World Trade in 2009 and 2010 Report submitted to the AIECE Autumn General Meeting Brussels, 4th-5th November 2009 By Alain Henriot

Overview of the world economy and general assumptions 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

- 4 Raw material and energy prices have already strongly recovered

- 5 World economy fell into recession in 2008Q4 and 2009Q1 before registering a positive growth in 2009Q2, which should have been strengthened in 2009Q3

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

- 7 Most recent figures show a pick up in world trade during last summer * (Sept. est.)

- 8 However, the use of « soft » data (here world PMI export order books) can be a bit misleading in the current context regarding the measure of the intensity of the rebound

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

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

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

- 12 Turning points of world trade and industrial production business cycles are very similar Growth cycles of world imports and world industrial production

Overview of world economy and general assumptions 2. Imports and domestic demand 3. Exports and price competitiveness 4. Trade balances

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

- 15 China played a leading role here, leading other Asian countries China: imports by main suppliers

- 16 The situation in other emerging countries remain heterogeneous regarding imports dynamism Import levels in volume terms

- 17 We expect only a moderate growth of developed countries imports in No further gains of terms of trade in 2010 (transfers in 2009 of about 1% of GDP), but no inflationary pressure. Import levels in volume terms

Overview of world economy and general assumptions 2. Imports and domestic demand 3. Exports and price competitiveness 4. Trade balances

- 19 Weakness of the dollar might slow the recovery in the Euro area Price competitiveness: national export prices/competitors in a common currency

- 20 Germany and Japan especially hit by the contraction of the sales of equipment goods Value of exports (7 months 2009/7 months 2008, percentage change)

Overview of world economy and general assumptions 2. Imports and domestic demand 3. Exports and price competitiveness 4. Trade balances

- 22 Main trade imbalances have not been fully offset by the crisis Trade balance

- 23 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 raises a risk on the exchange rate system (crash of the dollar). As a consequence of trade deficits and high unemployment, the U.S. and Europe can be attracted by protectionist measures Some risks of the forecast

- 24 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 Some risks of the forecast