Global trade expected to drop 9% in 2009

Global trade will shrink by 9% this year in the most devastating collapse since World War II, the World Trade Organization said Monday.

The WTO said commerce in rich countries would fall furthest, by about 10%. But poorer nations may suffer the most because they are more dependent on exports for growth.

Trade has grown unabated since 1982.

“For the last 30 years trade has been an ever-increasing part of economic activity, with trade growth often outpacing gains in output,” WTO chief Pascal Lamy said.

“The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, in particular in developing countries.”

The International Monetary Fund has predicted a trade decline of nearly 3%, but the WTO’s forecast was far bleaker.

It said the sharp deterioration in trade was evident late last year as demand sagged and production slowed. Although trade registered 2% growth in volume terms, it stagnated over the final six months.

“As a consequence, many thousands of trade-related jobs are being lost,” Lamy said.

He urged governments to avoid making the situation worse by boosting failing companies at the expense of foreign competitors.

Policymakers fear that a rise in isolationist economics could deepen the recession, as happened during the Great Depression of the 1930s.

“The use of protectionist measures is on the rise,” Lamy said. “The risk is increasing of such measures choking off trade as an engine of recovery. We must be vigilant because we know that restricting imports only leads your trade partner to follow suit and hit your exports.”