<b>T N C Rajagopalan</b>: Looking back at WTO's 20 years

Merchandise trade in developed countries dropped to 52% in 2014 from 80% in 1995

The World Trade Organization (WTO) has issued ‘International Trade Statistics 2015’. On the body’s 20th anniversary, this edition looks back at how trade has changed over these years. Some of the developments are on expected lines; some others are quite interesting. 

The report says world merchandise export grew from about $5.2 trillion in 1995 to $19 trn in 2014. Whereas global export of commercial services increased from close to $1.2 trn to $4.9 trn in that period. Trade experienced fairly strong growth from 1995 to 2001, and then a boom from 2002 to 2008, accompanied by rising commodity prices. Following the financial crisis in 2008, trade fell steeply in 2009, before rebounding strongly in 2010 and 2011. However, trade growth since then has been unusually weak, says the report. 

The average share of exports and imports of goods and commercial services in world Gross Domestic Product increased significantly from 20 per cent in 1995 to 30 per cent in 2014 (value terms). In other words, today’s GDP is highly influenced by international trade. World trade and GDP tend to grow in tandem but trade experiences stronger fluctuations, particularly in declines. The internationalisation of production has led to increasingly global production networks or value chains. In 2011, nearly half (49 per cent) of world trade in goods and services took place within global value chains.

Computer services ranks as the most dynamic services export sector, showing annual average growth of 18 per cent, with Asia improving its share from eight to 29 per cent in the past two decades. From 1995 to 2014, transport services grew on average slightly below total commercial services’ annual rate. World export of communications services at $115 billion in 2014 expanded by an annual average of eight per cent over the past 20 years, outpacing total growth for the services sector and demonstrating more resilience to market turmoil than many other services categories.

Europe has been the leading destination of exports over these 20 years. Followed by Asia, which has greatly increased its importance as a trading region. China overtook Japan as the leading Asian exporter in 2004, three years after its accession to the WTO. China also surpassed America in 2007 and Germany in 2009, to become the world’s leading exporter. 

As expected, the European Union is the largest in export among regional trade agreements, followed by the North American Free Trade Agreement and the Association of Southeast Asian Nations. Intra-regional trade accounts for a significant proportion of exports for Europe, Asia and North America. Merchandise trade between developing countries has increased steadily since 2000.

World export of fuels increased at an average annual 12 per cent (mostly due to a five-fold increase in prices), followed by pharmaceuticals (11 per cent), ores and other minerals (10 per cent),   non-pharma chemicals (seven) and food (six). Raw materials and textiles recorded the lowest average annual growth rates, of four per cent each. 

The most significant finding is the drop in share of merchandise trade in developed countries, from 80 per cent in 1995 to 52 per cent in 2014, the increase of developing Asia from 12 to 21 per cent, and the Middle East from one to six per cent in the period. Thus, the advent of new technologies and liberalisation of trade policies have helped developing countries and sparked anti-globalisation sentiment in richer ones.

E-mail: tncrajagopalan@gmail.com