Prospects for world trade

Prospects for world

tradeThe role of the WTO

in exiting the economic crisis

Coleman NeeEconomic Affairs Officer, WTO8 November 2012

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?

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.

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)

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.

World trade volume growth has been driven by manufactures

Volume of world merchandise exports by major product category, 1980-2011 (Index, 1980=100)

a Includes unspecified products.

Source: WTO Secretariat.

0

100

200

300

400

500

600

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Total manufactures a

Agricultural products

Fuels and mining products

Manufactures

Services trade has become increasingly important since the 1980s

Composition of world goods and commercial services exports, 1980-2011 (Trillion dollars and percentage)


Value (trillion dollars) Share of commercial services in G&S

0.37 0.38 0.79 1.18 1.49 2.514.17

1.94 1.883.43

5.106.39

10.37

18.10

2.31 2.26

4.22

6.28

7.89

12.88

22.27

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005 2011

Commercial services Goods (BOP)

15.917.0

18.7 18.8 18.9 19.518.7

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005 2011

Commercial services

The share of fuels and mining in world trade has risen at the expense of agricultural products and manufactures

Shares in world merchandise exports by product, 1990-2011 (Percentage)


Agricultural products, 9%

Fuels and mining products, 23%

Iron and steel, 3%Chemicals, 11%

Other semi-manufactures, 6%

Office and telecom equipment, 10%

Automotive products, 7%

Industrial machinery,

12%

Textiles, 2%

Clothing, 2% Others, 15%

2011

Agricultural

products, 12%

Fuels and mining products, 14%

Iron and steel, 3%Chemicals

, 9%

Other semi-manufactures, 8%

Office and telecom equipment, 9%

Automotive products, 10%

Textiles, 3%

Clothing, 3%

Others, 29%

1990

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

European Union (15), 37%

United States, 11%Japan, 6%

Other developed, 11%

Saudi Arabia, Kingdom of, 5%

USSR, former, 4%

Iraq, 1%

Nigeria, 1%

South Africa, 1%

Indonesia, 1%

Brazil, 1%

Chinese Taipei, 1%

Singapore, 1%

China, 1%

Mexico, 1%

Other developing and emerging, 15%

Developed economies, 66%

Developing and emerging

economies, 34%


United States, 8%

Japan, 5%Other developed,

7%

China, 11%Korea, Republic of, 3%

Russian Federation, 3%

Singapore, 2%

Saudi Arabia, 2%

Mexico, 2%

Chinese Taipei, 2%

India, 2%Brazil, 1%

Thailand, 1%

Malaysia, 1%

Other developing economies, 16%



economies, 47%

… and world imports since 1980

Shares of selected economies in world merchandise imports by level of development, 1980-2011 (Percentage)


1980 2011


United States, 12%Japan, 7%

Other developed, 11%

USSR, former, 3%

Saudi Arabia, Kingdom of, 1%

Singapore, 1%South Africa, 1%

Brazil, 1% Nigeria, 1%Iraq, 1%Mexico, 1%

Korea, Republic of, 1%

Taipei, Chinese, 1%

China, 1%




economies, 29%


United States, 13%

Japan, 5%Other developed, 6%

China, 10%Commonwealth of

Independent States (CIS), 3%

Korea, Republic of, 3%

India, 3%

Singapore, 2%

Mexico, 2%

Taipei, Chinese, 2%

Turkey, 1% Brazil, 1%

Thailand, 1%

United Arab Emirates, 1%




economies, 42%

Intra-Asia trade has grown as supply chains have expanded

Intra-regional and extra-regional merchandise exports of WTO regions, 1990-2011 (Billion dollars and percentage)

Source: 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.

41%

56%

48%59%

44%

52%

548

1225

2282

1990 2000 2011

North America

26%26%86%

74%

74%

120198

750

1990 2000 2011

South and Central America

35% 27%

29%65%

73%

71%

706

966

2707

1990 2000 2011

Europe (excl. EU-intra)

12%94% 91%

88%

106149

594

1990 2000 2011

Africa

Intra Extra

19%100%

80%

81%

58146

789

1990 2000 2011

CIS

15%94%91%

85%

138

268

1251

1990 2000 2011

Middle East

42%

49%

52%

58%

51%

48%

739

1658

5538

1990 2000 2011

Asia

Distributed production has led to relatively more trade between developing countries and less between developed countries

Shares of "North-North", "North-South" and "South-South" trade in world merchandise exports, 1990-2011(Percentage share in World trade)


Note: South incldes Centra l and Eastern Europe before 2000, equal to 1.6% of world trade in 1995.

8 12 12 16 20 21 23 24

3335 36

3737 37

38 38

5651 50

4641 40 37 36

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2008 2009 2010 2011

North-North

North-South

South-South

Unspecifieddestinations

Trade has grown faster than world GDP since the mid-1980s

World merchandise trade volume and GDP growth, 1980-2011 (Annual percentage change)

Note: Merchandise trade refers to the average of exports and imports .


0.0

0.5

1.0

1.5

2.0

2.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

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)

Trade and GDP plunged in 2009 and rebounded in 2010, but have since recorded below average growth

World merchandise trade volume and real GDP, 2005-13 a (Annual percentage change)

a Figures for 2012 and 2013 are estimates .


-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

2005 2006 2007 2008 2009 2010 2011 2012P 2013P

Exports

GDP

Average export growth 1991-2011

Average GDP growth 1991-2011

Global trade has not returned to its previous trend after the financial crisis

Volume of world merchandise exports , 1990-2013 a (Index, 1990=100)

a Figures for 2012 and 2013 are projections.Source: WTO Secretariat.

50

100

150

200

250

300

350

400

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

P

2013

P

Export volume

Forecast

Trend (1990-2008)

Trade volume in 2012 has hit a plateau similar to 2008

World merchandise trade volume, Jan. 2006 - Aug. 2007 (Index, Jan. 2006=100)

Note: World trade refers to average of exports and imports.Source: WTO Secretariat.

80

85

90

95

100

105

110

115

120

125

130

2006

m1

2006

m7

2007

m1

2007

m7

2008

m1

2008

m7

2009

m1

2009

m7

2010

m1

2010

m7

2011

m1

2011

m7

2012

m1

2012

m7

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)

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.

11.2 12.6

8.5 8.0

11.813.6

10.7

4.01.7

-3.0

13.713.5

10.49.4

10.610.5

9.8

6.3

3.7

1.3

24.926.2

18.917.4

22.424.1

20.5

10.3

5.4

-1.6-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

Developing and emerging economies a Developed economies World merchandise imports, y-o-y percentage change

Trade performances of developed economies have differed over the past year, with EU exports strong and imports weak

Merchandise trade flows of leading developed economies, 2010Q1-2012Q2Seasonally adjusted volume indices, 2010Q1=100


Exports Imports Intra-EU trade

95

100

105

110

115

120

125

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

United States EU-extra Japan

95

100

105

110

115

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

United States EU-extra Japan

95

100

105

110

115

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

EU-intra (exports)

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)

Source: WTO Secretariat

33

39

26

18

15

11 10

4 3

74

42

21

15

1816

78 8

3

75

0

5

10

15

20

25

30

35

40

45

2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3

Exports

Imports

Slump in merchandise trade is widespread across all regionsMerchandise exports and imports of selected economies, January 2011-September 2012 (Year-on-year percentage change in current dollar values)

China Rep. Korea

United States Japan European Union (extra trade)

FranceGermany United Kingdom

Brazil

-5

0

5

10

15

20

25

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-15

-10

-5

0

5

10

15

20

25

30

35

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

60

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

-30

-20

-10

0

10

20

30

40

50

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1Au

g-11

Sep-

11O

ct-1

1N

ov-1

1De

c-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-

12

Exports

Imports

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)

Source: WTO and UNCTAD Secretariats

China Singapore

United States Japan European Union (extra-trade)

FranceGermany

United Kingdom

Italy

0

2

4

6

8

10

12

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

ExportsImports

-10

-5

0

5

10

15

20

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

ExportsImports

-5

0

5

10

15

20

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

-15

-10

-5

0

5

10

15

20

25

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

ExportsImports

-10

-5

0

5

10

15

20

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

-10

-5

0

5

10

15

20

25

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

-20

-15

-10

-5

0

5

10

15

20

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

0

5

10

15

20

25

30

35

40

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

-10

-5

0

5

10

15

20

25

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

-10-505

101520253035

2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2

Exports

Imports

WTO has revised its trade forecast down for 2012 and 2013

World merchandise trade and GDP, 2008-2013 a (Annual percentage change)

2008 2009 2010 2011 2012 a 2013 a

Volume of world merchandise trade b 2.3 -12.5 13.9 5.0 2.5 4.5

ExportsDeveloped economies 0.9 -15.2 13.0 4.6 1.5 3.3Developing economies and CIS 4.3 -7.8 15.3 5.3 3.5 5.7

ImportsDeveloped economies -1.1 -14.4 11.0 2.9 0.4 3.4Developing economies and CIS 8.6 -10.5 18.3 8.3 5.4 6.1

Real GDP at market exchange rates 1.3 -2.4 3.8 2.4 2.1 2.4Developed economies 0.0 -3.8 2.7 1.5 1.2 1.5Developing economies and CIS 5.6 2.2 7.3 5.3 4.9 5.2

a 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.

Restrictive measures slowed in May-October, but their effect is cumulativeTable 1 Trade restrictive measures

Type of

measure

Apr- Aug 09

(5 months)

Sep09- Feb10

(6 months)

March- mid-May10 (3 months)

Mid-May-mid-Oct10 (5 months)

Mid-Oct10 - Apr11

(6 months)

May – mid-Oct11 (6 months)

Mid-Oct11 - mid-May12

(7 months)

Mid-May-mid-

Oct12 (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 month

16.0 15.8 18.7 10.8 20.3 18.0 17.7 14.2

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)

Oct 2008 to Oct 2009a

Nov 2009 to May 2010a

Mid-May to mid-Oct

2010b

Mid-Oct 2010 to

April 2011b

May to mid-Oct

2011c

Mid-Oct 2011 to

mid-May 2012d

Mid-May to mid-Oct

2012d

Cumulative

totald

Share in total world imports

0.8 0.4 0.2 0.5 0.5 0.9 0.3 3.5

Share in G-20 imports

1.0 0.5 0.3 0.6 0.6 1.1 0.4 4.4

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.

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.

Trade Collapse and Decrease in Trade Credits

25

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”

Prospects for world trade

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