Recent trends in World Trade

By Alain Henriot

Delegate Director Coe-Rexecode (Paris)

Kiel, 15th-16th March 2010

- 2

1. Overview of the world economy and the linkage with world trade

2. Imports and domestic demand

3. Exports and price competitiveness

4. Trade balances

• Content

- 3

• Financial and raw materials markets have given an early sign of the rebound at the beginning of 2009, but show now signs of hesitation

Domestic Market Capitalization (USD billions)

2002 2003 2004 2005 2006 2007 2008 2009 201020000

30000

40000

50000

60000

• Raw material and energy prices have also strongly recovered but signs of hesitation can be seen recently

- 4

BrentU.S. dollars barrel

2002 2003 2004 2005 2006 2007 2008 2009 201018

140

80

60

40

30

100

Industrial raw materials pricesJanuary 1988=100 (in dollar terms)

2002 2003 2004 2005 2006 2007 2008 2009 201060

100

140

180

220

80

120

- 5

• World economy fell into recession in 2008Q4 and 2009Q1 before registering a positive growth in 2009Q2, which strengthened in the second half of 2009

© Coe-Rexecode

%

2002 2003 2004 2005 2006 2007 2008 2009 2010

0

-8

-6

-4

-2

0

2

4

6

8

y-o-y, %quarter-on-quarter, %

- 6

• World industrial production back to previous trend (but a gap remains in terms of level)

2005=100

2002 2003 2004 2005 2006 2007 2008 200985

90

95

100

105

110

115

- 7

• World trade picked up briskly in the second half of 2009

y-o-y, %

J F M A M J J A S O N D J F M A M J J A S O N D J F2008 2009

0

-20

-15

-10

-5

0

5

10

CPBCoe-Rexecode

2005=100

J F M A M J J A S O N D J F M A M J J A S O N D J F2008 2009

90

100

110

120

130

CPBCoe-Rexecode

- 8

• « Soft » data (here world PMI export order books) gave a leading signal of the upturn, but were misleading on the exact timing of the recovery and to some extent on its magnitude

y-o-y, %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0

-20

-10

0

10

20

20

33

45

58

70

World trade (volume - LHS)World export order books PMI (RHS)

- 9

• The gap between the current level of world trade and the pre-crisis level remains big although narrowing …

y-o-y, %

909192939495969798990001020304050607080910

0

-20

-10

0

10

20

CPBCoe-Rexecode

2005=100

909192939495969798990001020304050607080910

20

40

60

80

100

120

140

CPBCoe-rexecode

- 10

• … the consequence of an historical drop in trade flows

annual percentage change

1929 1939 1949 1959 1969 1979 1989 1999 2009

0

-30

-20

-10

0

10

20

30

40

World trade: an historical perspective

- 11

• Turning points of world trade and industrial production growth cycles are very similar

Growth cycles of world imports and world industrial production

© Coe-Rexecode

Deviation to trend

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

-0.16

-0.12

-0.08

-0.04

0

0.04

0.08

0.12

World importsWorld industrial production

- 12

• World trade forecast: a strong rebound followed by a moderate growth (+7.4% in 2010 after -13.5% in 2009)

2005=100

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

30

40

60

80

100

120

140

2005=100 YoY %2008 119,62009 103,6 -13,42010 111,4 7,5

QoQ %2008 Q 1 123,02008 Q 2 122,1 -0,82008 Q 3 120,5 -1,32008 Q 4 112,9 -6,32009 Q 1 100,4 -11,12009 Q 2 100,2 -0,12009 Q 3 103,9 3,72009 Q 4 110,0 5,92010 Q 1 108,9 -1,02010 Q 2 110,6 1,52010 Q 3 112,2 1,52010 Q 4 113,9 1,5

MoMSeptember - 09 100,8

October - 09 103,6 2,7November - 09 101,8 -1,7December - 09 108,4 6,4

- 13

• First signals of a recovery were observed in emerging countries but no decoupling

Import levels in volume terms2005=100

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J2007 2008 2009

80

90

100

110

120

130

140

150

WorldDeveloped economiesEmerging countries

- 14

• China played a leading role, leading other Asian countries and then Western economies

China: imports by main suppliersBillions of US dollars (3 months mov. avg.)

95 96 97 98 99 00 01 02 03 04 05 06 07 08 090.5

150.0

100.0

50.0

10.0

5.0

1.0

TotalAsiaApecJapanE.U.AseanUSA

- 15

• The situation in other emerging countries remain heterogeneous regarding imports dynamism, although all regions came back to a positive trend

2005=100

2002 2003 2004 2005 2006 2007 2008 200960

80

100

120

140

160

180

NPIAOPECCEEC

Import levels in volume terms2005=100

2002 2003 2004 2005 2006 2007 2008 200940

60

80

100

120

140

160

Latin AmericaEmerging Asia (excl. NPIA)Africa (excl. OPEC countries)Middle East (excl. OPEC countries)

- 16

• We can expect only a moderate growth of developed countries imports in 2010 in volume terms. No further gains of terms of trade in 2010 (transfers of about 1% of GDP in 2009).

2005=100

2002 2003 2004 2005 2006 2007 2008 200960

80

100

120

USAJapanEuropean Union (7 countries)

Import levels in volume terms

2005=100

2002 2003 2004 2005 2006 2007 2008 200970

80

90

100

110

120

130

GermanyItalyUKFrance

- 17

• Weakness of the Euro: a relief for the Euro area exporters

Price competitiveness: national export prices/competitors in a common currency

2005=100

2002 2003 2004 2005 2006 2007 2008 200980

90

100

110

120

Euro areaJapanUSA

2005=100

2002 2003 2004 2005 2006 2007 2008 200940

60

80

100

120

140

160

ChinaSouth Korea

- 18

• Main trade imbalances have not disappeared with the crisis

Current account balance

-800

-600

-400

-200

0

200

400

600

Euro area Germany Japan China USA

2008

2009

2010

2011

Billions of US dollars

- 19

Downside risks . Would Europe and the U.S. find enough support from their internal demand to keep the global recovery continuing?

. Overheating in China might trigger a double dip late 2010

. Global imbalances put a threat on the exchange rate system

. As a consequence of trade deficits and high unemployment, the U.S. and Europe can be attracted by protectionist measures

• Forecast risks

- 20

Upside risks . The catching up process (huge output gap) might imply a quicker and longer economic growth of activity and trade than expected

. Emerging countries could take the lead of world trade growth to satisfy internal needs

• Forecast risks