World trade to contract by 9 per cent this year: WTO

The collapse in global demand brought on by the biggest economic downturn in decades will drive world trade down by about 9 per cent in volume terms in 2009, the biggest contraction since the Second World War, the World Trade Organisation (WTO) said in its annual assessment.

''Trade can be a potent tool in lifting the world from these economic doldrums. In London G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure which will render global recovery efforts less effective,'' WTO director-general Pascal Lamy said in a release on the oranisation's website.

''Economic contraction in most of the industrial world and steep export declines already posted in the early months of this year by most major economies, particularly those in Asia, makes for an unusually bleak 2009 trade assessment," WTO said in the release.

The contraction in the developed countries will be particularly severe with exports falling by 10 per cent this year, WTO said. In developing countries, which are far more dependent on trade for growth, exports will shrink by some 2-3 per cent in 2009, according to WTO economists.

Economic contraction in most of the industrial world and steep export declines already posted in the early months of this year by most major economies - particularly those in Asia - makes for an unusually bleak 2009 trade assessment, said the WTO in its annual assessment of global trade.

Signs of the sharp deterioration in trade were evident in the latter part of 2008 as demand sagged and production slowed. Although world trade grew by 2 per cent in volume terms for the whole of 2008 it tapered off in the last six months and was well down on the 6 per cent volume increase posted in 2007, it said.

''The collapse in global demand brought on by the biggest economic downturn in decades will drive exports down by roughly 9 per cent in volume terms in 2009," it said.

This is the first decline in total world production since the 1930s, it said.

''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," Lamy said.

''As a consequence, many thousands of trade related jobs are being lost. Governments must avoid making this bad situation worse by reverting to protectionist measures which in reality protect no nation and threaten the loss of more jobs.

We are carefully monitoring trade policy developments. The use of protectionist measures is on the rise. 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. In London G20 leaders will have a unique opportunity to unite in moving from pledges to action and refrain from any further protectionist measure which will render global recovery efforts less effective,'' Lamy added.