Key Trends in Globalisation

The share of developing countries in world exports

The rise of Asia, in particular China, in world export markets is well known. The aim of this post is, however, to provide a more systematic overall examination of trends in world visible exports - i.e. exports of goods and not including trade in services (to avoid excessive repetition all references to exports below are to be taken to be referring to visible exports unless otherwise specified).

The most fundamental, twenty year, tendency is shown in Figure 1. This is the well known consistent trend, since the late-1980s, for a major rise in the share of developing countries in world exports - and the decline of the share of already industrialised countries.

The share of industrialised countries in world exports fell from 70.3 per cent in 1988 to 53.3 per cent in 2007. In the same period the share of developing countries rose from 27.9 per cent to 45.2 per cent.

 

Figure 1

 

 

Considering these trends in greater detail, Figure 2 divides exports from developing countries between those in Asia and those outside Asia. Again the trend is clear.

 

The rising share of developing countries in Asia in world exports is continuous throughout the last quarter century - the share of developing Asian countries in world exports nearly tripling from 8.3 per cent in 1980 to 23.7 per cent in 2007.

 

For the initial part of the period after 1980 the share of non-Asian developing countries in world exports fell - this was particularly accounted for by a decline in the value of the share of world exports from the Middle East associated with the decline in the real price of oil in that period. However since the early 1990s the share of non-Asian developing countries in world exports has been rising steadily. The share of non-Asian developing countries in world exports rose from 13.5 per cent in 1992 to 21.5 per cent in 2007, while in the same period the share of Asian developing countries in world exports rose from 15.2 per cent to 23.7 per cent.

 

Since 1992, therefore, the increase in the proportion of world exports accounted for by Asian and non-Asian developing countries has been almost equal - the increase in the share of world exports accounted for by Asian developing countries being 8.5 per cent and the increase in the share of non-Asian developing countries being 8.0 per cent.

 

It is the combination of this rising share of world exports from both Asian and non-Asian developing countries that accounts from the strong overall rising trend in the share of developing countries in world exports. The phenomenon since the beginning of the 1990s is therefore one of developing countries in general and not one only of Asia.

 

Figure 2

 

 

 

Considering these trends in more detail, the huge role played by the development of China is evident. Figure 3 shows the share of world exports for China, developing Asia excluding China, and, to provide a comparison for the developed Asian economy, Japan.

 

The rise of China is evident - China's share of world exports rose from 1.0 per cent in 1980 to 9.8 per cent in 2006 - the last year for which full figures are available. In the same period the share of other developing Asian countries in world exports rose from 7.3 per cent to 13.7 per cent. Therefore, in this period, China alone accounted for 58 per cent of the increase in the share of developing Asian countries share of world exports - China's increase in the share of world exports being 8.8 per cent compared to 6.4 per cent for all other developing countries in Asia. Particularly since 1990 China's increase in the share of world exports has considerable exceeded that for the rest of the other developing Asian countries put together.

 

In contrast, to take the main developed country in Asia, the declining importance of Japan in world trade is evident.

 

In 1980 Japan accounted for almost as high a share of world trade as all the other developing countries in Asia combined. Since 1986 the share of Japan in world exports has declined sharply - falling from 10.3 per cent in that year to 5.3 per cent in 2007. In 1980 the developing Asian countries, including China, accounted for 8.3 per cent of world exports and Japan for 6.5 per cent. By 2006 the developing Asian economies, including China, accounted for 23.7 per cent of world exports and Japan for only 5.3 per cent. In 1980 Japan's exports were equivalent to 78 per cent of those from the developing Asian countries, while by 2006 Japan's exports were equivalent to only 22 per cent of those of the combined exports of the developing Asian countries.

 

The relative decline in importance in world of exports of Japan, and the rise of the developing Asian countries, above all China, is evident.

 

Figure 3

 

 

The more detailed trends for Asian developing countries, other than China, are shown in Figure 4. This confirms continuing strong export growth by South Korea. However Singapore, and more recently Malaysia, having been losing some world visible export share. Vietnam has been gaining export share steadily but from a very low base.

 

India stands out clearly as a large economy but with a very low share of world exports. India's share of world exports is only just over one per cent and has not been rising very strongly.

 

Figure 4

 

 

Such figures illustrate strikingly the different path of development being undertaken by China and India - the contrasting development in shares of world exports for India and China is shown in Figure 5.

 

India's economy is growing rapidly, but essentially within its domestic economy. India's share in world exports remains both very low and only slowly growing.

 

India's economy, in short, shows no signs of being strongly competitive on an international scale despite known  strength in individual sectors such as software. China's economy is growing even more rapidly than India and enjoying rapid export growth - China's economy, in short, shows far more signs of being competitive internationally than India's. This is line with the the data on the much greater size and development of Chinese firms compared to India that has been analysed elsewhere.

 

Both India and China are extremely important markets but China's economc fundamentals and competivity continue to be significantly stronger than India's.

 

Figure 5

 

 

Turning to non-Asian developing countries, the overall picture is shown in Figure 6. The main trend in the early part of the period considered is the sharp fall in the share of exports coming from the Middle East - reflecting the fall in the relative real price of oil after the beginning of the 1980s. It may also be noted that, despite the increase in the price of oil in the most recent period, the Middle East has only moderately increased its share of world exports, from relatively depressed levels, and its has not retained the position held at the beginning of the 1980s - in terms of trade surpluses, as opposed to share in world exports, a number of Middle East countries continue to be extremely important.

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In contrast, the share of world exports from developing countries in Eastern Europe has risen significantly - from 4.4 per cent of world exports in 1999 to 8.0 per cent in 2007. Within this total the share of Eastern Europe excluding Russia rose from 3.1 per cent of world exports to 5.8 per cent, while Russia's share rose from 1.4 per cent to 2.6 per cent.

 

Over the period as a whole Africa's share of world exports fell from 4.5 per cent in 1980 to 2.6 per cent in 2007- although there has been a small recent revival from the extremely depressed levels in the mid-1990s.

 

The share of developing countries in Latin America and the Caribbean (Western Hemisphere) in world exports fell significantly in the mid 1980s but has since risen again. The rate of increase, however, is still modest compared to countries in Eastern Europe and even more so when compared to Asia. Latin America and the Caribbean's share of world exports rose from 4.3 per cent in 1992 to 5.9 per cent in 2007.

 

Figure 6

 

 

 

 

Considering the situation within Latin America there was an increase in Mexico's share of world exports in the 1990s but this has since fallen back significantly. No Latin American country has gained world export share in the way that has been experienced in Asia. This is shown in Figure 7.

 

Figure 7

 

 

Summarising these developments overall the following the following key trends emerge.

 

The increase in the share of world exports from developing countries started in Asia, however since the early 1990s this trend has become substantially more generalised. The increase in the share of world exports coming from Asian and non-Asian developing countries was essentially equal in the 15 years 1992-2007. 

 

The success of China is even greater when placed in a comparative framework than when considered by itself. China is now the world's largest visible exporter - overtaking the US and Germany.

 

Asia outside China in the recent period has ceased to gain world market share in visible exports, after an exceptional performance for several decades. South Korea continues to show outstanding visible export performance but several other Asian developing economies have lost world market share. India's share of world exports continues to be extremely low for such a large economy and shows no strong trend to rise.

 

East European developing countries, both Russia and non-Russian, have an export performance which is second only to Asia - although lagging substantially behind Asian success.

 

Latin America and Africa's role in world exports has not yet increased - despite the commodity boom.

Britain as India’s Colony - by John Ross and Ken Livingstone

India and Britain inhabit a world changing so rapidly that to bring out its character let's deliberately put it in stark, even 'provocative', terms.

In 20 years time, only three people are guaranteed a place at the top table of the world's affairs - the presidents of the US and China and the prime minister of India. By then, the world will have shifted so much that if there were to be war between Britain and India, Britain would be more likely to end up as a colony of India than the other way round.

Fortunately, for everybody concerned, humanity has progressed to the point where colonies no longer exist and war, while not eliminated, has diminished. But such facts show the intensity of current transformations.

Globalisation, which is the framework for these shifts, cannot be conceived purely as an economic process. Those who believe that we will trade with, and invest in, each other’s countries more but everything else will stay the same are in for a severe shock.

Economic interaction is certainly accelerating. In London, it is a striking indicator that India now has the largest number of foreign inward investment projects after the US, and the spend of Indian tourists coming to London exceeds Japan’s. But overall London’s huge success, with studies showing it pulling ahead of even New York as an international business centre, is primarily due to its understanding of the shifts produced by globalisation.

New York’s dominance as the 20th century’s international financial centre was based on the US generating the overwhelming share of the world’s capital — accessing which was only possible in New York. This is no longer true.

Today, the greatest sources of world growth and capital are India, Russia and China. As recently as 2001, 54 per cent of IPOs of more than $1 billion were in New York.

Last year that fell to 17 per cent. Onerous and protectionist US restrictions need no longer be accepted. Economically the current problems in the US financial system, and the dollar’s, will further increase the attractiveness of London compared to New York.

The ramifications of globalisation socially are equally clear, and most pronounced in the most advanced international business centres. A third of London’s population was born abroad and 40 per cent of New York’s.

No one will solve the problem of having an international city without a very large number of foreigners. This reinforces the cultural, educational, policing and other consequences flowing from globalisation.

Trade always produced cultural influence but in the age of the internet and mass communications the speed of such influence is amplified greatly. Globalisation has not only an economic but also a profound cultural dimension. In the world’s great cities this mutual influence is the greatest.

Young people in London, Mumbai, Delhi, New York, or Paris have lives that are converging rapidly. They use the same technologies to make their lifestyle and have many similar aspirations. That in some cases they cannot yet directly talk to each other is merely a technical translation problem computers will solve during the first half of this century.

Two years ago, a commentator remarked that the lived experience of someone in London is already in many ways more similar to that of someone in Paris than life in London is to that in a small English village. Naturally this does not mean we will all change and become the same.

Culture changes more slowly than economy or politics. Leaving behind eras of conquest and colonialism means that culture change is now voluntary with people integrating from many societies to make their lifestyle - the iPod dominates everywhere while Chak de! India recently became the first Indian film to enter London’s top 10 most watched films.

The most fundamental shift of all is that current transformations mean 500 years of ‘West European’ cultural dominance, linked to its expansion across the world, is ending.

India is not merely a huge economy but one of the world’s greatest cultures. I constantly repeat in speeches in London that if people think the cultural impact of the India in our city is already great, which of course it is, in reality it has hardly begun.

This is the real basis of the new relations of London and India. The pre-eminent position to which India is heading is naturally not determined by the relative worth of individuals in Britain and India - which is entirely equal. It is determined by India’s rapid economic growth and that only partition obscures the fact that the Indian subcontinent already has a greater population than China.

Britain will never again be the world’s largest economy. However, London is the world’s most international city - a reality, not a boast. That internationalisation, in turn, makes London not only the world’s leading international financial centre but simultaneously a powerhouse of creative industries, of design, marketing, advertising and public relations - the best single stop most things Indian companies need to go global.

That equation - India is a rising economic superpower, London is the world’s leading international business centre - indicates the real common interests of both. Mutual interest for the future, not reminiscences about the past, is the firmest basis for friendship.

Note

This article appeared at the time of Ken Livingstone's visit to India as Mayor of London in November 2007. It appeared at the leader opinion article in The Times of India. It was jointly written by Ken Livingstone and John Ross, who was at that time the Mayor of London's Director of Economic and Business Policy. It naturally appeared at that time in the name of the Mayor.