Prospects for world trade
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  • 1. Prospects for world trade The role of the WTO in exiting the economic crisisColeman NeeEconomic Affairs Officer, WTO8 November 2012
  • 2. Outline• What is the World Trade Organization and what does it do?• How have global trade patterns evolved in recent decades, and what has changed since the collapse of 2008-09?• What is the short-term outlook for world trade? What factors will shape trade in the future?• What role can the WTO play in confronting global economic challenges?
  • 3. An outline history of the WTO• Post-war multilateral institutions have undergirded peace and prosperity. – IMF, World Bank and GATT (predecessor of WTO)• GATT was established in 1948 as a “provisional” agreement after the failure to create the ITO at Bretton Woods. – Basic principles: Most Favoured Nation (MFN), National Treatment. – First GATT round involved 15 countries and produced 45,000 concessions but tariffs remained quite high. – Tokyo round from 1973 to 1979 involved 105 countries and brought average tariffs on industrial goods to 4.7% – Uruguay round, begun in 1986, created the WTO and involved 123 countries and took 8 years. • GATT 1994 closed loopholes, GATS added services to, • Other issues added: TRIMS, TRIPS, etc. • Enhanced dispute settlement procedures with teeth. – Doha round has been going more than 10 years without conclusion.
  • 4. Functions of the WTO• Negotiating forum (common undertaking)• Dispute settlement• Technical assistance• Economic research on trade and related issues• Surveillance (Monitoring Reports, Trade Policy Reviews)• New: Statistics/Business intelligence – iTip (Integrated Trade Information Portal) – Short-term statistics for countries and regions – New indicators forthcoming (trade in value added)
  • 5. The evolution of trade over the last 20-30 years and developments since the economic crisis Since the 1980s, world trade has grown faster than global output. New players have emerged and trade patterns have shifted as a result of political and technological changes. However, the global financial crisis and trade collapse of 2008-09 have increased trade frictions and given rise to a renewed skepticism about the gains from trade.
  • 6. World trade volume growth has been driven by manufactures Volume of world merchandise exports by major product category, 1980-2011 (Index, 1980=100) 600 Total manufactures a 500 Agricultural products Fuels and mining products Manufactures 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 a Includes unspecified products. Source: WTO Secretariat.
  • 7. Services trade has become increasingly important since the 1980sComposition of world goods and commercial services exports, 1980-2011 (Trillion dollars and percentage) Value (trillion dollars) Share of commercial services in G&S25 25 22.2720 20 19.5 18.7 18.8 18.9 18.7 17.0 15.915 15 12.88 18.1010 10 7.89 6.28 10.37 5 4.22 5 6.39 2.31 2.26 5.10 3.43 4.17 1.94 1.88 2.51 0.79 1.18 1.49 0 0.37 0.38 0 1980 1985 1990 1995 2000 2005 2011 1980 1985 1990 1995 2000 2005 2011 Commercial services Goods (BOP) Commercial servicesSource: WTO Secretariat.
  • 8. The share of fuels and mining in world trade has risen at the expense of agricultural products and manufacturesShares in world merchandise exports by product, 1990-2011 (Percentage) 1990 2011 Agricultural products, 9% Agricultur Clothing, 2% Others, 15% al products, Fuels and mining Textiles, 2% Others, 29% 12% products, 14% Industrial Fuels and mining machinery, products, 23% 12% Iron and steel, 3% Clothing, 3% Chemicals , 9% Chemicals, Iron and steel, 3% Textiles, 3% Automotive products, 7% 11% Automotive products, 10% Other semi- Office and telecom Other semi- Office and telecom equipment, 10% manufactures, 8% manufactures, 6% equipment, 9%Source: WTO Secretariat.
  • 9. Developing and emerging economies have increased their share in world exports…Shares of selected economies in world merchandise exports by level of development, 1980-2011 (Percentage) 1980 2011 Other developing Other developing and emerging, 15% economies, 16% European Union Singapore, 1% Mexico, 1% European Union (27), 34% (15), 37% China, Chinese Taipei, 1% 1% Malaysia, 1% Brazil, 1% Thailand, 1% Indonesia, 1% Brazil, 1% Developing and India, 2% Developing and South Africa, 1% emerging Chinese Taipei, 2% emerging Nigeria, 1% economies, 34% economies, 47% Developed Mexico, 2% Developed Iraq, 1% economies, 53% economies, 66% Saudi Arabia, 2% USSR, former, 4% Saudi Arabia, Singapore, 2% Kingdom of, 5% Russian Federation, 3% Korea, Republic of, China, 11% 3% United States, 8% Other developed, 11% United States, 11% Japan, 5% Japan, 6% Other developed, 7%Source: WTO Secretariat.
  • 10. … and world imports since 1980Shares of selected economies in world merchandise imports by level of development, 1980-2011 (Percentage) 1980 2011 Other developing Other developing and emerging, 15% and emerging, 14% China, 1% European Union United Arab (27), 35% Taipei, Chinese, 1% European Union Emirates, 1% Korea, Republic (15), 41% Thailand, 1% of, 1% Brazil, 1% Mexico, 1% Turkey, 1% Brazil, 1%Nigeria, 1%Iraq, 1% Taipei, Chinese, 2% Developing and Mexico, 2% Developing and South Africa, 1% emerging emerging Singapore, 1% Singapore, 2% economies, 29% economies, 42% Saudi Arabia, Developed Developed India, 3% economies, 58% Kingdom of, 1% economies, 71% Korea, Republic of, USSR, former, 3% 3% Commonwealth of Independent States China, 10% Other developed, (CIS), 3% 11% United States, 13% Japan, 7% United States, 12% Other developed, Japan, 5% 6%Source: WTO Secretariat.
  • 11. Intra-Asia trade has grown as supply chains have expandedIntra-regional and extra-regional merchandise exports of WTO regions, 1990-2011 (Billion dollars and percentage) 2707 5538 789 81% 2282 1251 146 71% 58 48% 100 80% 19% % 52% 199 0 200 0 201 1 1225 966 CIS 706 44% 85% 548 73% 65% 48% 29% 59% 56% 35% 27% 268 41% 1658 138 199 0 200 0 201 1 199 0 200 0 201 1 91% Europe (excl. 94% 15% 52% North America 51% EU-intra) 199 0 200 0 201 1 594 739 750 Middle East 58% 49% 88% 42% 74% 149 106 199 0 200 0 201 1 198 91% Asia 120 94% 12% 74% 26% 199 0 200 0 201 1 86% 26% Africa 199 0 200 0 201 1 South and Central Intra Extr a AmericaSource: Netw ork of w orld merchandise trade tables from WTO International Trade Statistics 2010, supplemented w ith older netw ork tables and Secretariat estimates prior to 2000.
  • 12. Distributed production has led to relatively more trade between developing countries and less between developed countriesShares of "North-North", "North-South" and "South-South" trade in world merchandise exports, 1990-2011(Percentage share in World trade) 100% 90% 80% 37 36 41 40 46 51 50 70% 56 North-North 60% North-South 50% 38 38 South-South 40% 37 37 37 35 36 Unspecified 30% 33 destinations 20% 21 23 24 10% 20 16 8 12 12 0% 1990 1995 2000 2005 2008 2009 2010 2011Source: WTO Secretari a t.Note: South i ncl des Centra l a nd Ea s tern Europe before 2000, equa l to 1.6% of worl d tra de i n 1995.
  • 13. Trade has grown faster than world GDP since the mid-1980sWorld merchandise trade volume and GDP growth, 1980-2011 (Annual percentage change) 8.0 2.5 7.0 2.0 6.0 5.0 1.5 4.0 1.0 3.0 2.0 0.5 1.0 0.0 0.0 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2011 GDP growth (left scale) Merchandise trade volume growth (left scale) Elasticity (right scale)Note: Mercha ndi s e tra de refers to the a vera ge of exports a nd i mports .Source: WTO Secretari a t.
  • 14. Trade and GDP plunged in 2009 and rebounded in 2010, but have since recorded below average growthWorld merchandise trade volume and real GDP, 2005-13 a (Annual percentage change) 15.0 Average export growth 1991-2011 10.0 5.0 0.0 Average GDP growth -5.0 1991-2011 -10.0 Exports GDP -15.0 2005 2006 2007 2008 2009 2010 2011 2012P 2013Pa Fi gures for 2012 a nd 2013 a re es tima tes .Source: WTO Secretari a t.
  • 15. Global trade has not returned to its previous trend after the financial crisis aVol ume of worl d mercha ndi s e exports , 1990-2013 (Index, 1990=100) 400 350 Export volume Forecast 300 Trend (1990-2008) 250 200 150 100 50 2012P 2013P 1990 1993 1994 1995 1998 1999 2000 2001 2004 2005 2006 2009 2010 2011 1991 1992 1996 1997 2002 2003 2007 2008a Figures for 2012 and 2013 are projections.Source: WTO Secretariat.
  • 16. Trade volume in 2012 has hit a plateau similar to 2008World merchandise trade volume, Jan. 2006 - Aug. 2007 (Index, Jan. 2006=100) 130 125 120 115 110 105 100 95 90 85 80 2006m1 2006m7 2007m1 2007m7 2010m7 2011m1 2011m7 2012m1 2012m7 2008m1 2008m7 2009m1 2009m7 2010m1Note: World trade refers to average of exports and imports.Source: WTO Secretariat.
  • 17. The recent slowdown in trade is mostly due to falling import demand in developed countries Contributions to year-on-year growth in world merchandise imports, 2010Q1-2012Q2 (Percentage change in US dollar values) 30.0 26.2 24.9 24.1 25.0 22.4 20.5 18.9 20.0 13.5 17.4 10.5 13.7 10.6 15.0 9.8 10.4 9.4 10.3 10.0 13.6 6.3 5.4 12.6 11.8 5.0 11.2 10.7 8.5 8.0 3.7 4.0 1.7 1.3 0.0 -3.0 -1.6 -5.0 2010Q2 2010Q4 2011Q2 2011Q3 2012Q1 2010Q1 2010Q3 2011Q1 2011Q4 2012Q2 Developing and emerging economies a Developed economies World merchandise imports, y-o-y percentage change a Includes significant re-exports. Note: Due to scarce data availability, Africa and Middle East are under-represented in world totals. Source: WTO Secretariat estimates based on data compiled from IMF International Financial Statistics, Eurostat Comext database, Global Trade Atlas, and national statistics.
  • 18. Trade performances of developed economies have differed over the past year, with EU exports strong and imports weakMerchandise trade flows of leading developed economies, 2010Q1-2012Q2Seasonally adjusted volume indices, 2010Q1=100 Exports Imports Intra-EU trade125 115 115120 110 110115110 105 105105 100 100100 95 95 95 2010Q1 2010Q4 2011Q3 2010Q2 2011Q1 2011Q4 2010Q2 2011Q1 2011Q4 2010Q2 2010Q3 2011Q1 2011Q2 2011Q4 2012Q1 2012Q2 2010Q1 2010Q3 2010Q4 2011Q2 2011Q3 2012Q1 2012Q2 2010Q1 2010Q3 2010Q4 2011Q2 2011Q3 2012Q1 2012Q2 United States EU-extra Japan United States EU-extra Japan EU-intra (exports)Source: WTO Secretariat.
  • 19. China’s export and import volumes have also slowed ominously Merchandise exports and imports of China, 2010Q1-2012Q3 (Year-on-year % change in volume, NSA) 45 42 40 39 Exports Imports 35 33 30 26 25 21 20 18 18 16 15 15 15 11 10 10 8 8 7 7 7 4 4 5 5 3 3 0 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Source: WTO Secretariat
  • 20. 10 15 20 25 0 5 -5 10 20 30 40 50 60 10 20 30 40 50 0 0 -20 -20 -10 -10 Jan-11 Jan-11 Jan-11Feb-11 Feb-11 Feb-11Mar-11 Mar-11 Mar-11Apr-11 Apr-11 Apr-11May-11 May-11 May-11Jun-11 Jun-11 Jun-11 Jul-11 Jul-11 Jul-11Aug-11 Aug-11 Aug-11Sep-11 Sep-11 Sep-11Oct-11 Oct-11 Oct-11Nov-11 Nov-11 Nov-11 China GermanyDec-11 Dec-11 Dec-11 United States Jan-12 Jan-12 Jan-12Feb-12 Feb-12 Feb-12Mar-12 Mar-12 Mar-12Apr-12 Apr-12 Apr-12May-12 May-12 May-12Jun-12 Jun-12 Jun-12 Jul-12 Jul-12 Jul-12 Exports ImportsAug-12 Aug-12 Aug-12 Exports Exports Imports ImportsSep-12 Sep-12 Sep-12 10 20 30 40 50 10 20 30 40 50 10 15 20 25 30 35 0 0 0 5 -20 -10 -20 -10 -15 -10 -5 Jan-11 Jan-11 Jan-11Feb-11 Feb-11 Feb-11Mar-11 Mar-11 Mar-11Apr-11 Apr-11 Apr-11May-11 May-11 May-11Jun-11 Jun-11 Jun-11 Jul-11 Jul-11 Jul-11Aug-11 Aug-11 Aug-11Sep-11 Sep-11 Sep-11Oct-11 Oct-11 Oct-11Nov-11 Nov-11 Nov-11 Japan FranceDec-11 Dec-11 Dec-11 Rep. Korea Jan-12 Jan-12 Jan-12Feb-12 Feb-12 Feb-12Mar-12 Mar-12 Mar-12Apr-12 Apr-12 Apr-12May-12 May-12 May-12Jun-12 Jun-12 Jun-12 Jul-12 Jul-12 Jul-12Aug-12 Aug-12 Aug-12 Exports Exports Exports Imports Imports ImportsSep-12 10 Sep-12 Sep-12 20 30 40 50 10 20 30 40 50 10 20 30 40 50 0 0 0 -30 -10 -20 -10 -20 -20 -10 Jan-11 Jan-11 Jan-11Feb-11 Feb-11 Feb-11Mar-11 Mar-11 Mar-11Apr-11 Apr-11 Apr-11May-11 May-11 May-11Jun-11 Jun-11 Jun-11 Jul-11 Jul-11 Jul-11Aug-11 Aug-11 Aug-11Sep-11 Sep-11 Sep-11Oct-11 Oct-11 Oct-11Nov-11 Nov-11 Nov-11 BrazilDec-11 Dec-11 Dec-11 Jan-12 Jan-12 Jan-12 United KingdomFeb-12 Feb-12 Feb-12 Merchandise exports and imports of selected economies, January 2011-September 2012 (Year-on-year percentage change in current dollar values)Mar-12 Mar-12 Mar-12 European Union (extra trade)Apr-12 Apr-12 Apr-12May-12 May-12 May-12Jun-12 Jun-12 Jun-12 Jul-12 Jul-12 Jul-12Aug-12 Aug-12 Aug-12 Exports Exports Exports Imports Imports Imports Slump in merchandise trade is widespread across all regionsSep-12 Sep-12 Sep-12
  • 21. Trade in services is declining in a similar fashionExports and imports of commercial services for selected economies, 2011Q1-2012Q2 (Year-on-year percentage change in current US dollar values) United States Japan European Union (extra-trade)12 20 20 Exports Exports Exports10 Imports 15 Imports 15 Imports 8 10 10 6 5 5 4 0 2 -5 0 0 -10 -5 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 Germany France Italy 20 25 20 Exports Exports Exports 20 15 15 Imports Imports Imports 15 10 10 10 5 5 5 0 0 -5 0 -5 -10 -5 -10 -15-10 -15 -20 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 United Kingdom China Singapore 25 40 35 25 Exports 30 Exports Exports Exports 20 35 20 Imports 25 Imports Imports Imports 15 30 15 20 25 10 15 10 20 5 10 5 15 5 0 10 0 0 -5 5 -5 -5-10 -10 0 -10 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2011Q1 2011Q2 2011Q3 2011Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2Source: WTO and UNCTAD Secretariats
  • 22. WTO has revised its trade forecast down for 2012 and 2013 aWorld merchandise trade and GDP, 2008-2013 (Annual percentage change) 2008 2009 2010 2011 2012 a 2013 a bVolume of world merchandise trade 2.3 -12.5 13.9 5.0 2.5 4.5Exports Developed economies 0.9 -15.2 13.0 4.6 1.5 3.3 Developing economies and CIS 4.3 -7.8 15.3 5.3 3.5 5.7Imports Developed economies -1.1 -14.4 11.0 2.9 0.4 3.4 Developing economies and CIS 8.6 -10.5 18.3 8.3 5.4 6.1Real GDP at market exchange rates 1.3 -2.4 3.8 2.4 2.1 2.4 Developed economies 0.0 -3.8 2.7 1.5 1.2 1.5 Developing economies and CIS 5.6 2.2 7.3 5.3 4.9 5.2a Figures for 2012 and 2013 are projections.b Average of exports and imports.Source: WTO Secretariat for trade, concensus estimates of economic forecasters for GDP.
  • 23. Restrictive measures slowed in May-October, but their effect is cumulative Table 1 Trade restrictive measures Apr- Sep09- March- Mid-May- Mid-Oct10 May – Mid-Oct11 Mid-May- Type of Aug 09 Feb10 mid-May10 mid-Oct10 - Apr11 mid-Oct11 - mid- mid- measure (5 months) (6 months) (3 months) (5 months) (6 months) (6 months) May12 Oct12 (7 months) (5months) Trade remedy 50 52 24 33 53 44 66 46 Border 21 29 22 14 52 36 39 20 Export 9 7 5 4 11 19 11 4 Other 0 7 5 3 6 9 8 1 Total 80 95 56 54 122 108 124 71 Average per 16.0 15.8 18.7 10.8 20.3 18.0 17.7 14.2 month Note: This table includes all measures that restrict or have the potential to restrict and/or distort trade. The measures counted in the table are not all comparable, in particular in terms of their potential impact on trade flows. It has been estimated that G-20 economies put in place 148 trade restrictive measures during the period October 2008 to March 2009 (on average, 24.6 per month). Table 1 does not include general economic support measures which are listed separately in Annex 2. Table 2 Share of trade covered by import restrictive measures (Per cent) Mid-May to Mid-May Oct 2008 to Nov 2009 to mid-Oct Mid-Oct May to Mid-Oct to mid-Oct Cumulative Oct 2009a May 2010a 2010b 2010 to mid-Oct 2011 to 2012d totald April 2011b 2011c mid-May 2012d Share in 0.8 0.4 0.2 0.5 0.5 0.9 0.3 3.5 total world imports Share in G- 1.0 0.5 0.3 0.6 0.6 1.1 0.4 4.4 20 imports a Based on 2008 import figures. b Based on 2009 import figures. c Based on 2010 import figures. d Based on 2011 import figures. Source: WTO Secretariat calculations based on UNSD Comtrade database using import figures. Import data for G-20 economies include intra-EU27 imports.
  • 24. Testing the trade-credit and link• Trade credit is systemic for trade. Little trade paid cash, according to surveys, only 20% as a result of different interests of importers and exporters. Hence 70-80% of world trade relies on trade credit and guarantees.• It is difficult to test a causal link between credit availability an trade due to a lack of statistics, but a forthcoming paper by Auboin and Engemann uses Berne Union data on insured trade credit, available through 28 quarters from 2005 to 2011, in 91 countries, allowing for some 1800 country-quarter observations.
  • 25. Trade Collapse and Decrease in Trade Credits 25
  • 26. How can the WTO help in exiting the crisis• Restraining protectionism – Dispute settlement gives countries an opportunity to challenge measures they believe are discriminatory – Compliance with rulings is remarkably high – Contributes to certainty, allows businesses to make decisions without fear of • Surveillance and monitoring protectionist measures, “naming and shaming.” • Embracing 21st century issues: – Non-tariff measures, including health, safety and environmental regulations that may have legitimate public policy objectives but which may be used to shield domestic producers from competition – Preferential trade agreements, which provide a foundation for global production, could be “multi-lateralized”