Trade To Pick Up Slightly In 2002
2 May 2002
Trade To Pick Up Slightly In 2002 After Sharp Drop In 2001
World exports dipped 1% in volume in 2001 and contracted 4% in value to US$ 6 trillion, according to the World Trade Organization's latest report on international trade, released today (2 May 2002). For 2002, the WTO's economists predict a moderate recovery of around 1%.
“World merchandise trade is expected to expand only marginally on a year-to-year basis despite a projected increase of 6% between the fourth quarter of 2001 and that of 2002,” says the study, which will be part of the forthcoming 2002 WTO Annual Report.
A strong rebound is unlikely, according to WTO economists, because of “sober prospects” for information technology industries.
The 1.5% decline in export volume in 2001 followed a 12% increase in 2000. The steady decline was blamed on the continued weakness in overall economic growth (GPD) and in particular the steep fall in inventory levels in OECD countries, which further depressed import levels.
The 4% decline in export value in 2001 was the largest annual decrease recorded since 1982. All three major merchandise product groups ¡X agricultural products, mining products and manufactures ¡X suffered.
Commercial services exports slipped slightly by 1.5% to US$ 1.4 trillion, the first year-to-year decline for world exports in commercial services since 1983. The export value of certain commercial services ¡X for example, communications, insurance, financial services, royalties and license fees ¡X rose, but not enough to compensate for the fall in transportation and travel services exports.
Sharp contraction of world trade in 2001; moderate recovery projected for 2002.
These are the report’s main findings:
- In sharp contrast to 2000, when both trade and output expanded at record rates, the value and volume of world exports (a measure of world trade) actually decreased in 2001. In the fourth quarter of 2001, the volume of world exports had fallen to fully 6% below the preceding year’s level.
- Three factors played a major role in this stronger than expected global slowdown: the bursting of the global information technology (IT) bubble; the sluggishness of demand in Western Europe; and to a much lesser extent the events of 11 September 2001.
- The fall in business investment, a sharp rundown of inventories and weaker private consumption growth in all major industrial markets led to a matching trade decline throughout 2001.
- The regions and countries with the strongest export
decline in 2001 were those trading intensively in IT
products ¡X East Asia and the United States. Some of the
East Asian traders that are highly dependent on IT products
recorded an unprecedented export and output decline (e.g.
Singapore, Chinese Taipei).
- In sharp contrast, regions and countries which had benefited from the sharp recovery of oil and gas prices in 1999-2000 generally recorded strong import and GDP growth in 2001 (e.g. transition economies and the Middle East).
- The US dollar value of world merchandise exports fell by 4% to $6 trillion in 2001, much faster than commercial services exports (-1.5%) which reached $1.44 trillion last year.
- Developing countries’ merchandise exports decreased by 6%, a somewhat steeper decline than the world average in 2001, due to the marked contraction of shipments of IT products from the East Asian traders and those of oil exporting developing countries.
- Least-developed countries’ exports and imports are estimated to have stagnated in 2001. If these rough estimates are confirmed, the least-developed countries would have expanded their exports faster than world trade for the third year in a row but their share remains very small at 0.5%.
- In 2001 when China joined the WTO, its dynamic trade performance made it the fourth largest trader in the world (counting the EU as a single trader and combining exports and imports of merchandise and commercial services).
- World trade is expected to recover from the first quarter of 2002 onwards, driven initially by the rebuilding of inventories. The projected global exports expansion of 6% between the fourth quarter of 2001 and 2002 leads to an average annual growth projected at 1%for 2002. For the second year in a row, growth in world trade will lag behind the expansion of global output.
- The IT sector has a larger share in international trade than in global output. Consequently global trade has suffered more as a result of the bursting of the IT bubble than has output. Traditionally, trade has grown faster than output globally. The difference is likely to be less in the coming years, because of lowered expectations for demand and investment growth in the IT sector, combined with higher transaction costs ¡X a fallout from the events of 11 September 2001.
- A longer term review of the importance commodity prices in determining developing countries’ export earnings found:
- Commodity prices have become much less important in determining the export earnings of developing countries as a group over the last decades. The decline in the importance of commodity prices differed widely between developing regions. From the early 1970s to the late 1990s, developing Asia and Latin America made extraordinary progress in becoming less dependent on primary product exports, but Africa still depends on commodities for 80% of its merchandise exports.
- Among developing countries, there continue to be more exporters of primary products than those exporting mainly manufactured goods.
- A comparison of the export structure of individual developing economies between 1968-70 and 1998-2000 reveals that out of 103 developing economies, only 27 managed to make the successful transition from predominantly exporting commodities to predominantly exporting manufactures.
- The 35 developing economy exporters of manufactures (8 traditional and 27 new) account for more than three quarters of the total population of developing countries in the late 1990s. If China and India are excluded, the remaining 33 developing exporters of manufactured goods still represent more than one half of the population living in the developing world.