After the sudden drop in global trade in 2009, here are the major developments in global trade:
- World export volumes have regained pre-crisis levels (August 2008). As of October 2010 export volumes was 0.8 percent higher than their August 2008 levels. Although pre-crisis levels have been surpassed they remain below their pre-crisis peaks and about 13.6 percent lower than what might have been expected had the crisis not occurred.
- The recovery in trade is more advanced among developing countries than in high-income countries. By September 2010, high-income countries export volumes were still some 2 percent below their pre-crisis levels, whereas developing countries were 16 percent above their pre-crisis level by November 2010.
- Developing countries imports drove the rebound.Three quarters of the increase in high-income country exports during the first half of 2010 was sold to developing country importers, and overall developing country imports accounted for 58 percent of the increase in global exports during that period.
- Much of that import demand was in the form of capital goods, a sector of global activity still dominated by high-income countries. Exports of consumer non-durables fell 20 percent during the crisis, durables and machinery, transportation as well as minerals fell 30 percent. As a result, much of the recovery in trade was in these same categories.
- Low-income countries benefitted from the rebound in commodity prices.The increase in the demand for capital goods and durable consumer goods has also led to the recovery in demand for inputs that feed these markets including industrial metals. Partly as a result, industrial metal dependent economies experienced a surge in export revenues.
- Global trade in services, which proved more resilient to the crisis than merchandise trade, is also on the recovery path. After services exports declined by 6 percent in 2009, it increased by 8.4 percent in the first ten months of 2010, with passenger fares and other travel services leading the way.
- Tourism services, which remains critical for many developing countries also rebounded in 2010.The World Tourism Organization estimates tourist arrivals to have grown by 4 percent in 2010.
- Global imbalances have declined substantially and are expected to continue falling. The increase in public sector and consumer spending in China as well as the increase in household savings rate in the United States in 2010 supported this reduction in global imbalances.
- The bounce-back phase of the trade recovery has ended. Many of the factors that helped drive the trade rebound were temporary in nature (e.g. inventory re-stocking, restarting of trade-finance, declines in crisis-induced precautionary savings, and the growth impact of government stimuli packages). As these factors faded, global trade decelerated. Thus after growing at a 21.1 percent annualized rate in the first half, global exports decelerated sharply, declining at an annualized pace of 1.65% in the third quarter of 2010.
- Global trade growth still remains below its pre-crisis trend. The long-term average annual growth in global trade volumes during the pre-crisis period (1991-2008) was 7.0 percent. Thus the sharp downward adjustment in global trade growth that occurred in the third quarter points to the fact that global trade growth, post-the bounce back phase, is well below the long-term trend and had not yet stabilized at a new equilibrium by September.
- Several factors suggest the pace of recovery will pick-up. The most recent trade data for instance points to a slowdown in the pace of deceleration. In October, the pace of deceleration in global trade volumes had moderated to -2.8 percent from the -4.8 percent that occurred in September. Indeed, industrial production after registering a similarly sharp deceleration is now accelerating once again in the fourth quarter. Moreover, demand-side indicators show continued positive growth, and in high-income countries there is reason to believe that the recovery is becoming more broadly based—involving more countries and more segments of aggregate expenditure.
- As a consequence of the increasing importance of developing countries in global trade, significant changes to trading partners could occur over the forecast horizon.
- South-South trade is also growing. Just as developing countries are becoming increasingly important markets for high-income exporters, so to are other developing countries becoming more important destinations for the exports of developing countries. China, in particular has become an increasingly important export market for all developing regions.
- The growing importance of developing countries in global trade has implications for the structure of global trade. Because demand patterns in developing countries are different than in high-income countries, their growing share in global imports is shaping the product structure of global trade. Rapidly industrializing developing countries demand proportionately more industrial raw materials, energy and food products, as opposed to manufactured consumer goods and non-tradable services. Hence with the growing importance of developing countries as an engine of growth, this is likely to sustain the high increases in commodity prices that occurred in 2010 over the forecast horizon.
- Although progress has been limited, concluding the Doha process remains critical to maximizing the potential benefit to developing countries from trade openness.The continued proliferation of bilateral and regional trade agreements only partly compensates for the lack of multilateral progress and has eroded the preferential margins of many low-income countries. A multilateral deal that takes into account the supply-side constraints in low-income economies, and therefore allows for greater transition periods and better market access opportunities for agricultural goods as well as processed commodities would be more development friendly than the current system. Nevertheless, some of the largest barriers to trading developing country goods and services are imposed by other developing countries. Removal of these barriers could reap significant benefits, spurring an even faster expansion of South-South trade.
