Global Trade Today Presented by: Bodhi Ganguli, Economist
September 18, 2009
The Crisis and Its Aftermath
Global Trade Collapsed Much Faster Than GDP % change year ago 5 Merchandise exports (R)
4 3 2 1
Real GDP (L)
0 -1 -2
Sources: WTO, Moody’s Economy.com
-3 -4 06
07
08
30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35
09 3
Causes and Effects
Factors Behind the Record Contraction
Massive drop in demand caused by synchronized global downturn.
Drying up of trade finance.
Increasing presence of global supply chains.
Increasing (threat of) protectionist measures.
5
Effects Have Been Severe
WTO expects global exports to drop by 9-10% in volume terms in 2009, biggest contraction since the second World War (10% in developed countries, 2-3% in developing countries). FDI is likely to drop more than 30% in 2009. Many thousands of trade related jobs have been lost worldwide, raising unemployment rates. Drastic drop in industrial production around the globe, contributing to synchronized slowdown in GDP growth. 6
The Downturn Was Highly Synchronized Recovery
18
Europe
Argentina
South Africa
Asia
Annualized Growth Rate Most Recent Quarter (y-axis)
China
14
Americas
Indonesia
10
Hungary
Canada
France -11
Expansion
2008Q2
-9
-7
-5
-3
6
Mexico
U.S.
Russia
Australia
-6
1
Japan
3
Germany
5 U.K.
Spain
7 New Zealand
9
11
Sweden Singapore
-10 -14 -18
Contracting
India Brazil South Korea
2
-1 -2 Italy
Ireland
Greece Chile
-22 % Change Year-Ago (x-axis)
Note: Countries below the diagonal line are currently growing more slowly than a year ago. All data for Q2-2008 and Q1-2009 unless indicated otherwise.
Struggling NOTE: Size reflects relative total employment
7
All Major Economies Affected to Some Extent Recovery
Expansion
2009Q1 18
Europe 14
Americas Asia
10
Indonesia
Annualized Growth Rate Most Recent Quarter (y-axis)
6
New Zealand
South Korea -11
-9
-7
-5
Sweden
France
U.S
Japan Singapore Hungary
Australia 2
-1 -2
Brazil -6 Canada
Ireland Italy
-3
Spain United Kingdom
Germany
India
-10
Argentina 1
Contracting
3 Chile
5
7
9
11
Greece Russia South Africa
-14 -18
Mexico
China
-22 % Change Year-Ago (x-axis)
Note: Countries below the diagonal line are currently growing more slowly than a year ago. All data for Q2-2008 and Q1-2009 unless indicated otherwise.
Struggling NOTE: Size reflects relative total employment
8
Not Out of the Woods Yet 10
13400 IATA air freight, % change year ago (L)
11800
5
10200
0
8600
-5
7000 -10
5400
-15
3800
Baltic Dry Index (R)
-20 -25
2200 Source: Bloomberg
06
07
600 08
09 9
Protectionism
A Potential Impediment to Recovery
„
„
„
The crisis has put protectionism back on the policy agenda. Protectionism has been muted compared with the early 1980s or post-1929. But despite pledging to maintain open trade and refrain from new barriers to trade, there has been a measurable increase in protectionist measures by G20 members.
11
The New Face of Protectionism
„
„
„
Post crisis, G20 members have increasingly agreed to domestic industry demand for protection from import competition. 12.1% y/y increase* in initiated investigations in the second quarter under trade remedy laws. Members have preferred trade remedy policy instruments rather than tariffs, namely, antidumping, safeguards and countervailing duties (anti-subsidy).
*Source: Global Antidumping Database 12
Use of the “Safeguard� Policy Has Spiked in 2009 Safeguard initiations by WTO members, China most targeted 40 35
Source: Global Antidumping Database
30
Projected
25 20 15 10 5 0 95
96
97
98
99
00
01
02
03
04
05
06
07
08
09 13
Antidumping Remains Popular AD use by WTO members, India top user for last 10 years 400 350
Source: WTO
Initiations (3,427) Measures (2,190)
300 250 200 150 100 50 0 95
96
97
98
99
00
01
02
03
04
05
06
07
08 14
Case Study: Trade Effects of Indian AD Actions
Indian AD is moderately “effective” in limiting import competition to domestic traders*. In the first 3 years after a case is filed, imports from subject countries fall by as much as 23%. Some “trade diversion” does occur to nonsubject countries. But overall imports still fall in response to Indian AD legislation.
*Ganguli, Bodhi. “The Trade Effects of Indian Antidumping Actions”. Review of International Economics, Volume 16(5), November 2008 15
Looking Forward
Policy Recommendations—Consensus Is the Key
Adopt and implement improved global financial governance at G20 summit in Pittsburgh to boost availability of trade finance. Strengthen institutional monitoring, review and notification of new trade restrictions. Roll back temporary protectionist responses to the crisis (including “buy national” clauses). Signal commitment to keep trade and investment flowing by concluding Doha Round. 17
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