WTO economists predict biggest drop in global trade since WWII

GENEVA, Switzerland — World Trade Organization (WTO) economists have forecast a 9% drop in export volumes for 2009, the largest such contraction since the Second World War.

Developed countries will be hit hardest with exports falling 10% this year, while developing countries will see volumes shrink from 2% to 3%, according to the WTO.

WTO officials said warning signs of this year’s bleak trade assessment were evident in the latter part of 2008 as demand and production both grew sluggish. World trade still managed to grow by 2% in 2008. A slow final six months ensured volumes would be well shy of the 6% increase posted in 2007.

“For the last 30 years trade has been an ever increasing part of economic activity, with trade growth often outpacing gains in output. Production for many products is sourced around the world so there is a multiplier effect – as demand falls sharply overall, trade will fall even further. The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, in particular in developing countries,” said WTO Director-General Pascal Lamy.

Lamy urged government to “avoid making this bad situation worse by reverting to protectionist measures which in reality protect no nation and threaten the loss of more jobs,” and ensured that the WTO is “carefully monitoring trade policy developments.”

“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/ Trade can be a potent tool in lifting the world from these economic doldrums,” Lamy said.