Slowdown Takes Toll on Trade
The global economic slump is taking a heavy toll on international trade, slowing the worldwide growth of exports and imports to levels not seen since the Asian financial crisis in 1998, World Trade Organization economists said in a report to be released today.
The total volume of merchandise trade is expected to rise 2% this year, a sharp reduction from last year’s 12% growth rate, according to revised estimates by the Geneva-based organization, which oversees trade among its 142 member nations. Only a few months ago, WTO economists were predicting world trade would grow 7% this year.
The new estimates are based on levels of international commerce during the first half of the year, the report cautioned, and may not fully reflect the effects of the Sept. 11 terrorist attacks.
Even so, the figures show that the economic slowdown triggered by last year’s technology bust has spread to virtually every corner of the world, dampening demand for a broad range of goods and services.
“It’s been a while since we had a worldwide, coordinated downturn of this kind,” said Martin Baily, senior fellow at the Institute for International Economics in Washington.
Exports and imports actually fell during the second three months of 2001, the WTO said. It was the first quarterly decline since the Asian crisis three years ago.
“While the slowing of the U.S. economy in 2001 has, for the most part, matched expectations, short-term growth prospects in many other parts of the world economy became more clouded in the first six months of the year,” the report said.
WTO economists attributed the slowdown primarily to “severe contractionary pressures” in the technology sector. Worldwide sales of personal computers will fall this year for the first time in the industry’s history. Shipments of semiconductors, another key component of global trade, also will decline.
Other factors contributing to this year’s slowdown are higher energy prices and tight monetary policies in the leading industrial economies during most of 2000, it said.
Some regions will be harder hit. The shrinking market for high-tech products will do the most damage in Japan and other East Asian nations that are leading technology exporters. But China’s booming economy will be relatively unaffected, the WTO said. And the economies of Africa may post higher growth rates this year than in 2000, although they will still lag behind the world average.
“This is about the worst global situation since 1973 or 1974,” said David Orr, chief economist for Wachovia Securities in Charlotte, N.C. “We’ve never had a situation since then when all the regions of the world were either in recession or headed toward a recession at the same time. The reason this is happening is because the domestic economies are so bad.”
Richard Newfarmer, a World Bank economist in Washington, said the WTO trade figures were “broadly in line with the numbers we’re using. If anything, ours might be a little more severe.”
Economists said the revised figures could increase momentum to launch a new round of global trade negotiations next month.
Less clear is what effect the worsening trade picture might have in Congress, where President Bush is seeking authority to negotiate trade agreements that Congress could accept or reject, but not amend. Traditionally, support for trade liberalization declines in times of economic weakness.
