Asian Drivers and Poor Countries: The Research Agenda

1. Jörg Mayer UNCTAD China and India: What’s in it for Africa? Paris, 16-17 March 2006 Asian Drivers and Poor Countries: The Research Agenda

2. Some research issues • The rise of the Asian drivers and the development of Africa’s terms of trade: who benefits? • The strong impact of the Asian drivers on world trade in primary commodities and clothing: will it last? • What policy measures can maximize Africa’s benefits from the rise of the Asian drivers?

3. Africa’s terms of trade strongly improved but still are substantially lower than around 1980 Terms of trade, export volume and purchasing power of exports, Africa Source: UNCTAD Trade and Development Report 2005.

4. Since 2002, oil exporters and exporters of mining products have registered terms-of-trade gains – exporters of manufactures have suffered losses Terms of trade in selected groups of developing countries, 2000-04 Source: UNCTAD Trade and Development Report 2005.

5. Contribution of different product groups to terms-of-trade changes (year-on-year percentages changes) Source: UNCTAD Trade and Development Report 2005.

6. The Asian drivers’ impact on world trade of primary commodities: will it last? (1/3) • The causal relationship between changes in the size and pattern of world primary commodity trade and the rise of the Asian drivers is well established: will it last? • Agriculture (future evolution very uncertain): • Even small changes in China’s food self-sufficiency ratios strongly affect its agricultural trade balance; • But how will the new emphasis on rural development affect productivity in agriculture?

7. The Asian drivers’ impact on world trade of primary commodities: will it last? (2/3) • Minerals and metals (impact likely to last): • In China, import growth is likely to remain strong for several years to support both industrialization and infrastructure development (urban and rural); • India is 5 to 20 years behind China in per capita use of commodities such as aluminium, copper and steel – but will industrialization assume a significantly greater role in India’s development trajectory?

8. The Asian drivers’ impact on world trade of primary commodities: will it last? (3/3) • Energy (impact most likely to last): • Future development of China’s energy use depends on a balance of opposing trends: • Continued rapid industrialization, rising living standards and improvements in transport infrastructure will support strong demand; • But there remains considerable potential for energy-saving technologies. • India has only limited domestic resources.

9. Intensity of energy use, selected countries, 1965–2003(Tons of oil equivalent per GDP in million, PPP-adjusted dollars) Source: UNCTAD Trade and Development Report 2005.

10. Policy challenges in the primary sector • Ensure that a reasonable share of earnings from primary commodity exports provides income for the exporting country: • Is there a case to review agreements (royalties, tax rates) with foreign enterprises in extractive industries? • Ensure that this income contributes to economic development: • Enhance transparency of extractive industries; • Finance productivity-enhancing investment and minimize risk of Dutch disease; • No complacency about industrialization and diversification.

11. Is there a future for Africa’s textile and clothing industry? • Key questions: • Will China maintain export drive in clothing industry? • Will India (and other South-Asian economies) add to competitive pressure coming from China? • Short-run: Can Africa’s trade preferences with liberal rules of origin be preserved? • Long-run: • Can Africa build up an integrated industry structure? Are liberal rules of origin a handicap or can cheap textile imports make Africa’s clothing industry more competitive? • What is the scope for regional production sharing?