Some thoughts on ecology, evolution and economics

World trade: four years later

I first started tracking the main flows of world trade in 2015. Following up in 2018, there were subtle changes in the export of goods from twenty of the largest economies. In today’s post, we will look at the initial effects of the trade deals and conflicts discussed in 2018 and the early impacts of the pandemic. I will be using data from the Economist’s Pocket World in Figures 2022 . It is important to note that all these reports are two years out of date, in this case summarizing trade figures for the year ending in December 2020.

Fig.1: Main export flows in world trade (>$250 B in red,>$50B in blue)

Overall, exports among these twenty countries increased by 12% over 4 years, which is in line with an 11% increase in global Gross Domestic Product. These figures would have been higher if not for the 3% contraction in the world economy in 2020 as a result of the pandemic. The most interesting changes since our last report are regarding the BRIC countries ; Brazil, Russia, India and China. Brazil and India show up for the first time as having exports of more than $50 B (Brazil with China and India with USA). Russia switches its main export flow from the Netherlands to China. These changes reflect the much heralded formation of a new trading block among these nations.

The major trade flows, those greater than $250 billion, are the same, featuring exports to the US from China, Canada and Mexico as well as US exports to Canada. We have clearly averted the worst effects of the feared US-China trade war and the possible ending of NAFTA that I discussed in 2018. The only notable negative outcome among these trade relationships is a slight decline in US exports to China. Despite President Trump’s insistence on negotiating a “better” trade deal within North America – that is , one that would increase US exports relative to imports – the new USMCA deal picks up where NAFTA left off.

Brexit did come to pass in the intervening years. At the time, I predicted an 8% decline in UK exports to the EU. Though it has been difficult to distinguish the effects of the pandemic from Brexit, there is little doubt that overall trade is down for the UK. My figures here only track the top three trading partners in the EU. Exports to Europe from the UK are clearly down despite a 10% increase in exports to the US. One of the trade deals that the UK has put in place to make up for this loss is the CPTPP – the Pacific region trade deal. I have not detected any benefits for Canada and Mexico yet, who both signed on to the deal earlier. Time will tell if the UK can buck the trend of trading primarily with their closest neighbours.

One last deal that was mentioned in the 2018 post was CETA, a Canada-EU trade arrangement. Though exports to Europe tend to be small, the Canadian government has noted a 20% increase in exports from 2016-2020. Canada has yet to negotiate a comprehensive trade deal like CETA with the UK, its main European trading partner.

These figures are too early to reflect the major realignment in trade resulting from the war in Ukraine. In future posts, I expect to report on increasing separation between BRIC nations and the G7 nations. The relationship between China and the US is most important and continued engagement will depend on whether military tensions between these countries can be contained.