International Business Management
Flows, Sectors, Big Players, and Egypt’s Piece of the Pie in 2002
Naturally, the three regions with the strongest world economies, North America, Europe, and Asia, also dominate international trade. This paper is a study of some relevant details of world trade during 2002, focusing on where trade is going, what types of products it includes, who exactly is buying and selling, and where Egypt fits in. The World Trade Organization (WTO) publishes extensive annual reports with a variety of data on the world trade flows that are discussed here. What is surprising is the extent of the disparity in participation in international trade between the few, wealthier countries and the many lesser-developed nations.
International trade has recently undergone a remarkable transformation in total volume, as “international trade in goods and services has expanded from $200 billion to more than $7.6 trillion.” While it can be difficult to differentiate between the two, i t suffices to understand that “a good is an object, a device, a thing; a service is a deed, a performance, an effort.” Meanwhile, there is significant concern that the benefits of this trade do not reach everyone equally. This is challenging to quantify but it is evident that relative participation in world trade is tremendously disproportionate, with the same nations from the “West” and certain parts of Asia dominating world market share in every category.
The WTO is an organization whose mission is to promote democratic ideals while increasing efficiency in trade and improving both economic and social welfare for all. Based on sound fundamental principles of economics, it encourages reduced barriers to trade in order to reduce the price inefficiency caused by excessive tariffs and protectionist strategies. While, a common argument of anti-WTO leaders is that small countries are powerless in the WTO, trade proponents suggest that the opposite is actually true. Small countries would be weaker without it, they claim, as this institution increases their bargaining power. In the WTO system, every country follows certain rules in negotiating and discussing tariff reduction policies and these discussions have helped to encourage incredible growth in world trade in recent years.
It is important to note that trade patterns are evolving constantly and in order to understand the big picture, it is necessary to look at trending. For example, “from the 1960s to the 1990s, the trade role of primary commodities has declined precipitously while the importance of manufactured goods has increased.” The statistics used in this paper are taken exclusively from the WTO report on trade in 2002 and so they do not reflect historical precedents or give an indication of future expectations.
Meanwhile, there has been a recent shift from manufacturing to services, “perhaps presaging a similar shift of trade composition for the future.” This paper discusses the details of trade in merchandise and services in 2002 in order to give a picture of relative level of participation of different regions and countries. ,
Merchandise – Import, Export
It is important to look not only at who is actively involved in world trade but also who is left out. A useful category for comparison is world merchandise export, an important indicator of the economic health of a region. Not surprisingly, the concentration of market share among very few countries is as severe in terms of merchandise trade as it is in services. Western Europe, North America, and Asia account for over eighty-four percent (84%) of the world market while the rest of the world lags far behind.
Alone, Western Europe accounts for over two-fifths (41.2%) of all world exports in merchandise and Asia is next, with almost a twenty-eight percent (27.9%) share of total merchandise trade. While the United States is the largest individual merchandise exporter, North America ranks third with almost fifteen percent of the market (15%). Then, the decline is steep, with Latin America being the next largest contributor with only a five percent share. Combined, Africa and the Middle East only constitute six percent (6%), although they are comprised of some sixty-six (66) different countries.
The same individual countries participate most heavily in both the import and export categories. The US, Germany, Japan, France, China, UK, Canada, Italy, Netherlands, Belgium, and Hong Kong are in almost precisely the same order in both rankings. In fact, these top ten (10) countries account for over fifity-five percent (55%) of the total world trade in the manufactured products and mining and agricultural goods, in both categories.
The US is the market leader in both categories but was a significantly more active importer of merchandise than it was an exporter of these goods. While it imported over one trillion dollars of merchandise, an eighteen percent (18%) market share, the US exported less than seven hundred (700) billion dollars worth, or roughly eleven (10.7) percent of the world market. This disparity is detrimental to the US' overall balance of trade and more importantly, to the US economy as a whole.
World merchandise exports are recorded under three main categories: manufactures, mining products, and agricultural products. Of total world trade in this category, manufactured goods account for a significantly higher total value than any other sector. Also, its share of trade has increased slightly in recent years, growing to reach just over seventy-five percent (75%) of all merchandise exported in 1992.
These goods include textiles, chemicals, iron and steel, and different types of machinery and transport equipment. Of these, machinery and transport equipment are most notable, constituting a dominating forty percent (40%) of total merchandise exports. For example, office and telecom equipment (13.4%) account for a higher market share than all mining products (12.6%). Chemicals (10.5%), automotive products (9.9%), and other machinery (17.2%) are additional key contributers. After manufactures and mining, agricultural products rank the lowest of the three main categories, with food accounting for roughly eight percent (8%) of total world merchandise exports.
Commercial Services – Import, Export
In the commercial services sector, the same trend occurs: North America, Europe, and parts of Asia dominate the world market. With each country ranked according to market share, it becomes evident exactly who the big players are, as the top ten countries combined to account for more than fifty percent (50%) of the world market.
The US is by far the largest exporter of these services, with over seventeen percent share (17%), followed by the UK, Germany, and France, each accounting for over five percent (5). The same holds true in terms of importing commercial services, as the top five countries receive a combined forty percent (40%) of all world trade. In import category, the US (13%) ranks highest but by less of a margin. Germany accounts for almost ten percent (10%) of world market share, and Japan and the UK each receive over six-and-a-half percent (6.5%) of all world trade in these services.
In terms of exports, twelve European Union (EU) countries rank in the top twenty. Japan, Hong Kong, China, and the Republic of Korea represent the Asian region and India is the only other non-Western country to make the list. Egypt, the only African country ranked in the top forty, exported nine billion dollars ($9B) worth of commercial services. Ranked thirty-fourth (34), it has less than one percent (.6%) of world market share.
In terms of importing these services, two Middle Eastern countries are notable participants, with the United Arab Emirates ranked at thirty-one (31) and Saudi Arabia at thirty-six (36).
Role of Egypt, Africa, and the Middle East
Egypt , like most African and Middle Eastern countries, is relatively inactive in international trade, relative to the world economic powers. In fact, it accounted for less than one percent (1%) of merchandise exports in 2002 with a total export value of roughly four billion dollars. Although this total export value has increased in the past ten years (from three billion to four and a half), Egypt’s share of trade in the world merchandise market has actually fallen during that same period. In 1992, Egypt accounted for .08% share. Their position fell to .066% in 1996 and then further, to .057% two years later. Recently, Egypt's relative participation has risen to .068% but this growth is still only moderate.
In terms of total world merchandise trade, African participation is also particularly low. In fact, only South Africa ranks within the top fifty countries in terms of both imports and exports. Saudi Arabia, Brazil, India, UAE, and Turkey are the only other countries outside of Europe, Asia, and the Americas that rank in the top forty in either category. Each country accounts for roughly one percent (1%) of the world export market, ranking slightly lower as a group in terms of imported merchandise.
The strong presence of Middle Eastern states in this category is, of course, primarily due to their enormous petroleum reserves and the resulting world dominance in fuel export, under the ‘mining’ category. Relative to the big players, nonetheless, none of these countries is a significant participant in the exchange of important ‘renewable resources’ like machinery or technology.
In conclusion, participation in international trade is, at best, distributed unevenly. Meanwhile, many contemporary economic theorists postulate that growth in free, international trade is one factor that should help less developed countries put their economic problems woes behind them. For this to occur, these countries’ participation in world trade, as a percentage of the total, would have to grow significantly. Otherwise, many fear, they will be left behind.
Czinkota, et al. International Business – Update 2003. Thomson South-Western. United States. 2003.
World Trade Organization, International Trade Statistics 2, 2001, www.wto.org, October 25, 2001.
World Trade Organization. http://www.wto.org/english/res_e/statis_e/its2003_e/its03_bysubject_e.htm
From this web site, I downloaded and studied the following five tables.
Table 1.5 – Leading Exporters and importers in world merchandise trade, 2002.
Table 1.7 - Leading exporters and importers in world trade in commercial services, 2002
Table A4 - World merchandise exports by region and selected economy, 1992-02
Table III.3 - Intra- and inter-regional merchandise trade, 2002
Table IV.1 - World merchandise exports by product, 2002
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