The developing world has taken off. The number of people living in high growth economies or in countries with per capita incomes at OECD levels has increased fourfold over the last 30 years – from 1 billion to 4 billion, Growth Commission (2008). It is a remarkable result both in terms of global economic growth and the distribution of income. The dispersion in economic activity means that some of the most important economies in the world are not members of the OECD, a further reason for the OECD to expand its membership and to help ensure that multilateral programmes continue to be embedded in the global economy.
The International Economic Order and Trade Architecture
There is a growing perception that in the last 15 years, the world has lived through an accelerated globalisation process. From an economic perspective, this can be explained by the rapid increase in the degree of integration through international trade and investment flows. Indeed, global trade relative to world GDP has grown from 39% in 1992 to 52% in 2005. At the same time, the share of world trade of OECD countries has gone down from 73% in 1992 to 64% in 2005. This shift in the pattern of trade has led to much interest in analysing changes in the structure of the world trade network and in particular, how the role and influence of emerging markets on world trade has evolved.
The Bilateral Trade Performance of the BRIICS
What have been the main driving forces behind the rising trade of large emerging economies such as China or India? What is driving the phenomenal trade growth rates in China? Why is India’s merchandise trade apparently less dynamic? Why has Brazil’s trade lingered around 1% of world trade since the beginning of 1970s? Are the fastest growing emerging economies trading above or below their potentials? These are the questions that often underpin discussions about the opportunities and threats associated with the increasing presence of large emerging economies in the world economy.
Globalisation, Multinationals and the BRIICS
In order to understand the nature of the contemporary phase of globalisation, this chapter adopts the economists’ focus on international trade, international investment and international markets from the particular perspective of economic geography. From the standpoint of economic geography, it explores the explicitly spatial and regional characteristics and impacts of contemporary globalisation. Through the lens of international investment, impacts on individual countries, groups of countries, regions and cities are also analysed. The processes of globalisation which are mediated by the foreign direct investment (FDI) behaviour of multinational enterprises (MNEs) or trans-national corporations (TNCs) form a particular focus of this chapter. Impacts of globalisation on the BRIICS countries of Brazil, Russia, India, Indonesia, China and South Africa are also considered from an economic-geographic viewpoint.
Globalisation and the Political Economy of Trade Liberalisation in the BRIICS
This paper tries to make sense of trade-policy developments in the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa), against the backdrop of trade and foreign-direct-investment (FDI) liberalisation in developing countries and countries in transition since the early 1980s. Its accent is on political economy, comparing the countries concerned to show how politics and institutions interacted with economic conditions, and shaped the relative success or otherwise of reforms. National trade-policy reforms must also be seen in the context of modern economic globalisation. The global macroeconomic climate, in addition to global patterns of trade, FDI and technological change, set the external economic context of constraints and opportunities for nation-level policies in the BRIICS. Then there is the global political context: international rules and international economic organisations (such as the WTO, IMF and World Bank), and the role of the major powers, especially the USA.
Storm in a Spaghetti Bowl: FTAs and the BRIICS
The six BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa) are strongly integrated in global trade as well as having generally dynamic economic performance. This integration has partly been driven by their proliferating free trade areas (FTAs) with their major trade partners and with countries in their regions.
This chapter introduces a broad range of trade and trade related issues in Brazil. The paper takes a historical perspective in order to shed light on some current trade policy settings in Brazil. Brazil has faced a number of challenges in achieving a highly sustainable rate of economic growth and an improvement in income distribution over the last 60 years.
Russia is the largest economy in the world that is not a member of the World Trade Organisation (WTO), and, as of early 2008, it was among 30 countries in the long process of negotiating its accession to the WTO. Russia applied for membership in the General Agreement on Tariffs and Trade (GATT) in June 1993 and the GATT Working Party was transformed into the World Trade Organisation Working Party in 1995. During his first Administration, President Putin made WTO accession a priority for Russia, and after languishing for several years, the Russian accession negotiations began to see real progress under his administration. By early 2008, Russia had achieved bilateral agreements with almost all nations on its WTO Working Party, however, significant differences with Georgia and some other contentious issues remained.
India gained independence in 1947. From that year until the early 1990s, successive governments adopted inward-oriented development strategies with the state assuming a dominant role in the economy via state planning. Market forces were not permitted to play a major role in resource allocation. In the wake of a 1991 balance-of-payments crisis, India set in train a series of stabilisation-cum-structural adjustment measures with far-reaching effects. Their central objective was to reintegrate the Indian economy with the world economy by reducing barriers to trade and investment, and deregulation of a highly bureaucratised economy. The promotion of FDI was also seen as a way of reducing the country’s dependence on debt-creating capital inflows, while at the same time renovating Indian industry’s archaic technologies and easing its entry into international markets.
The Asian Financial Crisis of 1997-98 interrupted Indonesia’s robust economic growth and trade performance. Regaining its previous position, let alone expanding in world markets, now seems a challenge. Prior to the crisis, trade had long been an important driver of economic growth in Indonesia. On the demand side, net exports had been positively contributing to growth, while on the supply side, the expansion of production facilities for exports had boosted expansion of the entire economy. The crisis damaged structural relationships across the economy, and coupled with macroeconomic instability, firms were adversely affected, diminishing their ability to trade. Alongside these developments, several competitors emerged to conquer world markets, increasing the competitive pressure on Indonesian industries.
One of the most telling ways to describe China’s trade performance in recent decades is in terms of its integration into the global trade network, Figure 1.2. This truly spectacular trade performance has moved the economy from an isolationist position to the core of the trade network in the space of 30 years. What this means is that China is at the core of many global supply chains on a par with the G3 countries. That is, since 1978 China has chosen to become heavily dependent on the import supply of raw materials, parts and components and services from the rest of the world to meet the export demand for a wide range of final capital and consumer goods. In the words of the Growth Commission (2008), China is "fully exploiting the world economy" as one of its growth planks. In doing so China has stimulated the global demand for the export products and services of a very wide range of countries and it has provided very competitive products for consumers globally. In this way, China has been a prime mover is the dispersion of economic activity worldwide and has greatly contributed to the strong economic growth in the world as a whole in the recent past.
South Africa has managed to dramatically reinsert its economy back into the world trade environment in the mid 1990s following a long period of internal political difficulties and international reactions to the apartheid regime. Since the early 1990s South African governments have faced major economic policy challenges to change the institutional structure of the economy and adapt the trade policy regime to the new agenda and structures.
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