In less than 40 years India will overtake the US as the world’s second-largest trading nation, pushing today’s superpower into third place and Europe in to the little leagues, according to a new report by Citi.
“According to our projections, world trade in goods and services will grow from $37 trillion in 2010 to $149 trillion in 2030 and $371 trillion in 2050,” Citigroup’s William Buiter and Ebrahim Rahbari wrote in a research note released on Thursday.
“But at least as interesting as the growth in world trade that we forecast are the changes in its composition that we expect over the course of the next four decades, with today’s emerging markets set to gain much more prominence in world trade relative to advanced economies,” they added.
The report predicts that trade between emerging markets will overtake that between advanced economies in just four years in a clear sign that the world’s major economies of Europe and North America are set to lose relative importance to the global economy.
The big winner according to the report will be Asia. “Developing Asia accounted for 24 percent of world trade in 2010, but its share is expected to reach 42 percent by 2030 and 46 percent by 2050,” said Buiter and Rahbari.
This will be more or less in line with the world’s population and see Europe and North America’s importance to global trade ebb over the next four years.
“Western Europe on the other hand, in 2010 by far the largest region in terms of trade with 34 percent of world trade — already down from 48 percent in 1990 — is expected to account for 19 percent of world trade by 2030 and 15 percent by 2050,” they wrote.
“Similar declines in relative trade shares as for Western Europe are projected for North America and Japan, despite healthy increases in absolute levels of trade projected for each one of these regions,” the report added.
China is expected by Citi to become the world’s biggest trader by 2015 but it is India’s rise that could come as a surprise to many, according to Citi’s analysis.
“In terms of the largest countries by trade, we expect China to overtake the US to become the world’s largest trader by 2015 and to remain in the top spot for the rest of our forecast horizon,” the report said.
“India, which does not even feature in the top 10 of the world’s largest traders in 2010, is expected to be the world’s second-largest trader by 2050, with the US in third place,” the report predicted.
“In 2010, only two countries from Developing Asia featured in the top 10 (China and Korea), while five European countries were among the ten largest traders in the world. In 2050, we expect seven out of the ten largest traders in the world to hail from Developing Asia, with Germany the only remaining European constituent,” the Citi analysts wrote.
Relative loss of influence does not mean there will not be opportunity for today’s advanced economies, according to Citi.
“New trade routes have the potential to create new winners, be they products, services, cities, companies, industries, or economies,” said Buiter and Rahbari.