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World trade grew, despite WTO Seattle debacle

by Chakravarthi Raghavan

Geneva, 30 Nov 2000 -- Judged by the data and estimates published by the World Trade Organization Thursday, the collapse of the Seattle Ministerial Conference just a year ago, and the its failure to launch any new round of trade negotiations, had no effect on world trade which in 2000 grew at twice the rate in 1999.

In dollar value terms, world merchandise trade in 1999 was $5.47 trillion. The prices of internationally traded goods in 1999 decreased by 1.5%—with price declines in agriculture and manufactured goods more than offseting the rise in fuel prices.

According to the ‘WTO 2000’, containing the secretariat review of the world trade and the international trade statistics of 1999, and estimations and forecasts provided by the WTO economists, based on the performance in the first nine months of 2000, world trade will grow by 10% in 2000 or twice the rate recorded for 1999, and while decelerating slightly in 2001 is still estimated to grow by 7%.

The WTO’s chief economist, Mr. Karl-Michael Finger, told a press briefing that on a year-to-year basis, world trade grew in dollar value terms by 14% in the first nine months of 2000. The projections for the future are based on assumptions of a ‘soft landing’ for the US economy.

According to Finger’s data at the briefing, North America’s exports grew by 15% in the first nine months (that of the US by 14%) and imports by 19% (that of the US 20%).

Latin American exports grew by 23% and imports by 19%. Within that region, Mexico’s exports and imports were up by 24%, while that of Brazil (the other major economy) by 18 and 14% respectively.

Western Europe’s exports grew by 3.5% and imports by 6% in dollar terms - but by 18% and 21% respectively in euro terms, reflecting the sharp fall in the dollar/euro exchange rates.

Asia as a whole (including Japan) grew by 23% in exports and 28% in imports. China’s exports grew by 33% and imports by 39%, Japan’s exports by 21% and imports by 25%, while that of the Asean five registered an export growth of 23% and import growth of 32%.

Finger said that the Chinese data was clouded by data problems arising out of exports and imports and reimports involving Hong Kong China.

Though some of the projections, particularly of the countries exporting oil, for the future and the data for the first nine months are influenced by the rise in the price of oil, in terms of the overall world trade manufactured goods still account for a lion’s share.

Finger presented a picture of developing countries and their trade shares, overall and of manufactures, growing over the last decade: share of world merchandise exports of the developing countries in 1999 was 27.5%, compared to 23.4% in 1990. The developing country share of trade in manufactures 24.8% in 1999 compared to 17.2% in 1990.

[The developing country share of world trade in 1999 at 27.5% is 5-1/2% points below their share in 1948, when it was 33%.]

The WTO official implied that the developing countries had benefited by the reduction in tariffs under the Uruguay Round agreements (completed in 1999), but agreed that this did not take account of the non-tariff barriers faced by their exports - whether in textiles and clothing, agricultural products or others.

The WTO data showed that developing countries merchandise exports rose by nine percent, taking their share in world exports to 26.5%; this was due to the fuel sector as well as all the nine sectors of manufactured goods. But in agricultural trade, the developing country share decreased in 1999.

The WTO report brought out that against the background of the Asian recovery (from the financial crisis of July 1997 and 1998), and the continued strength of demand growth in North America, global economic output gained momentum and trade growth, which was sluggish at beginning of 1999, accelerated in the second half. For the year as a whole, the volume of trade growth in 1999 was 5%, unchanged from 1998.

But the value of world merchandise exports in 1999 was up by only 3.5% while that of commercial services was up by 1.5%.

The fastest growth in value terms was obtained by fuels, office and telecommunications equipment and automotive products. There was a decline for all major categories of primary products, except fuels, as well as for textiles and iron and steel. The increase in value for the three major service categories - transport, travel and other commercial services - remained “very modest”.

The buoyancy of world trade growth in the first half of 2000 is attributed to the stimulation of strong economic activity in western Europe and Latin America, and continued high demand growth in North America and Asia.

The trade expansion in 2001 is expected to be less than in 2000, but still above the average of 6.5% recorded for the 1990-99 period.

World exports of commercial services rose by 1.5% to $1,350 billion in 1999; Western Europe’s commercial services exports, accounting for 47% of world total, decreased in 1999, partly due to the weakness of the euro vis-a-vis the dollar.

In terms of regional performance, North America and Asia recorded export and import growth well above the world average.

But the transition economies, Latin America and Africa experienced a contraction of their merchandise imports, and a decrease in the value of their commercial service imports, influenced by weak demand.

But the exports of the two regions, in value terms, grew faster than world trade.

The merchandise exports of the least developed countries also rose faster than world exports, but this was partly due to strength of shipments of fuel. Exports of manufactured goods to the major developed markets rose by five percent, while agricultural exports fell by 8%.

While trade growth continued to exceed output growth in 1999, the difference between the two rates (often used by economists to show the globalization of the world economy) was much smaller than through the entire 1990-99 period.

International capital flows, in particular foreign direct investment, a major determinant of world trade, showed that large capital flows into the US sustained the large increase of US imports.

In Latin America too, large capital flows played a major role in the region’s import growth. But in 1999, bet capital inflows declined for the second year in a row and contributed to the contraction of imports.

Finger presented an upbeat view of the recovery in Asia and the growth in exports and imports, but said that the fall in share-markets in the region, and the possible effects of slowdown or fall in capital inflows (and any balance-of-payments problems these may give rise to for financing imports) had not been factored in by the WTO in its projections and estimates.

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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