Outlook glum for world trade in 2003, WTO says

Forbes.com-Reuters, 04.23.03, 6:02 AM ET By Robert Evans

GENEVA, April 23 (Reuters) - World goods trade, whose steady expansion over decades has been a motor of the global economy, looks headed at best for only minimal growth this year, the World Trade Organisation (WTO) said on Wednesday.

Even this could be thrown into doubt by fallout from the U.S.-led invasion of Iraq, the spread of the deadly SARS epidemic, and overall world economic gloom, according to the body's annual spring report.

"Considerable uncertainty clouds trade growth prospects for 2003," said the report. Initial signs suggested world trade volume would increase by less than three percent after an already poor 2.5 pct rise last year.

But even this would depend on a pickup in global production and consumer demand from April onwards -- a development that WTO Director-General Supachai Panitchpakdi suggested was far from certain in the present world political and economic climate.

"The downside risks on predictions for 2003 are large," the report declared.

The figures for 2002 marked a slight turnround from the disaster year of 2001 when trade declined, by one percent, for the first time in some 20 years -- after a record growth of 12 percent in the boom year of 2000.

The report said last year's upturn -- to a total value of $6.24 billion -- had been driven by strong demand in the United States and the bigger Asian economies, but was held back by a sluggish performance in Europe and Latin America.

GROWING UNCERTAINTY

Supachai, a former deputy prime minister and economy minister of Thailand, said the figures reflected "growing economic and political uncertainty in the world today" which could give rise to even greater global instability.

One way to tackle this, he suggested, would be for governments to speed up efforts to complete the deeply troubled Doha Round of liberalisation talks launched in November 2001 and due to end with a new world trade treaty by January 1, 2005.

The negotiations -- which the World Bank says could give a huge boost to the world economy if successful -- have already missed some important deadlines and many analysts say they are likely to drag on well into the second half of the decade.

The WTO report, written before the controversial U.S.- British invasion of Iraq last month which toppled President Saddam Hussein, suggested that the decision by the two powers to go it alone could have serious repercussions on trade politics.

It said the intervention -- launched without the approval of the United Nations and in the face of opposition from major powers like Germany, France and Russia -- could endanger the system of global governance through bodies like the WTO.

"The erosion of confidence in global institutions could encourage the creation of like-minded blocs" -- diplomatic phrasing for closed groupings of trading states -- "and inward- looking policies" -- or protectionism -- said the report.

International trade rules are currently set in multilateral negotiations involving all WTO member-countries, presently totalling 146. But many trade analysts fear the current trend to regional trade pacts could become a landslide.

Last week Rubens Ricupero, Supachai's counterpart at the head of the U.N.'s trade and development agency UNCTAD, said trade regionalism was potentially even more dangerous, especially for poorer countries, than protectionism.

CHINA, INDIA DOING WELL

For 2002, the WTO report said, goods trade by developing countries in Asia -- excluding Japan -- grew by about 12.5 percent, with China hitting 20 percent growth and India up 15 percent. Japan's growth was only three percent.

China, which joined the WTO at the end of 2001, at the same time overtook Britain last year to become the world's fifth largest single trader behind the United States, Germany, Japan and France. Britain was sixth and Canada seventh.

U.S. exports declined by nearly four percent, but imports surged by three percent, driven by consumer spending and tax cuts. Western Europe -- the 15-nation European Union and its four-nation EFTA partners including Switzerland -- saw goods imports down by 0.5 percent and exports up by 0.6 percent.

Latin America was badly affected by the crisis in Argentina, political instability in Venezuela and uncertainty in Brazil as it moved towards its autumn president election, the report said. The region's imports declined by five percent while exports rose by two percent.

There was a brighter picture for exchanges of commercial services, according to the WTO. The value of service trade -- covering area like banking, telecommunications, travel and tourism -- rose five percent to a total of $1.54 billion.