The rich western nations brought raw
materials in, sent manufactures out and traded with each other. Roll on to 2017
and we live in a world transformed. The planet’s population has more than
tripled to 7.5bn. Only 10 per cent live in Europe. North America holds 5 per
cent. Three out of every five people now live in Asia. This demographic shift,
linked with but separate from the rise of Asian economies, has changed the
pattern of global trade. Demographic shifts over the rest of the 21st century will
be just as dramatic. What is more, they will involve not just a change in the
distribution of people, but big changes in their relative age.
That will further shape how goods flow
around the world. “Ageing, migration, educational convergence and women’s growing
participation in the labour force — all linked to the underlying demographic
transition — help to shape countries’ comparative advantage,” said the World
Trade Organization in a 2013 report. “Moreover, as the size of the working-age
population increases in some countries and decreases in others — and as a
global middle class emerges — the size and the composition of import demand is
also changing, with further effects on trade flows. For instance, trade in
services, such as healthcare and education, is likely to increase.”Please use the sharing tools found via the email icon at the top of articles.
Copying articles to share with others is a breach of FT.com T&Cs and Copyright
Policy. Email licensing@ft.com to buy additional rights. Subscribers may share
up to 10 or 20 articles per month using the gift article service.More information
can be found here.
By 2100, the UN projects a population of more than 11bn. Just 6 per cent will
be in Europe and 4 per cent in North America. Asia’s share will fall from 60
per cent to 43 per cent. By contrast, Africa’s share is forecast to go from 17
per cent today to 40 per cent. Part of the story of trade over the rest of
century, therefore, is likely to be the rise of trade flows to Africa, and
between Africa and Asia in particular. Moreover, those workers in Africa will
be relatively young, while populations in Asia — certainly in China and Japan,
although less so in India — will become older. The relationship between
population ageing and trade is ambiguous. On the one hand, youthful countries
with a large supply of workers should have a comparative advantage in
manufacturing. At lower skill levels, this tends to be true, and industries
like textiles migrate around the world in search of the cheapest wages.
Please use the sharing tools found via the email icon at the top of articles.
Copying articles to share with others is a breach of FT.com T&Cs and Copyright
Policy. Email licensing@ft.com to buy additional rights. Subscribers may share
up to 10 or 20 articles per month using the gift article service. More
information can be found here. A reasonable guess, therefore, is that Africa
will at some point become a significant exporter of basic manufactured goods to
the rest of the world. However, young countries tend to have high consumption,
which sucks in imports, while workers in ageing countries save to support their
retirement. As a result, nations such as Japan have remained net exporters of
goods despite their rapidly ageing populations. The impact of demographics on
future trade patterns may also differ from the past because of factors such as
automation and migration. If, for example, robotics advances to a stage where
it can compete with even very low wages then the comparative advantage of
young, low-wage workers may become less relevant. So far, there is little sign
of such a change, with significant textiles industry growth in countries such
as Bangladesh.
Any forecast of how population
distribution will shape future trade also depends on migration. For example,
the UN population forecasts assume Africa’s population will more than treble to
4.5bn by 2100, while the population of Europe declines by 12 per cent from
today to 653m. If instead there is large-scale immigration from Africa to
Europe then the trade outcomes will be very different. Demography has shaped
trading patterns since antiquity. The early demographic transition in Europe
was bound up with its position at the centre of the global trading system, as a
source of both manufactured goods and migrants. The rise of Asia’s population
prefigured its role at the heart of the global economy. With dramatic change
ahead in the structure of the world’s population, it is set to remain one of
the deep factors shaping global trade flows.
Source: The Financial Times, United Kingdom Saturday, 25 November 2017