WTO: Technology, Emerging Economies, Demographics – Drivers Of Change In World Trade

The landscape and nature of world trade are changing, and quickly, according to the latest World Trade Report published by the World Trade Organization. Technological innovation, shifts in production and consumption patterns, and demographic change are said to be the primary factors that will shape the future of world trade and the global trading system, the report found.

Instead of focusing on a particular trade policy area, as in previous years, this report takes a broader approach and examines how the trade landscape may evolve in the future.

The 2013 report, available here, was published on 18 July.

At the launch of the report at the WTO, departing WTO Director General Pascal Lamy said this is “not an exercise in crystal ball gazing, but rather a systematic attempt to analyse the factors that will shape the future of world trade.”

One of the most significant drivers of change is technology as seen in revolutions in communications, transport, and the spread of information technology. Along with these technological advancements, new countries are emerging in the forefront of the trade landscape, with “technology spill-overs” seen regionally and among countries connected by production networks.

One of the core trends in trade in the last year highlighted by the report is the rise to prominence of many new players, notably emerging economies.

At the launch, Danny Quah, professor at the London School of Economics, noted that the world is currently witness to the greatest poverty reduction in history, and that this has led to unprecedented demands for trade.

The report shows a greater geographical spread of income growth and opportunity, with more countries than ever before engaged in trade at the international level. This is illustrated by the fact that in the last 30 years, developing economies raised their share in world exports from 34 per cent to 47 per cent, and their share in world imports from 29 per cent to 42 per cent.

A key feature of the report is Asia’s increased role in trade. Quah showed a map of the world with a point marking the global economy’s centre of gravity and how this has changed over the last 30 years. From 1980 to now, the centre of gravity has shifted from the middle of the Atlantic Ocean to its current position in the centre of Asia.

The report also highlighted the rise of global supply chains. This has changed the pattern of trade by increasing the level of interdependence of countries in such chains. At the launch, Lamy stated that this has the effect of creating more opportunities that can arise from the possibility of international trade. He highlighted the role that the WTO has had in such supply chains, saying that its Aid for Trade program has played a crucial role in connecting the least connected.

Quah emphasised that trade increasingly exists at the geographical and regional levels. He argued that that trade is not about countries – it is about regions. He suggested that going forward, the international community might have to shift paradigms and think of a world without national boundaries. He praised the report for moving away from traditional categories of North-North and South-South trade, and a strong focus on nations, and instead adopting a broader view of trade.

A major feature of trade in the last year, noted in the report, is the global transition in demography. The way in which it is changing has important implications for how trade will evolve.

A key example of this is the aging of populations in many countries. At the launch, Quah suggested that if age distorts the trajectory of economic growth, then the fact that nations such as India and China are growing older while certain economies remain younger, might have an effect on trade. However, he also said that perhaps the issue of demographic dividend is overplayed. Generalisations based on age are not always justified, thus one must be wary of putting too much emphasis on this.

The relationship between trade and the environment is a key feature of the report. It examines the issue of how to manage the environment in light of population growth and rising incomes in large parts of the world, especially since trade is perceived as contributing to concerns about resource exhaustibility.

Speaking at the launch, Patrick Low, chief economist at the WTO, said there is greater need for climate change policies and broader environmental policies, and greater attention must be paid to addressing environmental concerns at the national and supranational level.

Overall, the report highlights that the landscape and nature of trade are changing rapidly. Countries must identify their challenges and set policies to deal with those challenges. Low argued that there is no universal model for this and there will be policy differences from country to country. He stated that the broad global issue is one of competition – countries need to catch up and be able to adjust to new competitors.

This is the eighth and final World Trade Report for Lamy. Speaking at the launch, he thanked the WTO secretariat for all of its hard work over the last eight years and expressed his belief that the publication would continue in a strong manner.

Brittany Ngo is currently completing her Master’s in Health Policy and Global Health at the Yale School of Public Health and previously obtained a Bachelor’s of Arts in Economics from Georgetown University. Through her studies she has developed an interest in health-related intellectual property issues. She is a summer intern at Intellectual Property Watch.

Caitlin McGivern is currently studying at the University of Law in London and will graduate with an LLM in 2014. She previously obtained a Bachelor’s of Arts in Philosophy and Theology from the University of Oxford. She is a summer intern at Intellectual Property Watch. She is of Swiss, Canadian and Irish nationalities.