trade                                      321            199              518


Source: World Bank
                                                                                     Contd…
          Agri Trade Liberalisation
                                                              Contd…
                 Long-term Impact of Full Trade Liberalisation
 900                                                  5
 800
                                                      4
 700
 600
                                                      3
 500
 400
                                                      2
 300
 200                                                  1
 100
 0                                                    0
       Low & Middle       High Income   World Total       Low & Middle       High Income   World Total
       Income Countries   Countries                       Income Countries   Countries

                                                                               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
IPC SEMINAR & MEETING


THANK YOU
         EXIM BANK
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