Key Trade & Development Issues: New Realities in the Geography of the World Economy Dushni Weerakoon Institute of Policy Studies of Sri Lanka

2 Key Developments in the Global Economy Combined output of emerging economies accounted for more than half of world GDP in 2005 (PPP) Other wide ranging indicators: –Account for 45% of world exports –Consume a half of world’s energy –Account for 4/5 th of growth in oil demand –Hold 70% of world’s foreign exchange reserves

3 Rich economies no longer dominate global economy Emerging economies exerting impact on developed world Influence seen in different ways –High oil prices alongside low inflation globally –Result of productivity growth in countries such as China

4 Emerging economies showing rapid growth Annual growth of nearly 7% –Growth rates much wider now –Economies more integrated globally Faster growth spreading more widely offers possibility of sharp reduction in poverty globally

5 Developments not without problems Gains unevenly distributed Rise in emerging economies altering power relations Room for ‘protectionist’ policy stances to grow Economically more powerful emerging economies better placed

6 What are options for smaller economies? Link bilaterally to one or more of bigger economies (e.g. ISFTA) –Sharp increase in exports –Significant inflow of FDI linkages –Growing intra-industry links in sectors such as automobiles –In turn, draw in more FDI from 3 rd countries such as China

7 Strategic options for developing countries? More difficult unilateral trade reforms done for the most part At multilateral levels, concerns are to ensure a fair global trading system Links to integration via South-South trade needs to be developed