World trade contracted by around 12 per cent in volume terms in 2009 - the sharpest decline since the end of the Second World War - under the impact of the global financial crisis, Pascal Lamy, director-general of the World Trade Organisation, said today.
The freefall in trade has been caused by a simultaneous reduction in aggregate demand across all major world economies, sharpened by a drying up of trade finance and to some extend due to the adverse effects of some instances of increased tariffs and domestic subsidies, new non-tariff measures and more anti-dumping actions, Lamy said.
"We started last year with a collapse in trade, a drying up of trade finance, concerns that donors would reduce funding for "Aid for Trade", and worries that protectionism would kick in. And yet, one year on from the onset of the crisis, we see that, to this point at least, the multilateral trading system has proven its sturdiness as a bulwark against runaway protectionism," Lamy said in his speech at the European Policy Centre in Brussels.
Real world GDP registered a negative growth, estimated at -2.2 per cent, in 2009 while global unemployment rate reached its highest level ever, with the International Labour Organisation estimating the number of jobless worldwide at over 200 million, he pointed out.
He said the stimulus packages announced by most developed economies, including the EU, have helped to prevent a further deterioration in output while preparing the path to recovery. "The jury is still out though on whether some of the measures introduced to stimulate economies contain provisions that favour domestic goods and services at the expense of imports," he added.
However, stimulus packages on states level, have pushed up government deficits to alarming heights and economies now urgently need other sources that would not add to already serious indebtedness. "This is where trade can be an important part of the story, both in the long-run and in the short to medium-term," Lamy said.
Ttrade, in general, and exports, in particular, are also likely to contribute directly to the reduction of unemployment in the recovery phase following the financial crisis. These "first-round effects" relate to the experience of a number of countries where the share of employment which depends on exports is typically large.