Key Trade & Development Issues: New Realities in the

Geography of the World Economy

Dushni Weerakoon

Institute of Policy Studies of Sri Lanka

2

Key Developments in the Global Economy

• Combined output of emerging economies accounted for more than half of world GDP in 2005 (PPP)

• Other wide ranging indicators:– Account for 45% of world exports– Consume a half of world’s energy– Account for 4/5th of growth in oil demand– Hold 70% of world’s foreign exchange reserves

3

Rich economies no longer dominate global economy

• Emerging economies exerting impact on developed world

• Influence seen in different ways– High oil prices alongside low inflation

globally– Result of productivity growth in countries

such as China

4

Emerging economies showing rapid growth

• Annual growth of nearly 7%– Growth rates much wider now– Economies more integrated globally

• Faster growth spreading more widely offers possibility of sharp reduction in poverty globally

5

Developments not without problems

• Gains unevenly distributed

• Rise in emerging economies altering power relations

• Room for ‘protectionist’ policy stances to grow

• Economically more powerful emerging economies better placed

6

What are options for smaller economies?

• Link bilaterally to one or more of bigger economies (e.g. ISFTA)– Sharp increase in exports– Significant inflow of FDI linkages– Growing intra-industry links in sectors such as

automobiles– In turn, draw in more FDI from 3rd countries such

as China

7

Strategic options for developing countries?

• More difficult unilateral trade reforms done for the most part

• At multilateral levels, concerns are to ensure a fair global trading system

• Links to integration via South-South trade needs to be developed