Regional trade at a crossroads: Assessment and outlook State of - PowerPoint PPT Presentation

Regional trade at a crossroads: Assessment and outlook

State of affairs 1. Deceleration of world trade 2. International context with recessionary bias: excess liquidity and insufficient demand 3. Structural imbalances: de-linkage between the financial market and the real economy 4. Slow growth and global uncertainty exacerbate the region’s weaknesses 5. The region’s worst export performance in decades (four years of no growth)

World trade grew faster than GDP during most of the post- war period… ANNUAL VARIATIONS IN GLOBAL GOODS EXPORTS VOLUMES AND GLOBAL GDP, 1952-2014 (Percentages) 20 15 8.6 10 7.8 6.5 5.4 5.3 3.9 5 2.6 0 -5 European -10 China’s Fall of the Berlin Community 1957 GATT 1947 opening 1978 Wall 1989 -15 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Exports GDP Average export growth Source : ECLAC, on the basis of data from the WTO and IMF.

… but it has lost momentum since 2008 -2009 ANNUAL VARIATIONS IN GLOBAL GOODS EXPORTS BY VALUE AND VOLUME, 1992-2015 a (Percentages) 30 20 10 0 -10 -20 -30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Price Volume Value Source : ECLAC, on the basis of Netherlands Bureau for Economic Policy Analysis (CPB), World Trade Database. a Figures for 2015 are ECLAC projections.

Current account imbalances and their distribution SELECTED GROUPINGS AND COUNTRIES: BALANCE-OF-PAYMENTS CURRENT ACCOUNT BALANCES, 1997-2015 a (Percentages of GDP) 2.5% Surplus countries do 1.5% not absorb exports of deficit 0.5% countries -0.5% Deficit countries have to adjust -1.5% -2.5% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Lack of China Germany and the Netherlands reciprocity Japan USA Euro Area without Germany and the Netherlands Oil Exporting Countries Latin America without Venezuela (B.R.) Source : ECLAC, on the basis of International Monetary Fund, 2015 External Sector Report, Washington, DC, 27 July 2015. a Figures for 2015 are projections.

The financial sector is growing faster and delinking from the real economy EXTERNAL FINANCIAL ASSETS a AND SELECTED REAL VARIABLES WORLDWIDE, 2003-2013 (Indices, 2003=100) 240 220 200 180 160 140 120 100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Exports of Goods and Services Financial Assets Gross Capital Formation World GDP Source : ECLAC, on the basis of data from the IMF, UNCTAD and the World Bank. a Calculated on the basis of each country’s international investment position.

Excess liquidity and little effective demand: diminished monetary policy space The main interest rate tends to zero Despite QE, inflation does not pick up EUROZONE, JAPAN, UNITED STATES: POLICY EUROZONE, JAPAN, UNITED STATES: INFLATION RATES, RATES, 2000-2015 2000-2015 (Percentages) (Percentages) 7 12 10 6 8 5 6 4 4 2 3 0 2 -2 1 -4 -6 0 Feb-2000 Oct-2000 Jun-2001 Feb-2002 Oct-2002 Jun-2003 Feb-2004 Oct-2004 Jun-2005 Feb-2006 Oct-2006 Jun-2007 Feb-2008 Oct-2008 Jun-2009 Feb-2010 Oct-2010 Jun-2011 Feb-2012 Oct-2012 Jun-2013 Feb-2014 Oct-2014 Jun-2015 2000-01-01 2000-09-01 2001-05-01 2002-01-01 2002-09-01 2003-05-01 2004-01-01 2004-09-01 2005-05-01 2006-01-01 2006-09-01 2007-05-01 2008-01-01 2008-09-01 2009-05-01 2010-01-01 2010-09-01 2011-05-01 2012-01-01 2012-09-01 2013-05-01 2014-01-01 2014-09-01 2015-05-01 United States Euro Area Japan Japan Euro Area United States Source : ECLAC, based on data from the Federal Reserve Bank of Saint Louis, and from the Federal Reserve and the Statistics Bureau of Japan.

Aggregate demand is less dynamic after the crisis EURO AREA, JAPAN AND UNITED STATES: CONTRIBUTION OF AGGREGATE DEMAND COMPONENTS TO GDP GROWTH, 2000-2014 (Percentages) 8 6 4 2 0 -2 -4 -6 -8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Japan Euro Area United States Private consumption Government consumption Gross capital formation Net exports GDP growth Source : ECLAC, on the basis of data from the OECD.

The transition of the Chinese model impacts global growth CHINA: ANNUAL VARIATIONS IN SELECTED ECONOMIC INDICATORS a (Percentages) GDP (2000-2015) Industrial production and retail sales (2010-2015) 16 23 21 14 19 17 12 15 10 13 11 8 9 6 7 5 4 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Industrial Production Retail Sales Source : ECLAC, based on IMF, World Economic Outlook Database, April 2015 (GDP) and the National Bureau of Statistics of China (for industrial production and retail sales). a Figures for 2015 are projections.

Utilization levels have not recovered… INSTALLED CAPACITY UTILIZATION, 1995-2015 (Percentages) United States Eurozone 85% 87% 85% 83% 83% 81% 81% 79% 79% 77% 77% 75% 75% 73% 73% 71% 71% 69% 69% 67% 67% 65% 65% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source : ECLAC, based on data from Eurostat and the United States Federal Reserve.

… the same happens at the sectoral level and excess capacity sends prices tumbling in China LEVEL OF UTILIZATION OF INSTALLED CAPACITY (Percentages) Automobile industry in Brazil World copper refining 90 88 86 84 82 80 78 76 74 72 70 CHINA: Annual variation of industrial producer prices 2000-2015 a (percentage) 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

China is reducing the imported content of its exports, especially in high- tech products… SELECTED COUNTRIES: IMPORTED CONTENT CHINA: IMPORTED CONTENT OF EXPORTS IN GOODS AND SERVICES EXPORTS, BY SECTOR, 1995, 2005 AND 2011 1995, 2005 AND 2011 (Percentages) (Percentages) 40 Total Exports 35 Services 30 High-Tech Industries 25 Medium-High-Tech 20 Industries Low-Medium-Tech 15 Industries 10 Low-Tech Industries 5 Manufacturing (Total) 0 United States Germany Japan Brazil Mexico Russia India China South Africa Mining Agriculture 0 20 40 60 80 2011 2005 1995 1995 2005 2011 Source : ECLAC, based on data from the OECD/WTO Trade in Value Added (TiVA) database.

… while its high -tech exports are gaining market share in developed countries EUROPEAN UNION, JAPAN AND UNITED STATES: STRUCTURE OF MERCHANDISE IMPORTS FROM CHINA, 2000 AND 2014 (Percentages) 100% 16 90% 23 26 34 36 80% 40 13 70% 19 19 60% 21 20 50% 19 40% 30% 20% 10% 0% 2000 2014 2000 2014 2000 2014 United States European Union Japan High-Tech Manufacturing Medium-Tech Manufacturing Low-Tech Manufacturing Manufacturing Based on Natural Resources Primary Goods Source : ECLAC, based on data from COMTRADE.

Lack of reciprocity and the recessionary bias is stalling trade recovery • Slow growth in the European Union (one-third of global trade). • Import substitution in China results in reduced demand: transition towards a new model • Reduced incentives for further geographical fragmentation of production due to the maturity of China’s and Eastern Europe’s integration into the world economy • Weaknesses in global governance impede the coordinated expansion of world output and productive restructuring in deficit countries

The TPP and other megaregional agreements aim to inject dynamism into world trade but... • • TPP accounts for: WTO-plus commitments in services, investment, – 36% of world GDP government procurement, – 23% of world exports, digital trade • By excluding China, the US 26% of world imports wants to write the rules of the – 28% of FDI inflows game for IP incl. granting – 43% of outflows extended protection for pharmaceutical patents – 11% of world • Risks include the opening up population sensitive sectors such as auto Intra-TPP trade reached parts and dairy products US $2.1 trillion in 2014 • Textile sector is sensitive for Central America (due to increased competition from Viet Nam)

Latin America and the Caribbean shows its worst export performance in eight decades The region’s foreign trade will experience sharp contractions in 2015

Between 2012 and 2015, the region has its worst export performance in 8 decades LATIN AMERICA AND THE CARIBBEAN: ANNUAL VARIATION IN EXPORT VALUE AND VOLUME, 1931-2015 (Percentages) 80 60 40 20 0 -20 -5.8 -23.4 -40 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Volume Price Value Source : ECLAC, based on ECLAC, “ América Latina: relación de precios de intercambio ”, Cuadernos Estadísticos de la CEPAL, Nº 1, Santiago, 1976 and data from regional indices.