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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)
Source: WTO Secretariat.
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)
Source: WTO Secretariat.
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)
Source: WTO Secretariat.
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%
European Union (27), 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%
Developed economies, 53%
Developing and emerging
economies, 47%
… and world imports since 1980
Shares of selected economies in world merchandise imports by level of development, 1980-2011 (Percentage)
Source: WTO Secretariat.
1980 2011
European Union (15), 41%
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%
Other developing and emerging, 15%
Developed economies, 71%
Developing and emerging
economies, 29%
European Union (27), 35%
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%
Other developing and emerging, 14%
Developed economies, 58%
Developing and emerging
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)
Source: WTO Secretariat.
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 .
Source: WTO Secretariat.
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 .
Source: WTO Secretariat.
-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
Source: WTO Secretariat.
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”