Our exports sector has always remained afflicted by uncertainties. There are multiple reasons why it is so with the predominant reason being the lack of exportable surpluses in goods and services that are in demand in global markets. Periodic slump in global markets also has played a crucial role in causing our exports to grind.
The list of our exportable surpluses has remained unchanged over the last 48 years or so and; even the export destinations have remained the same. Most of what we have been exporting all these years has remained limited to raw materials and goods with very insignificant value-addition.
Neither our successive governments in Islamabad nor our private sector exporters seem to have bothered to find out which goods get traded the most in the world, and what countries play the most important roles in these deals. Also we seem to have never bothered to find out our comparative advantages that could be exploited to our maximum commercial benefit.
Jeff Desjardins, founder and editor of Visual Capitalist has prepared a list of goods (These are the world's most traded goods - published in Weekly Agenda of World Economic Forum on February 23, 2018) that are in the greatest demand in the global markets.
Understandably, none of the items on the list can be found on our list of exports goods. The list compiled by Desjardins contains good categories, along with the total dollar value and percentage of total exports that each category represents on the global market:
1. Cars ($1,350bn - 4.9% of total global market), 2. Refined petroleum ($825bn - 3.0% of TGM), 3. Integrated circuits ($804bn - 2.9% of TGM), 4. Vehicles parts ($685bn - 2.5% of TGM), 5. Computers ($614bn - 2.2% of TGM), 6. Pharmaceuticals ($613bn - 2.2% of TGM), 7. Gold ($576bn - 2.1% of TGM), 8. Crude petroleum ($549bn - 2.0% of TGM), 9. Telephones ($510bn - 1.8% of TGM), 10. Broadcasting equipment ($395bn - 1.4% of TGM), 11. Diamonds ($255bn - 0.9% of TGM), 12. Petroleum gas ($254bn - 0.9% of TGM), 13. Human and animal blood ($252bn - 0.9% of TGM), 14. Aircraft ($234bn - 0.9% 0f TGM), 15. Delivery trucks ($216bn - 0.8% of TGM), 16. Medical instruments ($216bn - 0.8% of TGM), 17. Industrial wires ($200bn - 0.7% of TGM), 18. Jewellery ($178bn - 0.7% of TGM).
"Finished automobiles are the top good traded worldwide with $1.35 trillion being traded each year between countries. Auto parts are not far behind in the No. 4 spot with $685 billion of trade.
"Oil also stands out as a key commodity: refined petroleum ranks No. 2 with $825 billion of trade, while crude petroleum and petroleum gas are at No. 8 and No. 12, for $549 billion and $ 254 billion traded, respectively.
"Finally, an odd standout is the category of human and animal blood - which apparently sees $252 billion in aggregate international trade each year.
"The United States is the biggest importer for 12 of the 18 trade categories, including the largest ones: automobiles and refined petroleum.
"Interestingly, the US is also the largest exporter of two of the goods that it is a top importer of: refined petroleum and medical equipment. This is because both are highly specialized categories - the US may import one grade of refined oil at a low cost, while simultaneously exporting a higher or more specialized grade of oil at a premium.
"Germany is top exporter of autos, vehicle parts, and pharmaceuticals, while Switzerland is the number one importer and exporter of gold.
"Lastly, China is the biggest exporter for five of the 18 trade categories: computers, broadcasting equipment, telephones, insulated wires, and jewellery, while being the largest importer of crude oil, integrated circuits, and aircraft.
"Every day, massive quantities of goods get traded on the global market.
"These goods can be entirely customized and unique, but more often they are things like commodities or bulk goods that get moved around on huge container ships from country to country. Included in this latter category would be common exports like crude oil, automobiles, iron ore, pharmaceuticals, and smartphones."
Meanwhile, the World Trade Organization has predicted a slight recovery in international trade for 2017 and 2018, albeit with many uncertainties.
As Jaime Malet, Chairman, American Chambers of Commerce in Spain said in his article, (International trade is slowing down. What does this mean for globalization? Published last November in the Weekly Agenda of World Economic Forum) historically, the volume of world merchandise trade has tended to grow between 1.5 times to twice as fast as world GDP.
But since 2012, trade has only been growing at a rate equal to or below that of GDP. In 2016, 20 of the world's largest shipping companies sold $120 billion, compared to $200 billion in 2012.
The downturn of the Chinese economy and other emerging economies, as well as the contraction of investment in the US during recent years, is said to explain part of this deceleration - but not all of it.
Other technological and political factors could indicate a long-term anti-globalization trend. This would create a world very different to the one we know.
Pakistani exporters need study closely to the developments being discussed below to assess the future challenges that they would be facing.
Malet said firstly, technological development is bringing production and manufacturing closer to the final destination of goods - the end user. The most obvious example is energy.
"We have new technologies for extracting oil. We are making progress in renewable energy to tackle climate change."
Further, as technology improves in these areas, the dependence of the US and European energy consumers on third-party countries decreases. As a result, so does the need to transport millions of barrels of oil (55% of world trade in 1970) and tons of coal.
Credit for this has been attributed to the new shale extraction techniques. Meanwhile, the US - the world's leading energy consumer - is said to becoming energy independent in oil and natural gas. This definitely has a large impact on world trade and geopolitics.
Given its growing energy independence, Malet believes the US may reduce its onerous role as guarantor of maritime security. A large part of its interest in this role, which it has played since 1945, has been to ensure the transport of fossil fuels to the West.
Even more relevant, though still in its infancy, according to Malet is the impact of robotic development on international trade. As the Fourth Industrial Revolution and its process of extreme automation spreads through factories of the rich world, and as robots become more efficient and affordable, practices such as offshoring manufacturing to places with cheap labour will most likely decline. Why relocate a factory to Vietnam or Poland if it can stay in California or Stuttgart with reliable robots that are more accurate, can work 24/7, and are less demanding than human workers? Millions of employees in the East may lose their jobs over the next few decades, substituted by robots in the West.
Advances in 3D printers, says Malet, may soon make it possible to substitute large factories with much smaller ones, closer to the consumer, where the manufacturing process is simplified thanks to the reproduction of models. Other radical changes in artificial intelligence and nanotechnology will come. New materials could be manufactured near the consumer, in order to substitute natural materials that need to be transported from distant mines and deposits. These changes will become more apparent over the next decade and will also influence the contracting process of trade. With less international trade and less maritime security, the price of maritime transport may spiral upwards.
Nevertheless, according to Malet, political reasons are an influencing factor, as evidenced by the latest European and the US elections and the Brexit. There are important sectors of the Western population that feel abandoned by globalization.
In the opinion of Malet, the process of accelerated globalization, which began with China's entry into the WTO on December 11, 2001, has been extremely positive for humanity as a whole. This model of globalization consists of offshoring manufacturing to countries based on cost efficiency variances, primarily labour costs. It lifted billions of people out of poverty in Asia, Latin America and Africa, and it allowed developing countries to grow significantly.
During the last 17 years, China increased its GDP from $1.2 trillion to $11 trillion, a sign of historically unprecedented growth for a country of this size. A similar phenomenon occurred in India, Vietnam and others. This model of globalization has also supported the growth of large multinational companies that have been able to offshore production processes and increase directors' and shareholders' income, as well as those of their employees and suppliers (including SMEs).
Furthermore, it has been excellent for consumers, enabling everyone to access an endless number of products at competitive prices.
However, as Malet notes, these benefits are not appreciated in the industrial communities of the American Midwest, in the mining and metallurgical areas of Liverpool and Manchester, and in formerly industrialized, rural areas of France.
Malet further notes that the people of these communities, 'duly indoctrinated', are starting to fear a world of which they are losing grasp and are therefore calling for tariffs and protectionism.
"Whether we like it or not, leaders of any political persuasion must make them happy by imposing stricter rules on trade (fair trade) by enforcing tariffs or abandoning certain trade agreements, even if some of us think this will not bring back the jobs as promised," maintains Malet.
"International trade of goods based on offshore manufacturing will obviously continue to exist, but it will tend to decline below world GDP growth. International organizations that were created after the Second World War will have to focus on the new challenges a different kind of globalization brings. These will require coordinated responses to other issues, such as climate change, migration, major financial crises, investment protection and cybersecurity," concludes Malet.
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