Magazine article International Trade Forum

New Forces of Economic Growth

Magazine article International Trade Forum

New Forces of Economic Growth

Article excerpt

The new dynamism and forces of economic growth in developing countries are in contrast to the low growth rates and uncertainty being felt in developed countries. While it is not possible to anticipate whether the pace of growth in the South will outpace the impact of depressed conditions in traditional markets, the appropriate balance between domestic and export growth, the roles of regional integration and how to enhance the value-added components of South--South trading agreements need to be addressed.

The world economy is changing fundamentally to the point where it would not be an exaggeration to say that the tectonic plates of the world economy are in motion, Over a prolonged period, and sometimes violently, new heights are being created and former heights are in retreat. Rapid gains are being achieved in parts of the developing world, led by China, but also involving India, South-East Asia and Brazil, Africa, including South Africa, form part of that trend, demonstrating a new dynamism which is propelling economic growth.

In contrast to this picture there has been sluggishness in the advanced

developed countries, Rates of growth are low, recoveries far from certain and analysts are expecting this trend to persist for as much as the next decade. This has demonstrable consequences for patterns of global trade, In South Africa's case, during the 2009 recession, exports to the European Union and the United States declined in the vicinity of 30% while exports to China and India grew, partially offsetting lower exports to the developed world, This experience is consistent with a broader trend in African trade.

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In addition to overall sluggishness in the developed world, there are also diminishing prospects for credit-funded consumer growth, At the same time, a country like China is aiming for a better balance between domestic and external market growth, This is taking place against a background of rising wages and a more finely tuned import policy, representing major ongoing change, Growth in trade between developing countries, particularly advanced developing countries, is likely to increase.

Although it can be expected that there will be positive developments conducive to increasing demand for imports from developing countries other than China, it may be insufficient to offset the weakened demand from the developed world, This raises the question of trade volume versus value.

The Cambridge-based economist Gabrielle Palmer has used the analogy, in terms of the varying performance of different countries and where the high potential gains in trade are to be found, of flying geese and waddling ducks, Or to take another example, does it really matter if a country exports computer chips or potato chips? …

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