Recent trends in World Trade

By Alain Henriot Delegate Director Coe-Rexecode (Paris)

Kiel, 15th-16th March 2010

 Content

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

-2

 Financial and raw materials markets

have given an early sign of the rebound at the beginning of 2009, but show now signs of hesitation
60000

Domestic Market Capitalization (USD billions)

50000

40000

30000

20000 2002 2003 2004 2005 2006 2007 2008 2009 2010

-3

 Raw material and energy prices have

also strongly recovered but signs of hesitation can be seen recently
Industrial raw materials prices 220 January 1988=100 (in dollar terms) Brent 140 U.S. dollars barrel

180

100

80 140 60 120

100

40

80

30

60 2002 2003 2004 2005 2006 2007 2008 2009 2010

18 2002 2003 2004 2005 2006 2007 2008 2009 2010

-4

 World economy fell into recession in 2008Q4 and

2009Q1 before registering a positive growth in 2009Q2, which strengthened in the second half of 2009
8

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

-2

-4

-6

-8 2002

2003

2004

2005

2006

2007

2008

2009

2010

Coe-Rexecode

-5

 World industrial production back to previous trend (but a gap remains in terms of level)
115 2005=100 110

105

100

95

90

85 2002 2003 2004 2005 2006 2007 2008 2009

-6

 World trade picked up briskly in the second half of 2009

10

y-o-y, %

130

2005=100

CPB Coe-Rexecode
0

120

CPB Coe-Rexecode

-5

110

-10 100 -15

-20

J FMAM J J A SOND J FMAM J J A SOND J F 2008 2009

90

J FMAM J J A SOND J FMAM J J A SOND J F 2008 2009

-7

 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
20
y-o-y, %

70

10

58

45

World trade (volume - LHS) World export order books PMI (RHS)
-10 33

-20 2002

2003

2004

2005

2006

2007

2008

2009

2010

20 2011

-8

 The gap between the current level of world trade and the pre-crisis level remains big although narrowing
20

y-o-y, %

140

2005=100

120 10

100

80

60 -10

CPB Coe-Rexecode

CPB Coe-rexecode
40

-20

20

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

-9

 the consequence of an historical drop in trade flows

World trade: an historical perspective
40
annual percentage change

30

20

10

-10

-20

-30 1929

1939

1949

1959

1969

1979

1989

1999

2009

- 10

 Turning points of world trade and industrial production growth cycles are very similar
Growth cycles of world imports and world industrial production
0.12

Deviation to trend

0.08 World imports World industrial production 0.04

-0.04

-0.08

-0.12

-0.16 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Coe-Rexecode

- 11

 World trade forecast: a strong rebound followed by a moderate growth (+7.4% in 2010 after -13.5% in 2009)
140 120

2005=100

100

2 0 0 8 2 0 0 9 2 0 1 0

2 0 0 5 = 1 0 0 1 1 9 ,6 1 0 3 ,6 1 1 1 ,4

Y oY % -1 3 ,4 7 ,5 Q oQ %

80

60

40

2 0 0 8Q 1 2 0 0 8Q 2 2 0 0 8Q 3 2 0 0 8Q 4 2 0 0 9Q 1 2 0 0 9Q 2 2 0 0 9Q 3 2 0 0 9Q 4 2 0 1 0Q 1 2 0 1 0Q 2 2 0 1 0Q 3 2 0 1 0Q 4

1 2 3 ,0 1 2 2 ,1 1 2 0 ,5 1 1 2 ,9 1 0 0 ,4 1 0 0 ,2 1 0 3 ,9 1 1 0 ,0 1 0 8 ,9 1 1 0 ,6 1 1 2 ,2 1 1 3 ,9

-0 ,8 -1 ,3 -6 ,3 -1 1 ,1 -0 ,1 3 ,7 5 ,9 -1 ,0 1 ,5 1 ,5 1 ,5 MoM

30

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

S eptem ber - 0 9 O c tober - 0 9 Novem ber - 0 9 D ec em ber - 0 9

1 0 0 ,8 1 0 3 ,6 1 0 1 ,8 1 0 8 ,4

2 ,7 -1 ,7 6 ,4

- 12

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

Import levels in volume terms
150 140 World Developed economies Emerging countries

2005=100

130

120

110

100

90

80

J J A 2007

J J A 2008

J J A 2009

- 13

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

China: imports by main suppliers

150.0 100.0
Billions of US dollars (3 months mov. avg.)

50.0

Total Asia Apec Japan E.U. Asean USA

10.0

5.0

1.0

0.5 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

- 14

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

Import levels in volume terms

180
2005=100

160

2005=100

160

140

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

140

120

120

NPIA OPEC CEEC

100

100

80

80

60

60 2002 2003 2004 2005 2006 2007 2008 2009

40 2002 2003 2004 2005 2006 2007 2008 2009

- 15

 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).

Import levels in volume terms

120
2005=100

130

2005=100

120

100

110

Germany Italy UK France

USA Japan European Union (7 countries)

80

100

90

80

60 2002 2003 2004 2005 2006 2007 2008 2009

70 2002 2003 2004 2005 2006 2007 2008 2009

- 16

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

Price competitiveness: national export prices/competitors in a common currency
120
2005=100

160

2005=100

140 110 120

100

100

China South Korea

80 90

Euro area Japan USA

60

80 2002 2003 2004 2005 2006 2007 2008 2009

40 2002 2003 2004 2005 2006 2007 2008 2009

- 17

 Main trade imbalances have not disappeared with the crisis

Current account balance
600 400 200 0 -200 -400 -600 -800 Euro area Germany Japan China USA
2008 2009 2010 2011

Billions of US dollars

- 18

 Forecast risks
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

- 19

 Forecast risks
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

- 20