Info Service on WTO and Trade Issues (Apr16/05)
13 April 2016
Third World Network
World trade growth to remain sluggish this year, says WTO
Published in SUNS #8217 dated 8 April 2016
Geneva, 7 Apr (Kanaga Raja) - The growth of world merchandise trade
in volume terms is expected to remain sluggish this year at 2.8%,
unchanged from the same percentage increase recorded in 2015, the
World Trade Organisation (WTO) said on Thursday (7 April).
In a press release highlighting the latest trade statistics and the
outlook for this year and next, WTO economists have projected world
trade growth to rise to 3.6% in 2017.
However, they cautioned that risks to the forecast are mostly on the
downside, including a sharper-than-expected slowing of the Chinese
economy, worsening financial market volatility, and exposure of countries
with large foreign debts to sharp exchange rate movements.
"On the other hand, there is some upside potential if monetary
support from the European Central Bank succeeds in generating faster
growth in the euro area," they said.
At a media briefing on Thursday, WTO Director-General Roberto Azevedo
said: "Clearly 2015 was a tumultuous year. Volatility and uncertainty
were pervasive throughout the year."
"World trade dipped ominously in the first half of the year before
rebounding in the second half. Oil prices plunged more than 60%, the
US dollar appreciated around 20%, [and] China's economy slowed but
bounced back somewhat by the end of the year," he said.
On a more positive note, the D-G said, import demand strengthened
appreciably in the European Union and the United States, cushioning
somewhat the slowdown elsewhere.
The overall result was growth of 2.8%, making 2015 another year of
weak but positive expansion in global trade, Azevedo added.
According to the D-G, the WTO members have the power to influence
the situation. "There are a number of steps that we can take
to ensure that trade lifts economic growth, job creation and development."
WTO members can roll back trade-restrictive measures that they have
put in place since the crisis, and can also act on the significant
agreements that members have struck in recent times, he argued, citing
the case of the Trade Facilitation Agreement (TFA) which he claimed
will cut global trade costs by up to 15%.
"So this is a bigger impact than eliminating every remaining
tariff around the world," he said, claiming that it could deliver
a trillion-dollar boost for global trade.
"So we are seeing excellent momentum in ratification of the Trade
Facilitation Agreement," he further said, adding that it (TFA
ratification) has picked up considerably recently.
"But we need to complete this task as soon as possible so that
the benefits of this agreement can be reaped."
[The claims about TFA, initially made by the International Chamber
of Commerce, and repeated since then by WTO, have, however, been challenged
by other economists, like Jeronim Capaldo, of the Global Development
And Environment Institute (GDAE), at Tufts University - see SUNS #7837
of 4 July 2014, โ€Trade Facilitation may lead to trade
hallucination'. - SUNS]
Similarly, said Azevedo, members "are taking positive steps to
follow through [on] our other decisions such as the deals that we
struck in Nairobi last December to scrap farm export subsidies and
to eliminate tariffs on a wide range of Information Technology products."
According to the D-G, members are having a "robust" debate
right now on the potential path forward "for our negotiating
work, looking at how we can tackle the remaining Doha issues and potentially
discuss other non-Doha issues as well."
According to the WTO press release, on the basis of the forecast for
2016, world trade will have grown at roughly the same rate as world
GDP for five years (at market exchange rates), rather than twice as
fast as was previously the case.
"Such a long, uninterrupted spell of slow but positive trade
growth is unprecedented, but its importance should not be exaggerated,"
said the WTO economists.
Overall, trade growth was weaker between 1980 and 1985, when five
out of six years were below 3%, including two years of outright contraction.
"Alternative indicators of economic and trade activity in the
opening months of 2016 are mixed, with some pointing to a firming
of trade and output growth while others suggest some slowing."
On the positive side, container throughput at major ports has recovered
much of the ground lost to the trade slowdown last year, while automobile
sales - one of the best early signals of trade downturns - have continued
to grow at a healthy pace in developed countries.
On the other hand, composite leading indicators from the Organization
for Economic Cooperation and Development (OECD) point to an easing
of growth in OECD countries, and financial market volatility has continued
"Therefore, trade growth may remain volatile in 2016."
According to the WTO economists, the 2015 result marks the fourth
consecutive year in which growth in world merchandise trade stayed
below 3.0% on an annual basis.
Trade was also unusually volatile over the course of the year, falling
in the second quarter in both developed and developing countries before
rebounding in the final half.
The weak but still positive growth of merchandise trade volume in
2015 contrasted with the sharp decline in the dollar value of trade,
which fell 13% to $16.5 trillion, down from $19 trillion in 2014.
"This discrepancy was mostly attributable to strong fluctuations
in commodity prices and exchange rates, which were in turn driven
by slowing economic growth in China, resilient fuel production in
the United States, and divergent monetary policies across leading
Volatility in financial markets also dented business and consumer
confidence and may have contributed to reduced global demand for certain
World trade in commercial services last year registered a smaller
decline in current dollar terms (exports down 6.4% to $4.7 trillion)
than merchandise trade, with goods-related services such as transportation
experiencing stronger declines (down 10.3% to $870 billion) than other
"The relative strength of services is not surprising, since this
type of trade tends to be less sensitive to business cycles than trade
in goods," the WTO economists said.
The preliminary figure of 2.8% for world trade growth in 2015 refers
to the average of merchandise exports and imports in volume terms,
i.e. adjusted to account for differences in inflation and exchange
rates across countries.
Exports from North America came in below expectations, while shipments
from oil-exporting regions (Africa, Middle East and the Commonwealth
of Independent States) were stronger than anticipated.
Meanwhile, European imports were stronger than predicted while those
of oil-producing regions were weaker.
"The relative strength of Europe's trade can be explained by
the recovery of intra-European Union trade, while the softness of
oil producers' imports is explained by low oil prices, which deprive
these countries of the export revenues that they need to pay for imports."
Negative import growth in South and Central America in 2015 was mostly
due to the severe and ongoing recession in Brazil, although other
distressed countries in the region contributed to the negative result
Meanwhile, the decline in imports of oil-producing regions is mostly
explained by the slide in world oil prices, which slashed these countries'
"The volume of world merchandise trade has grown at a slow, steady
pace in recent years, but this consistency belies changes in the contributions
of WTO geographic regions to trade volume growth over time,"
said the WTO economists.
Asia contributed more than any other region to the recovery of world
trade after the financial crisis of 2008-09.
However, the region's impact on world import volume growth declined
last year as the Chinese and other Asian economies cooled.
Asia contributed 1.6 percentage points to the 2.3% rise in the volume
of world merchandise imports in 2013, or 73% of world import growth,
but in 2015 the region contributed just 0.6 percentage points to the
global increase of 2.6%, or 23% of world import growth.
In contrast, Europe has mostly weighed down world trade since the
financial crisis, actually reducing global import demand growth in
2012 (-0.7%) and 2013 (-0.1%).
However, in 2015 Europe was again making a large positive contribution,
accounting for 1.5 percentage points of the 2.6% increase in world
import volume, or 59% of global trade growth.
"The gradual recovery of intra-EU trade in 2014 and 2015 was
responsible for much of the rebound in Europe, as the drag exerted
by the European sovereign debt crisis faded."
According to the press release, North America made a positive contribution
to world import growth last year (1.1%), while negative contributions
were recorded in 2015 for South and Central America (-0.2%) and Other
regions, which covers Africa, the Middle East and CIS countries (-0.4%).
Asia also did more than any other region to lift merchandise export
volume growth between 2011 and 2014, but its contribution fell below
that of Europe in 2015.
In the latest year, Asia was responsible for 1 percentage point of
the 3.0% rise in world merchandise exports, or 35% of export growth,
whereas Europe's 1.3 percentage point contribution accounted for 44%
of the rise.
North America's contribution to export growth in volume terms was
close to zero in 2015 as demand for US goods slowed in Canada, Asia
and South and Central America.
Meanwhile, South and Central America and other regions made small
positive contributions to export volume growth.
"The combination of increased export volumes in oil producing
regions and falling imports in Asia likely contributed to falling
energy prices in 2015, as oil supply outstripped energy demand, causing
prices to plunge."
In terms of product breakdown estimated for year-on-year growth in
the dollar value of merchandise trade, the WTO economists reported
that fuels and mining products were responsible for more than half
of the drop in trade values in 2015, but that slowing trade in manufactures
and agricultural products also contributed significantly to the overall
Among manufactured goods, the products where trade values notably
declined in 2015 were office and telecom equipment, chemicals and
other machinery (which includes investment goods and durables other
than automobiles), while clothing and textiles only made a small contribution
The dollar value of intra-Asia imports of manufactured goods is estimated
to have fallen around 5% in 2015, roughly in line with the decline
of Asian imports of manufactured goods worldwide.
"This would seem to indicate a broad-based decline in trade values,
perhaps more closely related to price fluctuations than to changes
in production and consumption patterns," said the WTO economists.
However, Asian imports of other machinery (a category that includes
capital goods) registered a stronger decline of around 8%, suggesting
a downturn in investment in the region.
In particular, China's imports of other machinery from Europe and
North America were down 15% and 8%, respectively, in 2015 based on
"This fall-off in investment may be temporary, driven by financial
volatility, exchange rate uncertainty and unsettled monetary policy
Commercial services trade recorded a 6.4% year-on-year decline in
2015, although transport services registered a larger drop of nearly
10% as prices for sea shipment of dry bulk cargo fell to record lows
Other types of services exports, such as travel and other commercial
services (a category that include financial services) saw smaller
declines of around 5.5%.
"The drop in world commercial services exports was less than
the 13.5% slide in the dollar value of merchandise exports, which
was strongly influenced by fluctuations in primary commodity prices."
According to statistics from the International Monetary Fund, primary
commodity prices have fallen by more than 50% on average since January
2014, with drops of around 20% for food and beverages, 30% for metals,
and 65% for energy (fuels).
THE TRADE OUTLOOK FOR THIS YEAR AND NEXT
According to the press release, the WTO's forecast of 2.8% growth
in the volume of world merchandise trade for 2016 and 3.6% trade growth
for 2017 are based on consensus estimates of real GDP at market exchange
rates from economic forecasters.
According to these estimates, world GDP should grow 2.4% this year
and 2.7% next year, with growth slowing slightly in developed countries
in 2016 and picking up modestly in developing ones.
Exports of developed and developing countries should grow at around
the same rate in 2016, 2.9% in the former and 2.8% in the latter.
Meanwhile, imports of developed economies are expected to outpace
those of developing countries in 2016, with a 3.3% rise in the former
compared to a 1.8% increase in the latter.
According to the WTO economists, Asia is expected to record the fastest
export growth of any region this year at 3.4%, followed by North America
and Europe, each at 3.1%.
South and Central America and Other regions will lag behind at 1.9%
and 0.4%, respectively.
North America should see its imports increase by 4.1% this year, while
Asian and European imports should both register growth of 3.2%.
Imports of South and Central America and Other regions are set to
contract again this year as oil and other commodity prices remain
low, but the degree of contraction should be less.
The WTO economists underlined that risks to the trade forecasts remain
tilted to the downside.
"Business and consumer confidence has slipped recently in developed
countries. As a result, forecasters now expect slower GDP growth in
the European Union and the United States in 2016, followed by a rebound
Financial instability in Asia has mostly abated but could return if
economic data come in above or below market expectations.
"On the other hand, more accommodative monetary policy from the
European Central Bank could spur growth in the euro area and boost
demand for goods and services, including imports," they said.