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 1
Trade and Growth –Positive Relationship 2
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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 export- oriented economies of China & Japan Financial Crisis 4
GDP Growth Rates Head South source: % Real Economic Growth Advanced 1.7% Emerging 5.9% World 3.5% 5
US Growth Goes Negative 6
China Slows But Stays Above 6% 7
China’s GDP by Expenditure (2007) Source: CEIC China’s growth very important for world economy 8
Savings Rates Widely Different 9
India Doing Well 10
Brazil More Unstable 11
Russia- Steady Growth then 0ff the Table 12
source: World Real GDP Growth vs Trade Volume in Goods & Services Trade GDP 13
Million $ Source: US Bureau of Economic Analysis U.S. Current Account Balance GDP= C + I + G + (X – M) GDP (Prodn) - (X-M) (trade bal.) = C + I + G (absorption) 14
US DOLLAR INDEX Source 15
Recovery –when, how fast 16 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.