Demographic Change Influence World Trade - Term Paper Example

Demographic Change Influence World Trade Introduction As globalization furthers, the world economy has created a space for all the stakeholders to grow. In 1980, developing economies accounted for just 34% of the total world exports as against 47% noted in 2011. This is because skill level of the countries changes over a period. Ageing, ratio of gender in workforce and education are continuously evolving. As a result of this, the trade of the countries is also changing. The effects of the demographics on the world trade are discussed below: Effects of Fertility and Mortality There are five stages of demographics transition with respect to fertility and mortality. In the first stage, fertility and mortality runs parallel to each other (World Trade Organization, 2013). This results in high proportion of the youth in the country. The energy and innovation of the youth help in growing the economies, which result in increased per capita income. Consequently, people make more purchases of items like cars and cell phones. More foreign companies enter into these economies by way of local manufacturing or exports. Uganda is a recent example, which has entered into this stage of demographic transition. The impact of the young population has started showing their impact. Uganda has raised its exports to $ 2.3 billion in 2013 as against $ 401 million recorded in 2000. At second stage of demography, fertility remains the same (high) as in the first stage but mortality decreases. Then after it, the fertility also declines. This results in a bit increased old age dependency. It results in expenditures as healthcare and hospitalization. This increases the production and imports of pharmaceuticals and other surgical equipment. Guatemala is one of those countries, which have entered into this phase. With the increase in old age population, youth becomes short of supply. This results in a shortage of labor factor. Such shortage leads to divestment by companies and reduction in trade exports by the country. In the third stage, the fertility also starts declining. This results in an increase in the working population, old age dependency remaining the same. Working population keeps increasing because the birth rate falls on average; however, it is more than the death rates. Cut in spending starts in this phase and economy starts contracting. As reduction in expenditures start, economy starts shrinking. The import of the luxury items by the country falls. Exports also start declining due to contracting economy. The trade shifts from the countries in third stage to the countries in first demographic transition. In the fourth stage, the effects of second and third stage get worse. It results in more high age dependency and ageing. Aged population usually spends on communication and transportation. This creates the import requirement for logistic providers and the ancillary fields related to it. Young work force becomes short. As labor gets short, they demand higher pay, which discourages business investments. The labor shortage pushes the manufacturing concerns to leave the country. The production level becomes low and exports start falling. Many of the developed countries are in this phase currently. Germany is a quotable example for this transition phase. Its trade surplus has started shrinking. The export items of these countries are then exported by the countries in first and second stage of demography. In the last stage of demography, the population falls with immense speed. Japan is the first country of its type to see such decline. However, it will be followed by Russia and East Asia. As Japan’s decreasing population will decrease the energy consumption, it will look forward to export its energy produce. Similarly, all the manufacturing units whose goods will be consumed lesser at home will start exporting their products, which will increase the exports of Japan. Lower consumption will be witnessed which will reduce the imports. Increase in Female Labor workforce As the culture of education expands, females also start getting educated. They then come in the market for jobs. This leads to increase in total workforce of the economy. However, the inclusion of the females in the work force is mainly dominated by the cultures. In some countries, it is still discouraged. Those countries will suffer by way of lesser productivity as compared to those countries that promote the female work force. The arrival of the female brings more competition in the economy. The productivity of the economy also increases due to this competition and increase in workforce. Regions like European Union, South and Central America will benefit from this situation. Due to competent work force available, the annual growth of the countries starts increasing. Many companies start investing in those countries to utilize the resource. This increases the exports of the countries. As females start getting the purchasing power, the imports for feminine products like cosmetics and jeweler also increase. The abundance of the workforce in the countries sometimes starts creating joblessness in the economies. This jobless environment is a transition phase. After some time, people start migrating for job searching. This sometimes results in stronger currencies being injected into the economies. The purchasing power in those countries starts increasing which then welcomes new businesses to the country. Imports of luxury items may begin shortly after this migration. Moreover, the migrants call for their local products in the country of immigration, which increases the exports. International Migration In the countries where population or fertility is low, migration is assumed as a good option to keep the economy growing. Such migration transfers the technology and skills from one country to another (World Trade Organization, 2013). New York is the hub for US economy and it consists of 36 % Immigrant population and 43% of the labor force (LSE, 2007). This establishes the fact immigration of skilled resources helps to flourish the world economies. The immigrants call for the local products of their origin country in the country of immigration. This increases the imports of that country. As skilled resource migrates, the productivity of the source country also increases. Consequently, its local good product and exports start increasing gradually. Dutch immigrants flourished cheese industry in Australia. In New Zealand, around 28% of the immigrant population has come in between 2001-2006. This increasing trend in immigration to New Zealand has given boost to its economy in many sectors. Household construction has seen a remarkable development due to this immigration. This has resulted in production of the construction items. Many goods related to construction are being imported. Urbanization Urbanization also plays an important role in the development of the world economies. The countries, which will have a significant portion of the urban population, will have a competitive edge over the other countries. Urban population is more inclined towards the development of the infrastructure. Such infrastructure will give stimulus to the economy being agglomerated. Agglomeration will provide the industrialists with better and quick logistics facilities, efficient energy consumption and better quality of production. It will provide more vendors and customers. Healthy competition and accessible market will help increase the national production. This will help in increasing the exports, and the import items that are used in the production of the export items. Africa is a remarkable example to be cited for urbanization. The skills of the locals are benefiting the foreign investors also as they are cheap than the other foreign employees. Urbanization is accompanied by education to provide better results. Projected growth rate of Africa is 5.2% in 2014 as against 4.7% in 2013. This is mainly because of the development of the infrastructure and natural resources in Africa. Saharan Africa has attracted around $ 43 billion in 2013, which are 16% more than 2012. This quick development has also boosted the tourism industry in Africa. Around 36 million tourists visited Africa in 2012 alone. Definitely, when tourists will come to Africa, other industries related to it like food, recreation and hospitality will also develop. Due to such agglomeration, new industries also add to the economic development of the country. As more investments are reaching Africa, it is more able to explore its natural resources. Sound economies like India and China import metal from Africa (World Bank, 2014). Education Availability of the educated labor is the main center of attraction for investors. As new industries will be established in the urban economies, they will create an appetite for the educated and skilled resource. In such a world where globalization is reaching new heights, Multi-national corporations are expanding their operations to new locations. Educated and Skilled resource is one of the main features of attraction for the MNCs. It is much economical to hire local educated rather than the foreign educated resource. New field of education will lead to new researches. This will lead to better production methods and low cost of production. Resultantly, the goods production will increase which will ultimately give boost to exports. China spends 4% of its GDP on education. This expenditure has made it the largest exporter of the world. USA expends around 3 % of its GDP on education and it is the second biggest exporter of world. Following this trend, Africa is increasing its education budget each year. The results are very obvious as investors are going there for investment. They find appropriate labor there. The Education in Africa has brought its positive impact; Africa has signed many new accords with European Union for trade. Conclusion It is difficult to project the precise relationship of different aspects of the demographics with the world trade. Different demographic features impact the trade in a different way depending upon the circumstances. At times, countries need high birth rates and at times they need low fertility. These issues are then combined with the educational affairs of the country. Education is primary for the development. But it becomes a question mark when it comes to deciding the field in which education has to excel. A slight disturbance in the ratios of different fields of education can create saturation in one field. Similarly, provision of education lesser than desired will create the need to import the educated staff, which will increase the cost of productions. Similarly, urbanizing the population is also necessary for economies. As urban population increases, the standard of living also meets new heights, which then call for more investment in new products from the producers. Demographic is a complex matter that needs thorough planning and due care. An error of small magnitude can lead to economy turmoil. There is always a need to have a cohesive framework for demographic features, which can add to the real economic growth of the world. References LSE. (2007 1-july). The Impact of Recent Immigration on the London Economy. Retrieved from http://www.lse.ac.uk/geographyAndEnvironment/research/london/pdf/theImpactofRecentImmigrationOnTheLondonEconomy.pdf World Bank. (2014 7-April). Africa’s Growth Set to Reach 5.2 percent in 2014 With Strong Investment Growth and Household Spending. Retrieved from http://www.worldbank.org/en/news/press-release/2014/04/07/africas-growth-set-to-reach-52-percent-in-2014-with-strong-investment-growth-and-household-spending World Trade Organization. (2013). World Trade Report . Geneva: World Trade Organization. Read More