Bridges Weekly Trade News Digest • Volume 12 • Number 38 • 12th November 2008

World Trade Growth Drops to 6 Percent, WTO Reports

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World trade dropped to 6 percent growth in 2007 according to a WTO report released last week, down from 8.5 percent the previous year.

The slow-down was caused in large part by weakened import demand from developed countries, but is still better than the expected 5.5 percent growth predicted by the preliminary assessment last April. Exchange rate realignments and fluctuations in prices for commodities like oil and gas have also caused uncertainties in the markets, and further hampered growth. And though those higher commodity prices aided certain countries, the related higher energy and food prices increase inflationary pressures worldwide.

But trade remained strong in developing countries. Africa, the Middle East, the Commonwealth of Independent States (CIS), South and Central America, and developing countries in Asia maintained their growth rates despite lower demand.

Thanks to a 14-percent increase in prices, agricultural exports expanded by 19.5 percent, the fastest growth rate since 2000. In comparison, the value of fuels and mining products increased by just 11 percent, half the growth of last year, and resulted in only 15 percent growth in the value of world exports, the lowest rate since 2003. In manufacturing, a 7-percent increase in average prices produced a similar growth of 15 percent in world value exports.

New patterns are beginning to emerge for regional trade agreements, the report noted. The EU is enjoying remarkably fast growth in intra-regional trade—a benefit of its highly integrated marketplace. But the North American Free Trade Agreement, or NAFTA, saw a drop in the percent of intra-regional trade in its total exports, from 56 percent in 2006 to 51 percent in 2007, a reflection of the fact that Canada, Mexico and the US have expanded trade with countries outside the agreement.

Brazil, China, and India were featured in the report as examples of ”vigorous growth among emerging economies.” Though the countries are the source of an increasing amount of world exports, that share is still quite small. Brazil and India are still providing just over one percent, while China’s share is approaching ten, an anomaly among developing nations. Brazil’s exports have grown at an average annual rate of 17 percent since 2000, trading primarily with Central and South America and Europe. India has grown at an even faster average annual rate of 19 percent since 2000. And China has almost quadrupled its exports since joining the WTO in 2001; its imports have more than tripled, leaving it with a trade surplus of US$ 262 billion. While nearly half of its exports head for other Asian countries, Europe and North America receive their faire share at nearly 21 percent each.

For the first time in five years, the value of trade in commercial services increased faster than trade in goods the report found. The 18-percent growth rate in services trade was due mainly to the expanding supply of services and an increase in transportation prices. Though the main exporters of commercial services – the EU, the US, Japan, China, and India – have not changed, China’s and India’s exports of commercial services have increased much faster than the world average, while the market share of Europe and the US has stagnated. Though most developing countries have a very small part in the services market, most have seen a marked increase in activity in the sector. Africa, the Middle East, and, most notably the CIS, which saw an increase of 75 percent in its share since 2000, are successfully breaking into the market.

The International Trade Statistics 2008 offers an overview of developments in world trade and breaks down the details of merchandise trade by product and commercial services by category.
The report can be accessed at http://www.wto.org/english/res_e/statis_e/its2008_e/its08_toc_e.htm
ICTSD reporting.