WTO: World Trade Outlook Glum in '03

<a href=reuters.com>Reuters Wed April 23, 2003 07:39 AM ET By Robert Evans

GENEVA (Reuters) - International trade in goods looks at best to be heading for only minimal growth this year, the World Trade Organisation said on Wednesday.

Even this could be thrown into doubt by fallout from the Iraq war, the SARS virus and overall world economic gloom, the organisation said in its annual spring report.

Rapid trade expansion over decades has been a motor creating jobs and wealth in the global economy, but the report says initial signs suggest goods volume will increase by less than three percent this year after a poor 2.5 percent expansion last year and a shrinkage in 2001.

"Considerable uncertainty clouds trade growth prospects for 2003," it said. "The downside risks on predictions for 2003 are large." Even the expected rise would rest on more production and consumer demand from now on, which WTO Director-General Supachai Panitchpakdi described as far from assured.

The 2002 total trade value of $6.24 billion marked a turnaround from a 2001 trade decline of one percent, the first year of shrinkage in some 20 years after record growth of 12 percent in 2000. Strong demand in the United States and larger Asian economies drove last year's upturn, but Europe and Latin American performances were sluggish. GROWING UNCERTAINTY

Director-General Supachai, former deputy prime minister of Thailand, said the figures reflected growing world economic and political uncertainty, which could give rise to instability.

To counter this, he suggested governments accelerate efforts to complete trade liberalization talks launched in Doha, Qatar, in November 2001 and due to establish a new world trade treaty by January 1, 2005. International trade rules are based on multilateral negotiations involving all 146 member states.

The World Bank has said the Doha Round negotiations, if successful, could inject a huge boost into the world economy, but negotiators have missed important deadlines and many trade analysts say the talks are likely to drag on well into the second half of the decade.

The WTO report, written before the U.S.- British invasion of Iraq, suggested the decision by the two powers to go it alone could have serious repercussions on trade politics and so endanger global governance through bodies like the WTO.

And erosion of confidence in global institutions might encourage closed groupings, or blocs, of trading states and inward-looking policies such as protectionism.

Last week Rubens Ricupero, Supachai's counterpart head of the U.N.'s trade and development agency UNCTAD, said trade regionalism was potentially even more dangerous than protectionism especially for poorer countries. And many trade analysts fear a trend to regional trade pacts could become a landslide. CHINA, INDIA DOING WELL

In its detailed figures for 2002, the WTO report said goods trade by Asian developing countries expanded about 12.5 percent, with China hitting 20 percent growth and India 15 percent. Japan's growth was only three percent.

China joined the WTO at the end of 2001 and 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 shrank nearly four percent but imports surged 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 fall 0.5 percent and exports rise 0.6 percent.

Argentina's economic crisis, political instability in Venezuela and uncertainty in Brazil ahead of elections together badly affected Latin America, where imports dropped five percent as exports rose two percent.

But there was a brighter picture in the trade of commercial services. The WTO report said the 2002 value of services exchanges covering areas like banking, telecommunications, travel and tourism rose five percent to $1.54 billion.