Warning on global trade growth slowdown

Global trade in goods will grow 3.7% this year after expanding a less-than-forecast 5% in 2011 as Europe’s debt crisis continues to crimp commerce, the World Trade Organization said.

“More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile,” WTO director-general Pascal Lamy said in a statement in Geneva yesterday.

“We are not yet out of the woods.”

Developing economies will again lead trade growth this year, with a forecast 5.6% increase in merchandise exports, compared with 2% for developed nations. After two straight years of slower growth, trade will recover in 2013, with volume seen as expanding 5.6%. The WTO used volumes rather than values for its assessment to avoid distortions caused by changes in commodity prices or exchange rates.

The dollar value of global merchandise trade climbed 19% last year to a record $18.2 trillion (€13.7bn), beating the previous peak of $16.1 trillion in 2008, due in large part to higher commodity prices.

The value of commercial-services exports advanced 11% to $4.2 trillion.

The prediction for 2012 assumes global output growth of 2.1%, which is down from 2.4% last year. Risks to that forecast include a steeper-than-expected downturn in Europe, financial contagion related to theEuropean debt crisis, surging oil prices and geopolitical risks, the WTO said.

The forecasts for both 2012 and 2013 are below the long-term average of 6% for the period from 1990 to 2008.

Lamy warned that slow trade growth may lead governments to impose measures to protect their domestic industries.

“The WTO has so far deterred economic nationalism, but the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness,” he said.

“It is time to do no harm. WTO members should turn their attention to revitalising the trading system and to ensuring such a scenario does not materialise.”

The WTO, which initially forecast commerce would grow 6.5% last year, scaled back its prediction as the world economy cooled amid the European debt crisis.

Other “shocks” that held back trade last year included the Japanese earthquake and tsunami and floods in Thailand.

The disruption of oil supplies in Libya cut African export growth by 8% and uprisings around the Arab world curbed African services exports.

Global trade grew a record 13.8% in 2010 after dropping 12% in 2009, the biggest contraction since World War II.

Bloomberg