Global Trade Update Report: UNCTAD

GS Paper II International Relations

Context

The forecast for international trade is optimistic and World GDP is expected to continue at around 3%.

Global Trade

Moderating Global Inflation:
- As inflation rates stabilize, it encourages trade by reducing uncertainty and cost fluctuations.
  - Stable prices make it easier for businesses and people to analyze the market trend due to which they’re more likely to trade with other countries.
Improved Economic Growth Forecasts:

- A favorable economic forecast worldwide encourages greater trade among nations by making people feel more confident about buying and selling things across borders.

- The focus on sustainability and eco-friendly products is causing higher trade in environmental goods, especially in electric cars, leading to higher growth in trade.

Shipping Route Disruption: Recent disruptions in key shipping routes, such as the Red Sea, Black Sea, and Panama Canal, could increase transportation costs and disrupt supply chains, affecting international trade negatively.
Political Conflicts Worldwide: Ongoing political conflicts worldwide may lead to instability in crucial markets like energy and agriculture, discouraging international trade.
- Example: Russia-Ukrain Conflict, Israel-Hamas War, etc.
Strained supply of essential minerals: The rising demand for minerals essential for clean energy technologies may strain their supply and cause price fluctuations, posing additional risks to international trade.

Overall decrease in global trade: Global trade decreased by 3%, amounting to approximately $1 trillion, compared to the previous record high of $32 trillion in the preceding year.
- The downturn was primarily driven by reduced demand in developed economies and weaker trade in East Asia and Latin America.
Sector Performance: While the services sector grew by 8% year-on-year, trade in goods declined by 5% compared to 2022.
Quarterly Growth: Quarter-over-quarter figures showed signs of improvement, particularly in major economies like China and India.

Merchandise Exports: India experienced a 5% growth in merchandise exports in the last quarter of 2023 compared to the same period the previous year.
- However, there was a 6% decrease in annual export growth.
Services Exports: Services exports remained unchanged in the last quarter of 2023 compared to the previous year.
- However, there was a 14% annual growth in services exports.
Changes in India’s Trade Dependence in 2023: India’s reliance on China and the European Union increased by 1.2%.
- Conversely, dependence on Saudi Arabia decreased by 0.6% during the same period.

Positives

Negatives

Boosted Exports: More trade globally means India can sell more of its products to other countries.
Job creation: Selling more goods abroad can create new jobs in India.
Attracting Foreign Money: Foreign investors might want to put money into India when global trade is good.
- This can help our economy grow even more.
Better Business Confidence: If businesses feel good about the world economy, they might invest more in India.

High expenses for Indian businesses: Disruptions in shipping routes, like the Red Sea and Panama Canal, might raise costs and delay shipments for Indian traders.
Global Political conflicts: Political conflicts worldwide could create uncertainty in energy and agriculture markets, affecting India’s trade prospects.
Impact of Mineral Shortages on Indian Trade: Shortage of essential minerals for clean energy may lead to price swings, impacting Indian industries reliant on them for trade.

Also Read: Trade And Economic Partnership Agreement (TEPA)

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