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WTO releases world trade figures 2002

Driven by strong demand in the United States and the big Asian economies, merchandise trade grew by 2.5 per cent in 2002, up from a 1 per cent decline in 2001, according to the latest WTO figures. But trade growth, which was significantly above the 1.5 per cent increase in total world output, was uneven and masked the sluggish trade performance in many regions including Latin America and Western Europe.

Considerable uncertainty clouds trade growth prospects for 2003. Early indications suggest that at less than 3 per cent, growth in trade volume for 2003 will be little or no better than 2002. This is well below half the average rate of trade growth achieved in the 1990s (6.7 per cent). The downside risks on predictions for 2003 are large, bearing in mind continued sluggishness in the world economy, the conflict in Iraq, and the possibility of the continuing spread of the Severe Acute Respiratory Syndrome (SARS).

“These trade figures reflect the growing economic and political uncertainty in the world today. This uncertainty is detrimental to economic growth and development and can give rise to greater instability across the globe. Governments must send a signal that they are prepared to address this problem. One very important contribution to this effort would be to accelerate work on the negotiations in the Doha Development Agenda,” said director-general Supachai Panitchpakdi.

Launched in November 2001 by ministers meeting in Qatar, the Doha Development Agenda comprises a wide range of negotiations on topics including agriculture, development issues, trade in services, industrial tariffs, WTO rules and trade and environment. Progress in these talks has been uneven and with the talks due to conclude by 1 January 2005, director-general Supachai has urged the 146 member governments to summon the political courage that is required to bridge differences across the negotiations.

The WTO’s assessment of the 2002 trade figures is based on the first preliminary compilation of statistics for the past year. Measured in value terms, merchandise exports rose by 4 per cent to $6,240 billion nearly offsetting the decline of the preceding year. Commercial services trade expanded a little faster than merchandise trade reaching a new record level of $1,540 billion. The trade recovery occurred amidst the weakness of the global economy, greatly reduced investment flows, major movements in exchange rates, dented business confidence, increased restrictions on international trade transactions to reduce risks from terrorism and rising geopolitical tensions. The rise in trade in commercial services took place despite the lingering fear of terrorism and higher fuel prices which limited growth in international travel and transportation services. But this was more than made up for by trade in other services which continued to expand rapidly. The weakness of fixed investment expenditure contributed significantly to the sluggish overall growth in the industrial countries.

Worldwide expenditures on electronic equipment, IT hardware and semi-conductor plants continued to shrink. The global economic recovery proved uneven, with significant differences in growth performance across regions. The driving forces of the pick up in global economic activity were the United States, the advanced economies in East Asia, China and the transition economies. In contrast, Western Europe and Japan experienced stagnation or a decline in domestic demand. In Latin America, crises in Argentina and Venezuela contributed to the severe slump. Trade performance largely mirrored the pattern of economic growth. Trade expansion was strong in Asia and the transition economies. North America’s imports recovered in line with stronger domestic demand although exports decreased in 2002. Trade remained stagnant in Western Europe and Japan. And it contracted in Latin America as a result of economic turmoil in a number of countries in the region.

Some details of developments in specific countries or groups of countries

Developing Asia’ merchandise trade grew by about 12.5 per cent in volume terms, driving the entire continent’s exports and imports to grow by double digits. The region also saw diverging growth paths between Japan, still Asia’s largest economy, and China and India, the two most populous nations in the world. In value terms, China’s merchandise exports and imports increased by more than 20 per cent while India’s also grew at double-digit rates. China has overtaken the UK to become the fifth largest trader in the world. Japan’s merchandise export growth was only 3 per cent while imports contracted.

Transition economies’ trade continued to show strong growth with merchandise trade expanding by about 10 per cent lifted by strong domestic demand growth and by rising foreign direct investment (FDI) inflows into the region. Imports into the US grew by 3 per cent driven by continuing consumer spending and an increasingly expansionary fiscal stance. But exports declined by nearly 4 per cent partly reflecting reduced demand from some key trading partners whose economies were either hardly growing, such as Western Europe and Japan, or in outright contraction, as in Latin America. Lack of price competitiveness might have also played a major role as US exports decreased even to those regions whose imports grew strongly.

Western Europe’s trade stagnated in volume terms with merchandise exports increasing by just 0.6 per cent and imports declining by 0.5 per cent. Latin America saw one of its worst years with the crises in Argentina, Venezuela and difficulties in Brazil in the run-up to the national elections. Latin America’s merchandise imports declined by over 5 per cent in 2002 although merchandise exports rose by about 2 per cent with the decline in intra-regional trade (especially intra-MERCOSUR trade) being balanced by increased shipment to other regions. LDC exports and imports rose last year although it does not change their overall situation as marginal participants in world trade.

Oil exporting LDCs saw a strong increase in the dollar value of their shipments as they increased their production and volume of trade. Exports of the non-fuel commodity exporting countries continued to rise after marked gains in 2001. However, exporters of manufactured goods experienced stagnation. Prices of crude oil, gold and agricultural commodities rose in 2002 providing an important lift to commodity exporting developing countries. However prices of minerals and metals continued to fall. Prices of manufactured goods recovered somewhat but were still around 10 per cent below their level in 1995.

In the course of 2002, the real effective exchange rate of the US dollar depreciated while the euro and the yen appreciated. However, the realignments did not seem to have materially affected the US trade deficit, nor current account surpluses being accumulated by the euro zone countries, Japan and developing Asia. International capital flows had risen throughout the 1990s and peaked in 2000. Since then they have experienced a drastic contraction. Both developed and developing regions have been affected by the reduction in FDI flows. Noteworthy exceptions were FDI inflows to China and to Central/Eastern Europe which continued to increase very strongly.