Global Trade To Shrink 9 Per Cent

World Trade Organisation (WTO) director-general Pascal Lamy has warned that protectionism was on the rise, a measure that could “choke off” trade as an engine of economic recovery.

Global trade was forecast to fall by 9 per cent in volume terms this year, its biggest contraction since the Second World War owing to a collapse in global demand as a result of the economic downturn, the WTO reported.

The organisation said that exports in developed countries would fall by 10 per cent, while exports in developing countries would fall by between 2 per cent and 3 per cent in 2009.

“Trade can be a potent tool in lifting the world from these economic doldrums. In London, G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measures, which will render global recovery efforts less effective,” Lamy said.

Economic contraction in most of the industrial world and steep export declines already posted in the early months of this year by most major economies, particularly those in Asia, make for an unusually bleak 2009 trade assessment, the WTO said in its annual assessment of global trade.

It noted that signs of the sharp deterioration in trade were evident in the latter part of 2008, as demand sagged and production slowed.

Although world trade grew by 2 per cent in volume terms for the whole of 2008, it tapered off in the last six months and was well down on the 6 per cent volume increase posted in 2007, the organisation reported.

Lamy highlighted the importance of trade as part of economic activity, saying that trade growth often outpaced gains in output.

“Production for many products is sourced around the world, so there is a multiplier effect. As demand falls sharply overall, trade will fall even further,” he commented.