TWN Info Service on WTO and Trade Issues  (Sept10/04)
14 September 2010
Third World Network

Merchandise trade surges by 25% in first half of the year
Published in SUNS #6992 dated 6 September 2010

Geneva, 3 Sep (Kanaga Raja) -- World merchandise trade in value terms increased by about 25% in the first six months of 2010, continuing a trend that began in the first quarter of the year, according to the latest figures on short-term merchandise trade values by the World Trade Organization (WTO).

In a press release, the WTO said that world merchandise exports saw an increase of about 7% in the second quarter of 2010 compared to the first quarter.

According to the WTO, both exports and imports from Asia increased by more than 35% in the second quarter of 2010, compared to the corresponding period of 2009.

It further said that African and Middle Eastern exports were 35% higher compared to the corresponding period of 2009.

The WTO attributed this rise to demand in Asia and the United States, and higher commodity prices.

The Commonwealth of Independent States (CIS) saw a buoyant growth in exports of 44%. In a similar vein, external trade between the European Union and the rest of the world (extra-EU trade) was more dynamic than trade within the EU, said the WTO.

Meanwhile, a similar trend in trade developments was highlighted by the UN Economic Commission for Latin America and the Caribbean (ECLAC) in its latest report released Thursday titled "Latin America and the Caribbean in the World Economy 2009-2010."

In a press release, ECLAC reported that exports from Latin America and the Caribbean will grow 21.4% this year, driven mainly by South American sales of prime materials. This would represent a jump from -22.6% in 2009.

According to the ECLAC report, this solid revival is largely based on the dynamism of domestic demand, a pick-up in investment and robust exports driven by demand from China and the rest of Asia, and by the normalization of demand in the United States.

The report further said that a number of the factors that led to the decline in global trade in 2008 and early 2009 are now contributing to its recovery, with final demand in emerging countries acting as the main engine of growth.

Other factors include the reactivation of demand for capital goods and intermediate inputs, partly thanks to the normalization of financial markets and credit and to fiscal stimulus plans. These have also supported an adjustment in inventories and a new cycle of electronic products.

Growth in world trade by value has also been helped by recovering prices for a number of commodities, particularly oil, it added.

The report however warned that a European financial crisis would raise the cost of investment and trade financing. Lower growth in these industrialized countries would in turn affect emerging countries' exports. Weak final demand in the industrialized countries and possible economic and financial contagion from the euro area could adversely affect commodity prices and demand, damaging commodity exporters in Latin America and other emerging regions.

Regional exports to China rose from -2.2% in the first semester of 2009 to 44.8% during the same period this year, said ECLAC.

According to ECLAC, the positive overall picture, however, masks a high level of heterogeneity in the region's countries. The best performance has been seen in commodity-exporting countries (namely, South American countries).

The recovery has been slower in countries that are importers of commodities and depend on tourism and remittances (such as Central American and the Caribbean economies), owing to the still weak performance of the industrialized countries that are the main source of these latter flows.

In the post-crisis period, said ECLAC, the exports of the Andean countries, MERCOSUR (Southern Common Market) and Chile performed the best, while those of Mexico and the Central American countries lagged behind. This is a result of the relatively strong prices for commodity exports, which account for a larger share of total exports in South America than in Mexico and Central America.

ECLAC estimates that exports this year from MERCOSUR are expected to increase 23.4% and those from Andean nations 29.5%. However, exports from the Central American Common Market will expand only 10.8%.

Exports from Mexico, for example, will rise 16% and from Panama 10.1%, but exports from Chile are estimated to grow 32.6%, said ECLAC.

The most notable upswing from the worst period of the crisis in 2009 is expected in the Caribbean Community (CARICOM), whose exports are estimated to grow from -43.6% that year to 23.7% in 2010, ECLAC added.

The report also examined export performance in the region over the past decade. It found that the region's exports have grown by less than the global average and have underperformed relative to other developing regions such as Asia, Africa and the Middle East in both value and volume.

While the export growth rate of South America has doubled, that of Mexico and Central America has fallen by more than half. The slackening of export growth in both Mexico and Central America over the past decade has been reflected in the performance of imports, since these countries' exports include a large component of inputs imported for the maquila industry.

ECLAC attributed the disparity to the fact that exports that most increased were natural resources from South America, at the expense of manufactured products and services with varying degrees of technological content.

After falling from some 52% of total exports in the early 1980s to a low of 26.7% in the late 1990s, the share of raw materials has risen over the past decade to reach almost 40% of the total in the last two-year period (2008-2009).

This increase in the share of raw materials has taken place at the expense of medium-, high- and low-technology manufacturing exports, all of which have grown by much less than in the 1990s. This is consistent with the reduced dynamism of engineering- and labour-intensive manufacturing exports, said the report.

Differences in the growth rates of raw material and manufacturing exports have led to a readjustment of the relative shares of exports from Mexico on the one hand and South America on the other.

The former's share of the region's total goods exports fell from 40% in 2000 to 30% in 2009. Meanwhile, Brazil increased its share from 13% in 2000 to about 20% in 2009, recovering the share of total exports it had in the early 1980s. Other countries in South America also increased their share of the region's goods exports, particularly Argentina, Colombia, Peru and Chile.

By contrast with goods, services exports have expanded slightly faster in the past decade than they did in the 1990s. Nonetheless, they grew more slowly than global exports of services and than those of Africa, Asia, China and the European Union.

According to ECLAC, this preliminary overview of export performance in the decade shows that the region has not succeeded in significantly improving the quality of its international trade.

On the one hand, the South American countries have displayed greater export dynamism in the aggregate, but this has largely been determined by exogenous factors such as the renewed strength of international demand for raw materials and the consequent rise in their prices.

On the other, Mexico and Central America, whose exports include a greater share of manufactures, have proved less dynamic in the aggregate, largely because of intense Chinese competition in their main market, the United States, especially for products whose manufacture involves intensive use of unskilled labour.

The expansion of natural resource-related sectors, driven mainly by demand from Asia, has not contributed enough to the creation of new technological capabilities in the region. Although returns in these sectors have improved, and there have actually been productivity gains, the absence of active production development policies has led to a widening of productivity gaps with countries deemed to be at the frontier, especially the United States, said ECLAC.

"The diversification of exports, a strong boost to competitiveness and innovation and greater regional cooperation will allow Latin America and the Caribbean to improve the quality of its insertion in the global economy, close productivity gaps and capitalize the opportunities of international trade in order to grow with more equality," said ECLAC Executive Secretary Alicia Barcena, at the launch of the report in ECLAC headquarters in Chile. +