World trade growth slowed in the third quarter of the year, according to the latest World Trade Organization (WTO) figures. An 18 percent rise in global merchandise trade annually in value terms was remarkably lower than the 26 percent increase registered in the second quarter.
According to a WTO report, the global trade slowdown was triggered by a combination of factors like protectionist measures in the wake of the crisis, a slew of stimulus packages and bailout programs as well as severe unemployment in various economies that crimped demand growth.
According to the WTO, restriction of trade is not the cure for large trade imbalances, high levels of unemployment and foreign exchange fluctuations.
WTO Director General Pascal Lamy said measures to restrict trade could provoke retaliation and undermine jobs growth worldwide. Restricting trade cannot correct those problems, but it could easily provoke retaliation which would seriously threaten jobs and growth worldwide,
The report points out that restrictive measures adopted by countries since the start of the global financial crisis amounted to around 1.2 per cent of world imports, especially in base metals and products, machinery and transport equipment. The report says governments introduced more than 200 new import restrictions between November 2009 and October 2010.
However, even as the world was recovering from the crisis, only 15 percent of those restrictive measures, which were supposed to be temporary, have been removed so far.
The report pointed out that stimulus packages announced by countries hosting leading automobile manufacturers could have crippled trade growth by feeding protectionist pressures in other parts of the world.
Countries like Argentina, India, South Africa and Ecuador have complained that stimulus packages and bailouts for auto sector subsidized many automakers.
The global trade body asked member state to prepare for exit strategies to unwind stimulus and bailout measures. In the meantime, exit strategies to unwind them should be transparent and accountable and should not be used as a pretext to discriminate, directly or indirectly, against foreign traders or investors, Lamy said.
The WTO report offered some insight into how outdated and wrong assumptions could seriously distort the debate on trade balances. It points out that the value of imports from a given country may be overestimated as customs figures only look at where a shipment originated from - not at whether the product in question was merely assembled in the source country from components manufactured elsewhere.
It also pointed out that new regulatory requirements like the Basel III rules were discouraging international banks from proactively engaging in the trade finance sector, which has dented the trade potential of many countries, especially those in Africa.