Letters

THIS MONTH'S PRIZE LETTER

Trade figures

Is globalisation taking hold?

In the week that George W Bush travels to Vietnam for the Asia-Pacific Economic Cooperation (Apec) meeting in Vietnam, and speculation mounts regarding the fate of the Doha round and whether the Apec meeting can kickstart the trade round into new life, I wanted to write to highlight the latest set of trade statistics to have been released by the World Trade Organisation (WTO). They make fascinating reading.

Are your readers aware, for example, that world exports as a proportion of GDP have risen from 20.5% in 1980 to 24.7% in 2000 and 28.5% in 2005? This leads me to think, at least, that the globalisation process is taking hold.

The WTO's annual statistical report reveals that the world's exports reached a staggering $12.5 trillion last year. This, I calculate, is nearly 30% of the $44.5 trillion of world GDP, based on currency comparisons, or about 20% of the world's $65 trillion GDP, based on purchasing-power-parity measurement. Either way, it is the largest ratio yet measured, nearly 50% above the 1980 level.

By product, the conventional division breaks the $12.5 trillion total into four parts. The largest chunk is, not surprisingly, $7.3 trillion in manufacturing exports, with $2.4 trillion in services second. Third and fourth are $ 1.75 trillion in natural-resource commodities (especially oil and gas, but also metal ores, salts, and the like) and $850bn in farm products.

Commodity trade has grown faster than any other sector in the past two years, but ominously for Africa, its peak may be only temporary.

China's industrial demand has driven resource prices to unlikely heights recently, for example since 2000 the prices of zinc, iron ore, copper, and silver have tripled, timber is up 25%, and oil and coal prices are double their new-millennium levels. Previous such price shocks led to conservation, recycling, and price drops. Perhaps this one will not, but one hopes that the African exporters of these products are saving some of the money they have been earning.

Manufacturing trade continues to grow steadily. The $1.3 trillion in IT goods' exports represents a recovery from a sharp fall in 2001-2002. Textiles and clothes, at $500bn in exports, are shrinking as a percentage of manufacturing trade, as the end of textile quotas cuts store prices; the fastest-growing manufacturing export sector is scientific and technical instruments, now at $200bn. Vehicles (including spares) and chemicals, come in at $900 billion and $830 billion respectively.

What is truly amazing is that services' exports now equal farm and natural resources trade combined, and have grown the most rapidly of the four sectors over the past decade. Current trends - liberalising policies in some big countries, plus a global opening of services through the internet - suggest that they will catch manufacturing exports in the late 2010s or early 2020s, just as manufacturing used tariff cuts and container shipping to leap past commodities and farm exports in the 1980s and 1990s.

The fastest-rising major exporter is China, whose share of exports has doubled since 2000. Should current trends continue without change, China could catch the US as the world's largest goods and services exporter by 2009 or 2010, and as the world's largest importer three or four years later.

But the US continues to extend its lead over competitors in services exports, and assuming no change in trend could retake the export lead over China late in the 2010s.

I am sure readers will agree that we truly live in interesting times! But the question is, are those interesting times leaving Africa increasingly marginalised?

Lily Vanquire

Cape Town, South Africa.

Africa's energy

East is east, west is ...

I am an avid reader of your correspondent Neil Ford's excellent energy articles and usually agree with much of what he writes. But I was surprised by what he wrote in his article Interest rises in East African oil Prospects (African Business November 2006) where he suggests that East Africa is "highly unlikely to possess anything like the same volumes of hydrocarbon reserves [as the Gulf of Guinea]".

Mr Ford may well be right in this assertion, but it could be argued that simply no one knows what lies beneath East Africa's offshore waters. We do know that the geological structures are in place to make it at least probable that hydrocarbon reserves are there to be exploited.

What is distorting opinions over East Africa's oil and gas potential is that West Africa got lucky back in the 1960s with the discovery of quite large off-shore oil fields. That led all the oil companies, displaying the herd instinct that they are so famous for, putting nearly all their exploration eggs in one basket and concentrating all their energies on this region while virtually ignoring East Africa.

Another factor was the closer geographical proximity of West Africa to the important industrialised markets of the US and Western Europe at a time when Asian markets were struggling to develop.