The demand contraction in the West notwithstanding, world trade would continue to grow in double digits this calendar year, said World Trade Organization?s director-general Pascal Lamy in an interview to FE. The apex global trade body would stick to its earlier trade growth forecast of 13.5% for the year with emerging economies contributing a major chunk of it, Lamy asserted.
Decoding Lamy’s statement, trade experts and economists were quick to highlight the significance of the rising clout of India, China, Brazil and South Africa vis-a-vis the rest of the developed world when it comes to global trade.
Even Lamy concurred with this view as he said trade in the developing world would grow 16.5% in 2010 compared to 11.5% in the developed world. ?We knew from the very beginning that the first part of the year would be more dynamic than the second, but for the moment, we keep our forecast,? he said.
In 2009, world trade had nosedived 12% primarily on account of the sub-prime crisis which originated in the US, triggering a credit crunch that spread across the globe and choking merchandise trade. This was the sharpest decline in world trade ever, the previous highest being 7% in 1979.
But despite the odds, WTO predicted trade will grow 13.5% in 2010, hiking its earlier projection of 9.5%. However, economists welcomed the revised prediction with caution primarily because of the Greek debt crisis.
Lamy explained that the trade turnaround was primarily on account of WTO’s free trade principles which had stood the test of time. ?It was the stress test for the WTO system and it has proven that despite a major storm, the boat of trade openness has been maintained. Trade is today as open as it was two years ago…The crisis has proven the value of this system.?
RS Ratna, analyst at Indian Institute of Foreign Trade in New Delhi said that though India’s 2009-10 merchandise exports had declined 3.5% to $179 billion from $185 billion the previous year, in comparison to the rest of the world, India had actually gained. ?In 2009-10, global exports had declined in double digits; compared to that, India’s trade declined only 4%, which shows that in relative terms we have gained,? he said.
Ratna explained that during the same period, India’s exports to north-east Asia which includes China, South Korea and Japan grew 14%, while its exports to southern Africa jumped 15%. ?This data show that trade between developing countries is growing while that between a developing country and a developed country is actually falling. India, Brazil, China and South Korea are the major contributors in this regard,? he added.
Senior economist at UNCTAD Rashmi Banga concurred. She said that owing to the government’s strategy of diversifying both the export basket and destinations, India’s exports were showing healthy growth signs despite global uncertainties. ?Developing countries’ share in the global trade basket is gradually going up. We are seeing that addition of new markets under various schemes have helped push up exports,? she added.
In April-October, India’s merchandise exports have grown 26.8% to $121.4 billion and commerce minister Anand Sharma is confident that the export target of $200 billion for the fiscal would be met. In a press briefing last week, commerce secretary Rahul Khullar said: ?The question is not whether we can reach the target (of $200 billion) but by how much can we cross it,? he said. The commerce ministry has already formed a core committee to discuss ways in which total exports can be doubled in the next three years.
Currently, India’s share in world merchandise trade is less than 1%. The country is targetting 5% share in world trade by 2020.