Global trade growth slows sharply
2011-09-23 12:22:09
The expansion in global trade has slowed sharply in recent months, with the World Trade Organisation warning that a loss of economic confidence harms prospects for export growth worldwide.
The WTO on Friday revised down its estimate for growth in global goods trade in 2011 to 5.8 per cent from an already cautious forecast of 6.5 per cent and warned that the risks were “firmly rooted on the downside”.
Meanwhile, an estimate of commerce compiled by the Netherlands Bureau for Economic Policy Analysis, a Dutch think-tank, showed growth in goods trade grinding to a halt over the summer, threatening to start contracting for the first time since it went into freefall during the global financial crisis in 2008-09.
The WTO said the slowdown in trade was concentrated in the advanced economies and particularly Europe, suggesting that it was related to the sovereign debt crisis in the eurozone.
“Downside risks to GDP [gross domestic product] have certainly intensified in the last few months, and where output goes trade tends to follow,” the WTO said. “The situation in Greece is injecting considerable uncertainty into the economic environment.”
Data compiled by the Netherlands bureau showed that goods trade in the three months to June shrank 0.5 per cent over the previous three months, the first fall in that measure since mid-2009. Following the collapse of Lehman Brothers in 2008, global trade suffered an implosion without equal in the postwar period, dropping nearly 20 per cent in seven months. Trade has since recovered to its pre-crisis level but its growth was slowing even before the eurozone sovereign debt crisis worsened over the summer.
The WTO warned that protectionist actions by governments, which have been relatively restrained over the past three years, might become more tempting again if the global economy and trade continued to slow.
“The multilateral trading system has been instrumental in maintaining trade openness during the crisis, thereby avoiding even worse outcomes,” said Pascal Lamy, director-general of the WTO. “This is not the time for go-it-alone measures.”
Brazil caused a stir by proposing that WTO rules should be changed to allow countries to impose emergency import tariffs on exports from countries with undervalued exchange rates. Guido Mantega, Brazilian finance minister, said in an interview, that tension over currencies would persist as long as the global economy was weak. “Manufacturers all over the world have idle capacity,” he said. “That is what is behind the exchange rate war.”