Trade to expand by 9.5% in 2010 - WTO
After the sharpest decline in more than 70 years, world trade is set to rebound in 2010 by growing at 9.5%, according to WTO economists. “WTO rules and principles have assisted governments in keeping markets open and they now provide a platform from which trade can grow as the global economy improves. We see the light at the end of the tunnel and trade promises to be an important part of the recovery. But we must avoid derailing any economic revival through protectionism,” said Director-General Pascal Lamy.
Exports from developed economies are expected to increase by 7.5% in volume terms over the course of the year while shipments from the rest of the world (including developing economies and the Commonwealth of Independent States) should rise by around 11% as the world emerges from recession.
This strong expansion will help recover some, but by no means all, of the ground lost in 2009 when the global economic crisis sparked a 12.2% contraction in the volume of global trade — the largest such decline since World War II. Should trade continue to expand at its current pace, the economists predict, it would take another year for trade volumes to surpass the peak level of 2008. Measuring trade in volume terms provides a more reliable basis for annual comparisons since volume measurements are not distorted by changes in commodity prices or currency fluctuations, as they can be when trade is measured in dollars or other currencies.
One positive development in 2009 was the absence of any major increase in trade barriers imposed by WTO members in response to the crisis. The number of trade-restricting measures applied by governments has actually declined in recent months. However, significant slack remains in the global economy, and unemployment is likely to remain high throughout 2010 in many countries. Persistent unemployment may intensify protectionist pressures.
“During these difficult times, the multilateral trading system has once again proven its value. WTO rules and principles have assisted governments in keeping markets open and they now provide a platform from which trade can grow as the global economy improves. We see the light at the end of the tunnel and trade promises to be an important part of the recovery. But we must avoid derailing any economic revival through protectionism,” said WTO Director-General Pascal Lamy.
Why was the trade decline so large?
The 12% drop in the volume of world trade in 2009 was larger than most economists had predicted. This contraction also exceeded the WTO's earlier forecast of a 10% decline. World trade volumes fell on three other occasions after 1965 (—0.2% in 2001, —2% in 1982, and —7% in 1975), but none of these episodes approached the magnitude of last year's economic slide (Chart 1). Trade in current US dollar terms dropped even further than trade in volume terms (—23%), thanks in large part to falling prices of oil and other primary commodities.