WTO Cuts Trade Forecast, Sees Rising Protectionism

July 1, 2009
Trading volumes of developed economies are now expected to shrink by 14% while those of developing economies contract 7%.

The World Trade Organization (WTO) warned Wednesday of rising protectionism amid the economic crisis as it sharply cut its forecast for trade volumes of developed and developing economies this year. Making its latest assessment of the global economic situation, the WTO also observed that the sharp contraction of the global economy registered in the first quarter this year "appears to be slowing down." However, citing risks including rising unemployment and oil prices, the organization lowered its forecast of global trade contraction to 10% from its March forecast of a shrinkage of 9%. Trading volumes of developed economies are now expected to shrink by 14% instead of 10% while those of developing economies would contract 7%, rather than the earlier forecast 2% to 3%. Amid the economic crisis, the WTO said in its report to member states that there has been a growing number of instances of protectionism. "In the past three months, there has been further slippage toward more trade restricting and distorting policies," it said in the report obtained by AFP. The WTO added that "resort to high intensity protectionist measures has been contained overall, albeit with difficulties." It noted that even without taking into account trade measures put in place due to the swine flu pandemic, there were more than twice as many new trade barriers introduced than new trade liberalizing measures. It said restrictions related to the A(H1N1) flu pandemic has been "most noticeable," listing at least 39 member states that imposed measures such as import bans on pork products from swine flu-affected countries. The trade organization also raised renewed concerns over stimulus programs put in place by governments in a bid to lift economies out of the recession. It said that there is "very limited information that is available publicly" on these programs, therefore, it is difficult to assess how these measures could distort markets and competition. In addition, it is unclear when support or subsidies provided to prop up ailing industries such as automobile or banking would be withdrawn. "An important consideration for the G20 countries, therefore, is to design and announce as soon as possible an exit strategy from their crisis measures that will allow world markets to return to normal again," it said. On Monday, the top central banking body -- Bank for International Settlements -- also called on governments to end stimulus programs "promptly" once economic recovery occurs. Copyright Agence France-Presse, 2009

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