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 bil ions) 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 January 1988=100 (in dollar terms) 220 Brent U.S. dollars barrel 140 180 100 80 140 60 120 100 40 30 80 60 18 2002 2003 2004 2005 2006 2007 2008 2009 2010 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, % 6 4 2 0 -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 20 5=10 5 CPB Coe-Rexecode CPB Coe-Rexecode 120 0 -5 10 -10 10 -15 90 -20 J F M A M J J 2008 A S O N D J F M A M J J 2009 A S O N D J F J F M A M J J 2008 A S O N D J F M A M J J 2009 A S O N D J F -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 0 45 World tr ade (volume - LHS) World export order books PMI (RHS) -10 33 -20 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 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 20 5=10 120 10 100 0 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 0 -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 0.1 2 Deviation to trend 0.0 8 Worl d i m ports Worl d i n dustri a l pro ducti o n 0.0 4 0 -0 . 0 4 -0 . 0 8 -0 . 1 2 -0 . 1 6 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 2 0 5 =1 0 120 2005=100 119,6 103,6 111,4 2008 2009 2010 10 YoY % -13,4 7,5 QoQ % 2008 Q 2008 Q 2008 Q 2008 Q 2009 Q 2009 Q 2009 Q 2009 Q 2010 Q 2010 Q 2010 Q 2010 Q 80 60 40 1 2 3 4 1 2 3 4 1 2 3 4 123,0 122,1 120,5 112,9 100,4 100,2 103,9 110,0 108,9 110,6 112,2 113,9 -0,8 -1,3 -6,3 -11,1 -0,1 3,7 5,9 -1,0 1,5 1,5 1,5 MoM 30 91 92 93 94 95 96 97 98 9 0 01 02 03 04 05 06 07 08 09 10 September - 09 October - 09 November - 09 December - 09 100,8 103,6 101,8 108,4 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 2005=100 140 World Developed economies Emerging countries 130 120 110 100 90 80 J F M A M J J 2007 A S O N D J F M A M J J 2008 A S O N D J F M A M J J A S O N D J 2009 - 13 • China played a leading role, leading other Asian countries and then Western economies China: imports by main suppliers 150.0 Bi l i o ns of US dol l a rs (3 month s mov. avg.) Total Asia Apec Japan E.U . Asean USA 100.0 50.0 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=100 160 160 140 140 120 NPIA OPEC CEEC 120 2005=100 Latin America Emerging Asia (excl. NPIA ) Africa (excl. OPEC countries) Mid le East (excl. OPEC countries) 100 100 80 80 60 40 60 2002 2003 2004 2005 2006 2007 2008 2009 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 Germany Italy UK France 110 USA Japan European Union (7 countries) 100 90 80 80 70 60 2002 2003 2004 2005 2006 2007 2008 2009 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 Euro area Japan USA 90 60 40 80 2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009 - 17 • Main trade imbalances have not disappeared with the crisis Current account balance Billions of US dollars 600 400 200 2008 0 2009 2010 -200 2011 -400 -600 -800 Euro area Germany Japan China USA - 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