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1
AGRICULTURAL TRADE IN THE
BROADER GLOBAL CONTEXT
Lecture 4- AHEED Course “International Agricultural Trade
and Policy”
Taught by Alex F. McCalla, Professor Emeritus, UC Davis.
March 31 ,2010, University of Tirana, Albania
Trade and Growth –Positive Relationship
2
Rise of Protectionism





Openness to trade is associated with greater economic
growth. Trade & investment have driven a large share of
global economic growth – So TRADE MATTERS!
Since 1948 on GATT trade has grown much faster than global
GDP and is therefore more important now than 60 years ago
In the most recent G20 summit trade was a big part of the
discussion.
World econ growth has turned negative in past year (-3.8%
growth in G7 advanced countries in 2009)
US/China trade tensions (1st & 3rd largest economies): new
disputes: Chickens, tires, auto products, paper
BRICs

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3 
Past 20 years; China, India & Russia have become forces in
the world economy; emerging market countries have been the
main recent driver of global growth in PPP terms—led by
China, which alone contributed nearly 27 percent to global
growth in 2007. (IMF. Jan 2008)
China double-digit growth for past several years; India 9%;
Russia 7-8%. Brazil 5-6%; (the BRICs)
Globalization – merchandise trade increased by 3 X in last 16
years.
services trade growth, 1990-2005: doubled (2x)
manufacturing trade growth, 1990-2005: tripled (3x)
Financial Crisis
4

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US, EU, China & Japan account for 50% of global GDP;
70% of global financial flows; & 2/3rds of global saving.
Because of integrated financial markets, the banking
problems in US spread quickly to Europe
But China & Japan were not directly exposed to the
toxic assets originating in the US
Instead, the collapse of world trade hit the exportoriented economies of China & Japan
GDP Growth Rates Head South
% Real Economic Growth
5
10
Emerging 5.9%
8
6
World 3.5%
4
2
0
-2
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Advanced 1.7%
-4
-6
Advanced economies
Emerging and developing economies
source: http://imf.org/external/datamapper/index.php
World
2009
US Growth Goes Negative
6
China Slows But Stays Above 6%
7
China’s GDP by Expenditure (2007)
8
Net Exports
22%
Consumption
39%
Investment
39%
Source: CEIC
China’s growth very
important for world
economy
Savings Rates Widely Different
9
India Doing Well
10
Brazil More Unstable
11
Russia- Steady Growth then 0ff
the Table
12
World Real GDP Growth vs Trade Volume in
Goods & Services
13
15
Trade
10
GDP
5
0
1999
2000
2001
2002
2003
2004
2005
2006
-5
-10
-15
source: http://imf.org/external/datamapper/index.php
2007
2008
2009
U.S. Current Account Balance
14
Million $
200,000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
-200,000
-400,000
-600,000
-800,000
-1,000,000
Balance Current Account
Balance: Goods
Balance: Services
GDP= C + I + G + (X – M)
GDP (Prodn) - (X-M) (trade bal.) = C + I + G (absorption)
Source: US Bureau of Economic Analysis
US DOLLAR INDEX
Source http://www.fxstreet.com/rates-charts/usdollar-index/
15
Recovery –when, how fast
16
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There seems to be an emerging consensus that we have reached the
bottom although unemployment remains high in advanced countries.
All agree it will happen first in middle income developing countries eg
China, Brazil, next in other developing countries, last in advanced
countries.
Most agree that will be slow recovery in countries like US where
everybody’s confidence has been shattered. Savings rates in G7 will
probably rise meaning resumption of consumer spending will be
delayed.
Implications for agricultural trade are not clear especially given the
recent price spike in commodity prices, the topic of next lecture.
More when we review Economist”s projections in last lecture.