The dynamics of global trade have changed over the past few decades

Jul 24, 2010 Letters

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Dear Editor,
There is a saying that when it comes to inter-state relations, there is no such thing as permanent friends; only permanent interests. There is a whole lot of truth in this saying.
The most recent development in this regard had been the signing of a technical cooperation agreement between Guyana and Kuwait encompassing a number of areas including finance, foreign trade and air transport.
Only recently, Guyana and Iran signed a number of agreements which saw technical and financial support in the field of mining and health care.
Apart from cultural ties with countries of the Middle East, it is essential that as a nation we seek to broaden our trade and commercial relations with the outside world.
It is clear that the dynamics of global trade has changed significantly over the past few decades. Gone are the days when trade relations were dominated by Europe and North America. The global market place has become much more diversified with the emergence of new centres of trade and commerce, most notably China, India and Brazil which benefitted from relatively cheap labour and is better positioned in terms of economic competitiveness.
This changing dynamics has resulted in severe disequilibrium at the global level in terms of balance of trade and as a consequence balance of payments.
The United States, for instance, is today the largest debtor nation with the highest per capita debt in the world.
It is carrying an enormous trade deficit and has resorted to much borrowing with the majority of its borrowed money coming from China.
Chinese products dominate the global market, due mainly to price competitiveness and enhanced quality of products manufactured in China. The end of the Cold War which previously limited trade and commerce between the East and the West has now proven to be a great commercial boost to China which now has the advantage of a much larger market that was hitherto the case. China now enjoys a significant trade advantage over the United States and for that matter the whole of Western Europe.
Its internal market, which is today the world’s largest, together with the penetration of markets in the western world, has now rendered China as a formidable economic and commercial powerhouse.
The fact is that the United States and for that matter, western countries no longer have the monopoly when it comes to international trade.
The rise of the BRIC countries – Brazil, Russia, India and China – has changed in a fundamental way the nature and scope of trade and aid. China in particular has proven to be a significant economic player and is today one of the largest consumer of raw material and energy.
Because of consistently high growth rates it has now overtaken a number of western powers in terms of economic might including that of Great Britain, France, Germany and Japan which only recently were economic powerhouses.
If the current growth momentum continues it would only be a question of time before China overtakes the United States as the largest economic power in the world.
China’s growth potential is showing little signs of abating despite the crisis which hit the western world. The World Bank, for instance predicted that the Chinese economy will grow by 9.5% this year, with a shift from government-led investment to a mix of solid consumption, enhanced exports and stable investment. The World Bank also suggested more flexibility in China’s implementation of fiscal and monetary policies, given the volatility of the global economy.
The need to diversify trade relations has now become imperative for developing countries such as Guyana if there is to be any significant shift in its economic outlook in the medium to long term. For one thing, the financial and economic crisis which hit the United States and some other western countries have had a diffusing effect on smaller economies in particular those with significant trade relations with the United States. The weakening of the US currency meant a reduction in the purchasing parity of the US dollar which impacted adversely on remittances and import earnings.
This is why it is important to focus more on trade and economic diplomacy as opposed to political/ideological considerations as in the days of the Cold War.
In Guyana’s case, it has to forge strategic alliances with other development partners as in the case of Kuwait which is today the fifth richest country in the world with a Gross Domestic Product (GDP) of US$ 167.9 billion and a per capita income of US$ 81,800. According to media reports, Guyana signed four bilateral agreements with Kuwait which paves the way for the establishment of mechanisms that would monitor the cooperation programmes between the two countries in the economic, commercial, investment and financial fields.
The need to expand and diversify our trade and commerce with the wider international community cannot be overemphasized. We live in a world that is vastly different from what obtained during the days of the cold war and its aftermath when interstate relations were influenced more by political/ideological consideration rather than economic and commercial interests. Today, the impact of globalization has now reshaped the international landscape and has created new configurations and trading blocs. Guyana as a poor developing country must take into account these changing dynamics and re-position the country strategically to take advantage of these new developments.
Hydar Ally

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