Recent trends in World Trade By Alain Henriot Delegate Director Coe-Rexecode (Paris) Kiel, 15th-16th March 2010

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

Raw material and energy prices have also strongly recovered but signs of hesitation can be seen recently - 4

- 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

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

- 7 World trade picked up briskly in the second half of 2009

- 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

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

- 10 … the consequence of an historical drop in trade flows 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

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

- 13 First signals of a recovery were observed in emerging countries but no decoupling Import levels in volume terms

- 14 China played a leading role, leading other Asian countries and then Western economies China: imports by main suppliers

- 15 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

- 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). Import levels in volume terms

- 17 Weakness of the Euro: a relief for the Euro area exporters Price competitiveness: national export prices/competitors in a common currency

- 18 Main trade imbalances have not disappeared with the crisis Current account balance

- 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 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