This is compounded by the fact that the worlds trade watchdog, the WTO, has failed to reach any sort of global consensus to facilitate international trade, the ineffectual Doha rounds being a prime example of this indecision. If financial markets are reeling, trade should be the avenue to look at to improve stability.
However, as the UNCTAD report shows, this may be a vain hope, especially with regard to the developed countries.
According to the report, international trade rebounded in 2010 from its lowest levels reached since the Second World War. Growing 14% year-on-year in 2010, world trade levels little more than offset the decline in 2009, which saw a negative growth rate of 13.3%. This recovery, which the report says was mostly driven by firms restocking their inventories, started in the second half of 2009 and went on till the end of the first half of 2010. This resurgence started spluttering thereafter, with developed countries running out of steam. In 2011, the report projects that the growth of international trade will return to single-digit figures, around 7-8%.
This resurgence in growth of trade has also been uneven, with developed countries yet to see volumes surpassing pre-crisis levels. The US, for example, saw its volume of exports in 2010 growing by 15.3%, which barely offset the contracting it suffered in 2009, of a negative 14.9%. The EU, too, saw its export growth in 2010 (at 11.2%) not even offsetting the negative 14.3% growth it saw in 2009. Japan, although saddled with an ageing population and the recovery process from the earthquake-tsunami-nuclear meltdown triple-threat, saw its export growth at a reasonably healthy 27.9%, more than offsetting the contraction it saw in 2009, of negative 24.9%.
Contrastingly, the volume of both import and export growth in most developing countries already outstripped their 2008 peaks, with East Asia leading the way. In the case of India, exports grew by 12.7% in 2010, almost doubling the contraction of volumes in 2009. However, this rate is still lower than the rate of growth of exports India saw in 2008 (16.8%). China, on the other hand, saw its exports and imports both surging. In 2010, it saw its exports grow by 29.4%, easily tackling the contraction it saw in 2009. This figure is also almost triple the 10.5% growth it saw in 2008. Chinas imports grew by a whopping 30% in 2010, up from only 2.3% in 2008.
This is where the WTO and its various rounds become so important. If the developed world is suffering, and the developing world surging, it only makes sense to ease trade barriers so that the latter can bolster the former. Pascal Lamy, the WTOs director-general, is still keen on the Doha rounds, even though most of the world agrees that they are now defunct, and should be allowed to die. However, just because Doha failed does not mean that the effort to reach a global consensus on trade must stop. Developed countries would do well to lower barriers so that industrial goods from the developing countries can be traded. With the recovery being buoyed by developing countries, the developed countries would do well to realise that it doesnt make sense to stifle the drivers of growth just to protect themselves. In the longer run, thatll take the whole world down.
Trade trends also vary according to the nature of the commodity traded. The trends in China and Japan, both mostly exporting durable and capital goods, can be explained by the typical scenario of the demand for such goods suffering during times of crises. As soon as the recovery picks up speed, these goods come back in demand, driving these countries export growth, as has happened. On the other hand, countries that mainly export primary commodities saw relatively stable volumes.
All this data suggests that the global economic recovery, such as it is, is mostly driven by the developing countries, with them reaching pre-crisis levels far faster than developed countries. Now, if only the world leaders could reach a consensus to leverage this, maybe the outlook for the next few years doesnt have to look so gloomy.