Saturday, December 31, 2011

Free Trade 19: Top Exporters by 2050

Citigroup released an interesting -- but not exactly surprising -- projections of the world's export heavyweights four decades from now. Out of the top 10, seven are Asian economies. The three non-Asians are the US, Germany and UK. Below is the list, lifted from Citigroup.

These 10 Countries Will Command World Trade In 2050

#1 China
Trade in 2050: $52.2 trillion
Percent of world trade: 18.2%.

China, which at $3.6 trillion currently accounts for 9.5% of world trade, will overtake the U.S. in 2015. In 2030, at $21.3 trillion, it will account for 17.4% of world trade.

#2 India
Trade in 2050: $25.7 trillion
Percent of world trade: 9%
India which doesn't make the top 10 countries by trade in 2010, is set to account for 2.8% of world trade in 2015, and 5.6% in 2030.

#3 USA
Trade in 2050: $19.1 trillion
Percent of world trade: 6.6%
The U.S. which is the current global leader in trade, accounting for a massive 10.7% of world trade, is set to account for only 8.2% of world trade in 2030. The U.S. is expected to lose ground to India and China.

#4 Germany
Trade in 2050: $9.9 trillion
Percent of world trade: 3.5%
At $2.86 trillion Germany accounted for 7.6% of world trade in 2010. While trade is projected to rise to $5.8 trillion in 2030, it will account for just 4.7% of world trade.

#5 Korea
Trade in 2050: $9.7 trillion
Percent of world trade: 3.4%
At $1.05 trillion Korea accounted for 2.8% of world trade in 2010. By 2030, this figure is set to rise to $4.7 trillion and account for 3.8% of world trade.

#6 Indonesia
Trade in 2050: $8.8 trillion
Percent of world trade: 3.1%
Indonesia makes the list for the first time in 2050, driven by trade with China, Japan and the European Union.

#7 Hong Kong
Trade in 2050: $8.5 trillion
Percent of world trade: 2.3%
Hong Kong, which didn't make the top 10 list in 2010, is expected to jump to the seventh spot in 2030 with $3.8 trillion in trade.

#8 Japan
Trade in 2050: $7.6 trillion
Percent of world trade: 2.7%
Japan which at $1.78 trillion accounted for 4.8% of world trade in 2010, is expected to slip in the rankings. By 2030, it will account for only 3.5% of world trade.

#9 Singapore
Trade in 2050: $6.8 trillion
Percent of world trade: 2.4%
Singapore will account for 2.7% of world trade in 2030 and its trade will total $3.2 trillion in 2030

#10 UK
Trade in 2050: $6.02 trillion
Percent of world trade: 2.1%
UK's trade is set to rise from $1.77 trillion in 2015, to $3.2 trillion in 2030 and account fo 2.6% of world trade.

Note also that in the top six, only S. Korea has a relatively small population. The other five are large population economies. Which proves once again that people are assets, not liabilities, and thus government-sponsored population control is bad policy, but I digress.

Small population economies like Hong Kong and Singapore are able to squeeze themselves in the top 10 for two main reasons: (a) they are a free trade economies. HK in particular has a unilateral free trade policy; no trade negotiations, no need for WTO perhaps, exporters from other countries can bring in their goods to HK so long as these are not among the regulated or prohibited products like bombs. And (b) they are financial centers in the region.

Regardless of the types of protectionism that many sectors would want to erect, like "to save the planet", people want free trade, free choice in sourcing the various goods and services they need. That deep desire for free trade, for free choice and free market, will keep world trade humming and rising in the years and centuries to come.

Last June 06, 2011, I wrote this:

More on Free Trade

A friend commented to my paper, Econ for statists 7: Free trade and consumer surplus last May 27 this year. She wrote,
Aside from (rise in) consumer surplus, there's also loss in producer surplus brought about by price reduction with MFN (WTO) and preferential (free trade agreements) tariff reduction. But net effect, we do gain from free trade. For preferential trade, however, there's some trade diversion effect. For example (hypothetical, but i think this is true), Philippine imports sugar from Thailand rather than from Cuba even though cuban sugar is more competitive. Why? Because we have FTA with Thailand under ASEAN; we enjoy low tariffs from Thailand. That's trade diversion (this can be shown in the consumer surplus, producer surplus graph). Although, in effect, we can still gain from FTAs.

And all these surpluses, losses (consumer and revenue) are just static effects of free trade brought about by price reduction, induced by MFN and preferential tariff reduction. A country will appear to have gained more if we consider the dynamic effects -- economies of scale, technology transfer, FDIs, structural change and reforms, competitiveness incentives, depending of course on the agreements agreed by FTA members. Japan, EU, US, for example, would negotiate technical cooperation chapters. They usually offer plant and technology improvement (particularly for fish products in order to comply with SPS and TBT), technical assistance/capacity building (service sector, reforms in domestic regulations).

In general, we do gain from trade more than just on consumer surplus. The problem with FTAs is that we are now having this Asian noodle bowl, for example. Too many FTAs, overlapping, defeating economies of scale, confusing to traders. There's a study/survey (not sure if already released) that says preferential tariffs are, in fact, not used by traders because they're either confused or they don't know preferential tariffs exist. And some customs staffs also do not know all these preferential tariffs; some can't memorize, making FTAs futile, in particular, for trade in goods. -- Aiken
I thanked Aiken for her additional inputs. Hong Kong often comes to my mind when people talk about FTA, WTO, MFN, etc. HK does not need any of them. HK simply declared a unilateral trade liberalization, zero government to government negotiations, agreements and protocols. Unilateral free trade is unconditional opening of borders to foreign goods at zero tariff. The only imported goods that HK subjects to government regulations are perhaps guns, bombs, poisonous chemicals and substances, virus-infested food products, live animals that may bring in certain viruses, related items. In short, only when goods would affect public health and security, that government regulations come in. Otherwise, it steps back, no unnecessary bureaucracies and taxation. So that HK is able to efficiently utilize its bright minds. Away from trade politics towards actual trading and money-making.

Free trade simply means freedom to trade by the people. If someone needs a new laptop at his specific budget range and desired specifications, he does not care if that laptop will come from HK or Singapore or S. Korea or China or the US or Germany, etc. He does not need government to indirectly tell him that he can import from these countries but not from the other group of countries because of higher tariff and plentier regulations.

Or carinderia (cheap restaurant) owners -- there are tens of thousands of them nationwide -- want cheaper rice, cheaper onions, garlic, chicken, etc. because that is what their poor consumers want. So they do not care much if those raw food products will come from the Philippines or Vietnam, Thailand, Taiwan, China, US, or anywhere else. They just want cheap food for their poorer consumers and still make a good profit at the same time. So the FTAs that many governments negotiate, reject, renegotiate, revise, horse trade, etc. simply defeats the real spirit of what "free trade" really is.

Smuggling is a market signal, or consumer signal, that people do not want unnecessary taxes and regulatory bureaucracies that cause unnecessary rise in prices more than their free trade price. Smuggling is also an indicator that bureaucracies love protectionist policy because it allows them to extort money from traders and consumers.

That is why I mentioned in my earlier paper the possibility of WTO abolition. HK does not need the WTO or any of those bilateral and regional FTAs. It simply allows free trade to happen. If the Philippines will follow HK's unilateral trade liberalization policy, then there will be no need for our tax money to be used to send trade negotiators, trade lawyers and consultants for global junkets to negotiate "I bring down tariffs here, you reduce trade barriers there..." Worse, the trade negotiators that we send -- and sent by their own respective governments -- can only explain later why real free trade does not happen. It is easy to find someone else to blame while hiding the fact that they themselves carry protectionist sentiments and vested interests when they go to negotiate with other country representatives.

See also:

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