Trade Essentials: Exploring 5 Need-to-Know Charts
Did you know that during the past six decades, while the global economy has grown 100x, global trade has grown 250x?
Do you know how much trade is accounted for by maritime, and which countries dominate trade?
Here are the top five things you need to know:
1. Trade Has Grown 250 Times since 1960s And Now Is 25% Of the Global GDP
Global trade (merchandise exports) was only 9% of global GDP, back in 1960, while it has now reached one quarter of global GDP; this means that $1 out of every $4 spent in the world is spent somewhere along the global trade value chain. It’s not surprising when one contemplates the hyperconnected, globalized, and consumeristic world we live in today. Global trade acts as the super-highways connecting the world with goods from all around the world.
2. 20 Countries Still Account For 70% Of Global Trade, with Asia Dominating Exports
Accounting for both imports and exports of merchandise, trade is more than 50% of global GDP. The top twenty countries account for 70% of international trade with eight Asian countries accounting for 30% and seven European countries accounting for 22%. The North American countries of the United States, Canada, and Mexico account for 13% exports. Invariably the top three trading partners, based on country and region, tend to be China, the European Union, and the United States. With China being the largest export nation, it helps in explaining why eight of the top twenty busiest ports are in China alone.
3. Maritime Trade Accounts for the Largest Volume
Despite being the slowest mode of transport, maritime trade is by far the largest segment of trade, due primarily to scale and efficiency, compared to trade by air or land. Besides cost savings, maritime trade also allows for the transportation of large goods in tankers, main bulk and other dry (which includes containers) cargo formats. Tankers and main bulk account for 57% of volume (millions of tons loaded), as of 2021.
4. Regional Trade Agreements Are the Preferred Tool Today
There are over 350 cumulative regional trade agreements in place. Plurilateral trade agreements divert interest away from more complicated multilateral negotiations and encourage trade among those who stand to benefit. This has led to an increase in the global value chains, which refers to international production sharing where production is broken into activities and tasks which are carried out in different countries and is estimated to account for 70% of all trade with the remaining 30% accounting for final goods, meant for the consumer.
5. Trade Is Still Concentrated in Pockets
Infobyte: Global trade value by type of concentration, 2021
Research by McKinsey shows that, in 40% of trade cases, importing countries rely on three or fewer countries for the supply of a given resource or manufactured good. In these ‘concentrated trade’ cases, one quarter of the time is because there are limited suppliers, while the remaining 75% of the time importing countries prefer to do so from only 2 or 3 countries, despite there being many suppliers across the globe. As an example, 15 economies account for 90% of global wheat trade, but most countries buy from just two or three countries. This concentration is not because of a lack of suppliers, but due to a range of factors, including geography, consumer and business preferences, preferential trade arrangements and supplier structures and relationships.
To read more about the power of sustainable trade in the race to net zero – read the full report here.
This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa’s tech and entrepreneurial ecosystems.
