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World Trade Suffers Biggest Drop Since WWII
Wednesday, 24 February 2010 00:00

WTO says 2010 will be better but the number of unemployed people—200 million on a global basis—will be a huge obstacle to overcome.

At an unprecedented 12% drop, according to new figures, global trade last year suffered its biggest collapse since World War II.

And it is a steep downwards revision from the WTO's most recent estimate in December of 10%, said Pascal Lamy, director general of the World Trade Organization.

While he would give "no forecast" for 2010 trade growth, he insisted a "pickup" is underway, but led by an "overheating" China, could not say whether it is short-term or sustainable.

The massive contraction makes it "economically imperative to conclude" stalled international free trade talks in 2010, Lamy told business figures and policymakers at the European Policy Centre, a Brussels think-tank.

The Doha Round of trade negotiations that began in 2001 with a focus on dismantling obstacles to trade for poor nations has been dogged by intractable disagreements. These include how much the United States and the European Union should reduce farm aid and the extent to which developing countries such as India and China should lower tariffs. Deadlines to conclude the talks have been repeatedly missed, with the latest being the end of this year.

Lamy said getting agreement on Doha is a "challenge" but said the world was "80%" there. He also said he "wouldn't venture any prediction" on when Russia would come on board.

Along with Brazil, China and India, Russia makes up a quartet of developing economies said to hold the key to conclusion of a deal that would cut agriculture subsidies and tariffs on industrial goods.

On Feb. 24, Australia resumed bilateral free-trade talks with China after a 14-month gap.

Lamy blamed last year's trade "freefall" on a reduction in demand "across all major world economies" as well as the drying-up of trade financing and rising tariffs or national subsidies.

Some protectionist response "was to be expected," he said, although he maintained that worries of "runaway protectionism" had proved an exaggeration.

Amid vast government deficits, he said the biggest enemy to a sustained pick-up was "intolerably high" unemployment that the International Labor Organization estimates has hit 200 million people worldwide— 20 million of whom have lost their jobs since the crisis began on Wall Street.

"The political consequences in my view are still to come," Lamy warned of the so-called jobless recovery, underlining that "keeping international markets open is vital" if negative global economic growth of minus 2.2% in 2009 is to be reversed.

Lamy said getting agreement on Doha is a "challenge" but said the world was "80 percent" there.

Industry Week, 2/24/2010