Lecture 5: Recent Patterns and Trends: A Global Perspective

Macro-Scale: A Global Triad

3 large producing and trading regions: Europe, North America, and East and South East Asia — “3 legged collossus”

• triad = 85% GDP and trade

  • shifting towards Asia (fast-growing economies)

National-Scale: World Manufacturing Activity, 2011

Brazil growing for production, Germany = largest European producer, China, U.S., Germany, and Japan = 50% of the world’s manufacturing activity

• Canada losing its relative share of activity

Structural Changes in World Production, 1970-2008

• manufacturing value added = $ outputs - $ inputs

• slowly declining slope for Europe and North America

• Asia doubling share

• more developing countries holding greater shares of manufacturing

Diverging Trajectories: US — China, 1970-2018

US’s % of total world manufacturing drops from 25% to 20% while China moved from less than 5% to almost 20%

• 1978: China’s economy reforms under Deng Xiaping

  • opens up to foreign capital and privatization of state-owned enterprise

• transportation and labor costs decreasing → MNCs move in

Annual Growth in Manufacturing, 1980 - 2003

minimal growth in western Europe, formerly soviet countries growing, Asia growing minus Japan (went bankrupt in 90s, could’ve grown an economy stronger than China’s if it weren’t for the “lost decade” 90s halt)

Global Patterns of Manufacturing

• Europe, North America and East Asia = roughly 85% of manufacturing production —- U.S., Japan, and Germany dominated much of the 20th C

• Growing importance of NIEs — Brazil, Russia, India, China (BRICs)

  • China led the way — growth of manufacturing in East and Southeast Asia outpaces all other regions

Map of World Merchandise Trade, 2011

• more imports than exports in U.S.

• Global Triad still evident

• China, US, Germany, Japan = 30% trade value

• middle east exports lots of oil and gas

• primary resources diversify trade flow

Net Merchandise Trade Balances, 2012

Trade balances: surplus → $ exports > $ imports, deficit imports > exports

• China and Germany — trade surplus

• U.S., UK and France — trade deficit

How sustainable is it. for the U.S. to have such a deficit?

could lead to a recession but also only accounts for goods, not services

Network of World Merchandise Trade, 2012

CIS = commonwealth independent states (formerly Soviet) has more external trade than internal, Europe has more internal than external, North America has more external, and Asia is about half and half but has more internal

Three primary trading regions

Europe (EU), East and Southeast Asia (ASEAN) and North America (NAFTA)

• most world trade is either within or between these three blocks

Merchandise Trade Trends over time

• trade growth faster than output growth

• growing interconnectedness

• NIEs experienced the strongest trade growth

• the rise of China as a world mega-trader