Shifting Markets

The global economic crisis has radically changed market opportunities and the global business environment. As the global economy rebalances, the new drivers of economic growth are expected to come from increasing consumption in and demand from emerging markets.

In this edition, we explore the impact of shifting market trends on trade, investment and opportunity with commentary from leading businessmen and -women, economists and researchers. We also take an in-depth look at some of the challenges and opportunities these shifts are presenting for sectors including foreign investment, biotechnology, services outsourcing, tourism, textiles and clothing.

Asian economies were the first to rebound after the global crisis, while other emerging markets are expected to deliver growth numbers that overshadow mature, developed economies.

Longer-term forecasts by the Organisation for Economic Co-operation and Development suggest that today's developing and emerging countries are likely to account for nearly 60% of world gross domestic product by 2030. Furthermore, according to ITC's latest figures, almost 45% of world trade is conducted by developing countries with nearly half of this trade categorized as South-South trade.

The growth of South-South trade has been attributed to various factors including the rapid economic expansion of some developing countries; improved trade facilitation and transport infrastructure; the strengthening of regional integration; and intra- and inter-firm and -industry networks and transactions.

Although world trade continues to recover overall and South-South trade is increasing, ITC analysis of trade trends demonstrates that least developed countries (LDCs) are suffering the fallout of the global financial crisis. In 2009 non-oil exports from LDCs to their major trading partners declined by more than 8.5% in value, although the volume of goods exported increased by nearly 6%. In effect, these countries are now exporting more for less in the aftermath of the crisis.

On the positive side, LDCs continued to do better than the world average for exports, according to ITC data. In the final quarter of 2009, non-oil exports from the group showed a 2% year-on-year increase, while world exports showed a small decline of 0.2% compared to the same quarter in 2008.

With the growth potential in emerging markets, South-South trade needs to be nurtured and deepened as a source of demand, to safeguard against future global economic shocks. There has been an increase in cooperation between developing countries towards reducing trade and other barriers to South-South trade. This trend brings an opportunity to reduce the dependence on commodity exports for many developing countries through increasing potential for trade opportunities that offer higher value-added goods and services with technological content.

The world's perspective on financial security and investment has also changed. With the collapse of traditional finance structures in developed countries, the financial systems in developing countries have been recognized as sound options, inducing greater confidence for investment.

The crisis has also emphasized an already emerging trend towards a focus on value-creating regulation, causing businesses within large international value chains to recalibrate. This trend has been to the advantage of some suppliers but not others. However, as many of our contributors in this issue of International Trade Forum have highlighted, there are opportunities in the challenges. One thing is for certain, maximizing trade potential in emerging markets requires a more structured approach.

For many small and medium-sized enterprises, improved trade facilitation measures, trade financing options and joint ventures can assist in moving their businesses towards South-South trade.

As a means for adapting to the new market reality, there is a need for innovative solutions from enterprises and trade support institutions to ensure increased economic growth, job creation and entrepreneurial opportunities to build strengthened positions for both current and future markets.