International Trade

International Trade

CHAPTER

7

The years 2008 and 2009 were tumultuous ones for global trade. The simmering

sub-prime crisis in the US in 2007 which triggered the global financial crisis in September 2008 spread its tentacles in full, leading to a full blown global recession resulting in unprecedented fall in global trade. World trade volume (goods and services) grew by only 2.8 per cent in 2008 compared to 7.3 per cent in 2007, with trade growth tumbling down month after month from September 2008 onwards. While the fall seems to have been stalled with the recent recovery, world trade continues to be vulnerable given the nature of the recovery.

WORLD TRADE

7.2 The deepening world recession had profound impact on world trade. The US$16 trillion global trade of 2008 collapsed, reaching US $ 5.8 trillion in the first half of 2009 compared to US$8.2 trillion in the corresponding period of 2008. As a result, growth of world output and trade volume of goods and services fell to (-) 0.8 and (-) 12.3 per cent respectively in 2009 according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO) January 2010. The World Trade organization (WTO) in March 2009

forecast a 9 per cent decline in global trade for 2009, the largest in over 60 years. The decline was more marked in the case of advanced economies (Table 7.1) 7.3 The World Bank’s Global Economic Prospects, 2010, estimates world real GDP growth and world trade volume to fall by (-) 2.2 per cent and (-) 14.4 per cent respectively in 2009. As per the World Bank, the dollar value of world trade plummeted 31 per cent between August 2008 and its low point in March 2009. After discounting for falling commodity prices

Table 7.1 : Trends in growth in trade volumes (per cent change)

Projections 2008 World Trade Volume (Goods and Services) Imports Advanced Economies Emerging and Developing Economies Exports Advanced Economies Emerging and Developing Economies

Source: IMF:WEO, January 2010...