From UPSC perspective, the following things are important :
Prelims level : Trends in global trade post covid
Mains level : Slowdown in China and opportunities for India
The World Trade Organization (WTO) has upgraded its world merchandise trade growth outlook to nearly 11 percent for this year, higher than 8% estimated in March.
- The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade between nations.
- Governments use the organization to establish, revise, and enforce the rules that govern international trade.
- It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948.
- The WTO is the world’s largest international economic organization, with 164 member states representing over 96% of global trade and global GDP.
- The WTO facilitates trade in goods, services and intellectual property among participating countries.
- It prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
Report on Global trade
- According to a WTO, global goods trade is expected to grow by 10.8 per cent compared to the forecast of 8 per cent in March, but with varied recovery, depending on the region.
- The report said export volume growth in 2021 will be 8.7 per cent in North America, 7.2 per cent in South America, 9.7 per cent in Europe, 7 per cent in Africa, 5 per cent in West Asia and the highest for Asia at 14.4 per cent.
- On the other hand, imports are expected to grow at a faster pace as compared to exports. Inbound shipments into North America are set to grow by 12.6 per cent.
- It will be 19.9 per cent in South America, 9.1 per cent in Europe, 13.1 per cent in CIS, 11.3 per cent in Africa, 9.3 per cent in West Asia and 10.7 per cent in Asia.
Key highlights for India
- Exports from India have been rising consistently over the last few quarters, after plummeting for a few months as the outbreak of Covid-19 disrupted global trade.
- India’s exports to its top trading partners such as the US, European Union, nations in West Asia, among others, are expected to rise.
- Exports data during the first six months of the current fiscal year is emblematic of the fact that external demand has been robust.
- Besides, supply-side disruptions can also be exacerbated by the rapid and unexpectedly strong recovery of demand in advanced and many emerging economies.
Competing with China
- Experts said with rising global demand, India should be able to compete in various segments vis-a-vis China.
- Currently, China is facing supply-side as well as demand-side issues owing to several internal challenges (energy, debt crisis).
- Therefore, India is in a good position to increase its exports, and can become a substitute for China across various product categories or sectors.
- India can take advantage of the increasing global demand, which can ultimately translate into demand for Indian exports.