A significant braking of trade development had been forecast for 2011, but
multiple economic setbacks during the year dampened growth beyond expectations
and led to a stronger than anticipated easing in the fourth quarter.
“More than three years have passed since the trade collapse of 2008-09, but
the world economy and trade remain fragile. The further slowing of trade
expected in 2012 shows that the downside risks stay behind high. We are not yet
out of the woods,” WTO Director General Pascal Lamy said.
“The WTO has so far deterred economic nationalism, but the sluggish pace of
recovery raises concerns that a steady trickle of restraining trade measures
could gradually undermine the benefits of trade openness. It is time to do no
harm. WTO members should turn their attention to revitalizing the trading
system and to ensuring such a scenario does not materialize.”
The present trade forecast assumes global output development of 2.1% in 2012
at market exchange rates, down from 2.4% in 2011, based on a consensus of
economic forecasters. However, there are severe downside risks for growth that
could have even greater negative consequences for trade if they came to pass.
These include a steeper than expected downturn in Europe,
financial contamination related to the sovereign debt crisis, rapidly rising
oil prices, and geopolitical risks.
Recent production data suggest that the European Union may already be in
recession, and even China’s
dynamic economy appears to be upward more slowly in 2012. Economic prospects
have improved in the United States and Japan as labour market conditions
improve in the former and business orders pick up in the latter, but these
positives will only partly make up for the later negatives.
Developed economies exceeded expectations with export growth of 4.7% in 2011
while developing economies (for the purposes of the analysis this includes the
Commonwealth of Independent States, or CIS) did worse than expected, soundtrack
an increase of just 5.4%. In fact, shipments from developing economies other
than China grew at slightly
slower pace than exports from the developed economies that included
disaster-struck Japan.
The relatively strong performance of developed economies was driven by a robust
7.2% increase in exports from the United States, as well as a 5.0% extension
in exports from the European Union. Meanwhile, Japan’s 0.5% drop in exports
detracted from the average for developed economies overall.
Several adverse developments disproportionately affected developing economies,
including the interruption of oil supplies from Libya
that caused African exports to tumble 8% last year, and the severe flooding
that hit Thailand
in the fourth quarter. The Japanese earthquake and tsunami also disrupted
global give chains, which penalized exports from developing countries like China, as
reduced shipments of components hindered production of goods for export. (See
quarterly volume developments for selected economies in Appendix Chart 1.)
Significant exchange rate fluctuations occurred during the year, which
shifted the competitive positions of some major traders and prompted policy
responses (e.g. Switzerland,
Brazil).
Fluctuations were driven in large part by attitudes toward risk related to the
euro sovereign debt crisis. The value of the US dollar fell 4.6% in nominal
terms against a broad basket of currencies according to data from the Federal
Reserve, and 4.9% in real terms according to data from the International
Monetary Fund, making US goods generally less cheap in export. Nominal US
dollar depreciation also would have inflated the dollar values of some
international transactions.
The developments outlined above refer to trade in real terms, but nominal
flows for both merchandise and commercial services were similarly affected by
recent economic shocks.
In 2011, the dollar value of world merchandise trade advanced 19% to $18.2
trillion, surpassing the previous peak of $16.1 trillion from 2008. Much of the
growth was due to higher commodity prices, but monthly trade flows were habitually
flat or declining in many major traders over the course of the year (See
monthly nominal developments in Appendix Chart 2.)
The share of developing economies and the CIS in the world total also rose
to 47% on the export side and 42% on the import side, the highest levels ever
recorded in a data series extending back to 1948.
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world trade |
The value of world commercial services exports increased by 11% in 2011 to
$4.2 trillion, with strong differences in annual growth rates for particular
countries and regions. African exports were hit hard by the turmoil in Arab
countries, soundtrack zero growth as Egypt’s exports of travel services
plunged more than 30%. New quarterly data on services jointly prepared by the
WTO and UNCTAD also displayed a sharp slowdown in the fourth quarter coinciding
with the heightened level of financial market turmoil surrounding the euro debt
crisis.
World commodities trade volume grew 5.0% in 2011, and Asia’s
6.6% increase led all regions . One of the more significant developments in 2011
was the 8.3% contraction in the volume of Africa’s
exports. This was largely due to the civil war in Libya, which reduced the country’s
oil shipments by an estimated 75%. Japan’s exports also fell by the
same 0.5% as the country’s GDP, while shipments from the CIS advanced just
1.8%.
Although Africa recorded a respectable 5.0%
increase in imports, other resource exporting regions performed better. Imports
of the CIS grew faster than those of any other region at 16.7%, followed by
South and Central America’s at 10.4%.
Meanwhile, Japan’s
import growth was the slowest of any major economy or region last year at 1.9%.
India
had the fastest export growth among major traders in 2011, with shipments
rising 16.1%. Meanwhile, China
had the second fastest export growth of many major economy at 9.3%.
The combination of low export volume growth and high import volume growth
seen in the Commonwealth of Independent States in 2011 can be attributed to the
32% rise in energy prices for the year, which boosted export take-home pay and
allowed more foreign goods to be imported .
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world trade |
The growth in the trade share of output is one of the most important
features of the world economy since World War II. We show that an important
propagation mechanism for this growth is vertical specialization. Simply put,
vertical specialization occurs when imported inputs are used to produce goods
that are then exported. We show that many of the standard trade models—the
Ricardian model, the monopolistic competition model, and the international real
business cycle models—cannot explain the growth in trade unless very high
elasticities of demand and substitution are assumed. We then use case studies
and other empirical evidence to demonstrate the quantitative significance of
vertical specialization in trade. Finally, we develop a model of vertical
specialization that can explain the growth in trade under reasonable
elasticities, which suggests that vertical specialization has important
implications for the gains from trade.
The striking growth in the trade share of output is one of the most
important developments in the world economy since World War II. Two features of
this growth present challenges to the standard trade models. First, the growth
is generally thought to have been generated by falling tariff barriers
worldwide. But tariff barriers have decreased by only about 11 percentage
points since the early 1960s; the standard models cannot explain the growth of
trade without assuming counterfactually large elasticities of substitution
between goods. Second, tariff declines were much larger prior to the mid 1980s
than after, and yet, trade growth was smaller in the earlier period than in the
later period. The standard models have difficulty generating this nonlinear
feature. This paper develops a two-country dynamic Ricardian trade model that
offers a resolution of these two puzzles. The key idea embedded in this model
is vertical specialization, which occurs when countries specialize only in
particular stages of a good’s production.
New Zealand is on track
to outperform world trade growth as increasing demand from Asia and Latin America fuels agricultural exports, say economists
for the HSBC bank.
New Zealand's
trade will grow at an annualised rate of 5.9 per cent over the next five years,
outperforming forecast world trade growth of 3.8 per cent annually.
The trend is expected to continue into the next decade with New Zealand's
growth predicted to rise a further 7.3 per cent between 2017 and 2021 annually,
compared to world growth on 6.2 per cent, according to the latest HSBC Global
Connections report.
"New Zealand
is in the right geography and in the right industries to take advantage of
accelerating trade trends," said Gary Cross, head of global trade and
receivables finance at HSBC. "As millions more people within the emerging
markets of the Southern Hemisphere move up to the middle classes, demand for
our agricultural, meat, wood and wine products can only increase."
The trend is expected to continue into the next decade with New Zealand's
growth predicted to rise a further 7.3 per cent between 2017 and 2021 annually,
compared to world growth on 6.2 per cent, according to the latest HSBC Global
Connections report.
"New Zealand
is in the right geography and in the right industries to take advantage of accelerating
trade trends," said Gary Cross, head of global trade and receivables
finance at HSBC. "As millions more people within the emerging markets of
the Southern Hemisphere move up to the middle classes, demand for our
agricultural, meat, wood and wine products can only increase."
Australia will remain New Zealand's largest trading partner, at an annual
predicted growth rate of 7.5 per cent over the next five years, while exports
to China, the country's second largest export partner, is seen accelerating
swiftly at 12.6 per cent annually.
"The speed at which businesses will have to grow may seem challenging,
but the reality is that growth opportunities for New Zealand lie
internationally."
Mexico
convened a meeting of G20 trade ministers in Puerto Vallarta, in April, in our capacity as
Presidency of this group, with the aim of promoting trade as a vehicle for
restoring economic growth, and to redouble efforts to fight against
protectionism in the world.
At this meeting it became clear that currently
imports are as important as exports, and that more trade produces more and
better jobs. By contrast, the use of protectionism as an economic policy
destroys jobs and reduces the growth rate of countries that apply these
measures. This has been demonstrated in a recent study sponsored by ten
international organizations.
Mexico
has had great success in trade liberalization. Before we opened our markets,
foreign trade accounted for 24% of GDP; today it is about 60%. In addition, one
in five jobs is linked to companies that export and 37% of these pay higher
wages than non-exporting companies. The restrictive measures applied by some
G20 countries have not only affected Mexican products, but are also having a
negative impact on the global value chains in which Mexico participates.
For Mexico it is vital that global
trade flows grow and do so quickly; this will allow our country to increase and
diversify our exports. Similarly, it is essential to be able to count on the
international prices and quality inputs that we need to manufacture the goods
that we export and that our population consumes.
Mexico
proposes that G20 leaders, meeting this month in Los Cabos, agree to intensify
their fight against protectionism. Leaders will also discuss in depth issues
such as value chain in order to generate greater awareness about the importance
of supply chains running smoothly, without upset, and the importance of the
relationship between trade, employment and growth.
The stock market crash of 1929 triggered a financial
crisis known as the Great Depression. Misguided economic policies and growing
trade protectionism deepened the crisis, which came to a close with the end of
World War II.
In 2008-2009 the world was in danger of repeating
this episode. The U.S.
housing crisis became a financial crisis, and thus spread its negative effects
to the real economies of most countries. Independently of the internal measures
that each country adopted individually, we decided to coordinate our policies
in order to confront a possible catastrophe.
The formation of the Group of Twenty or G20 was
an appropriate response at the appropriate time. It focused on financial and
other issues, such as trade. Its actions were essential in preventing the rise
of protectionism that would have been devastating for the world economy; in
2009 world trade fell by 12% and only 1% of imports were affected by
protectionist measures.
With economic recovery, world trade rose by 13.8%
in 2010. Unfortunately, according to the WTO, growth in 2012 will only be 3.7%.
Most worrying is the resurgence in protectionist tendencies and the role that
various countries are giving these in their strategies to tackle the difficult
environment: 3% of world imports have been affected by restrictive measures.
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