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Recent trends in World Trade

By Alain Henriot

Delegate Director Coe-Rexecode (Paris)

Kiel, 15th-16th March 2010

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1. Overview of the world economy and thelinkage with world trade

2. Imports and domestic demand

3. Exports and price competitiveness

4. Trade balances

Content

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Financial and raw materials markets havegiven an early sign of the rebound at thebeginning of 2009, but show now signs of

hesitationDomestic Market Capitalization (USDbillions)

2002 2003 2004 2005 2006 2007 2008 2009 2010

20000

30000

40000

50000

60000

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Raw material and energy prices have alsostrongly recovered but signs of hesitation canbe seen recently

- 4

BrentU.S. dol lars barrel

2002 2003 2004 2005 2006 2007 2008 2009 2010

18

140

80

60

40

30

100

Industrial rawmaterials pricesJ a n u a r y 1 9 8 8 = 1 0 0 ( i n d o l l a r te rms )

2002 2003 2004 2005 2006 2007 2008 2009 2010

60

100

140

180

220

80

120

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World economy fell into recession in 2008Q4 and 2009Q1before registering a positive growth in 2009Q2, whichstrengthened in the second half of 2009

Coe-Rexecode

%

2002 2003 2004 2005 2006 2007 2008 2009 2010

0

-8

-6

-4

-2

0

2

4

6

8

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

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World industrial production back to previoustrend (but a gap remains in terms of level)

2005=100

2002 2003 2004 2005 2006 2007 2008 2009

85

90

95

100

105

110

115

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World trade picked up briskly in thesecond half of 2009

y-o-y, %

J F M A M J J A S O N D J F M A M J J A S O N D J F

2008 2009

0

-20

-15

-10

-5

0

5

10

CPB

Coe -Re xe co de

2005=100

J F M A M J J A S O N D J F M A M J J A S O N D J F

2008 2009

90

100

110

120

130

CPB

Coe -Re xe co de

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Soft data (here world PMI export order books) gave aleading signal of the upturn, but were misleading on the exacttiming of the recovery and to some extent on its magnitude

y-o-y, %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0

-20

-10

0

10

20

20

33

45

58

70

World trade (volume -LHS)World exportorderbooks PMI (RHS)

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The gap between the current level of worldtrade and the pre-crisis level remains bigalthough narrowing

y-o-y, %

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

0

-20

-10

0

10

20

CPB

Co e - Re x e c o d e

2005=100

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

20

40

60

80

100

120

140

CPBCo e - r e x e c o d e

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the consequence of an historical dropin trade flows

a n n u a l p e r c e n t a g e c h a n g e

192 9 19 39 19 49 1959 19 69 1979 1 989 199 9 2 009

0

-30

-20

-10

0

10

20

30

40

World trade: an historical perspective

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Turning points of world trade and industrialproduction growth cycles are very similar

Growth cycles of world imports and world

industrial production

Coe-Rexecode

D e v i a t i o n t o t r e n d

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

0

-0.16

-0.12

-0.08

-0.04

0

0.04

0.08

0.12

WorldimportsWorldindustrialproduction

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

2005=100

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

30

40

60

80

10 0

12 0

14 0

2005=100 YoY %

2008 119,6

2009 103,6 -13,4

2010 111,4 7,5

QoQ %

2008 Q 1 123,0

2008 Q 2 122,1 -0,8

2008 Q 3 120,5 -1,3

2008 Q 4 112,9 -6,3

2009 Q 1 100,4 -11,1

2009 Q 2 100,2 -0,1

2009 Q 3 103,9 3,7

2009 Q 4 110,0 5,9

2010 Q 1 108,9 -1,0

2010 Q 2 110,6 1,5

2010 Q 3 112,2 1,5

2010 Q 4 113,9 1,5

MoM

September - 09 100,8

October - 09 103,6 2,7

November - 09 101,8 -1,7

December - 09 108,4 6,4

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First signals of a recovery were observedin emerging countries but no decoupling

Import levels in volume terms2005=100

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J

2 0 07 20 0 8 2 0 0 9

80

90

10 0

11 0

12 0

13 0

14 0

15 0

W or l d

D ev e l oped ec onom i es

E m erg i ng c ount r i es

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China played a leading role, leading other Asiancountries and then Western economies

China: imports by main suppliersBillionsof USdollars (3monthsmov. avg.)

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

0.5

150.0

100.0

50.0

10.0

5.0

1.0

Tota lAsia

ApecJapan

E.U.Asean

USA

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The situation in other emerging countries remainheterogeneous regarding imports dynamism, althoughall regions came back to a positive trend

2005=100

2002 2003 2004 2005 2006 2007 2008 2009

60

80

100

120

140

160

180

NPIA

OPEC

CEEC

Import levels in volume terms

2005=100

2002 2003 2004 2005 2006 2007 2008 2009

40

60

80

100

120

140

160

La tin Amer icaEmerg ing Asia (excl . NP IA )A fr i ca (excl . O PECcoun tr ies)Midd le East (excl . O PECcoun tries)

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We can expect only a moderate growth of developed countriesimports in 2010 in volume terms. No further gains of terms of trade

in 2010 (transfers of about 1% of GDP in 2009).

2005=100

2002 2003 2004 2005 2006 2007 2008 2009

60

80

100

120

USAJ a p a nEuropean Un ion (7 countr ies)

Import levels in volume terms

2005=100

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

7 0

8 0

9 0

1 0 0

1 1 0

1 2 0

1 3 0

Germ anyIta lyUKF ranc e

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Weakness of the Euro: a relief for the Euro areaexporters

Price competitiveness: national export prices/competitors in a common currency

2005=100

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

80

90

100

110

120

Euro area

J apan

USA

2005=100

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

40

60

80

100

120

140

160

China

South Korea

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Main trade imbalances have not disappearedwith the crisis

Current account balance

-800

-600

-400

-200

0

200

400

600

Euro area Germany Japan China USA

2008

2009

2010

2011

Billions of US dollars

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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 protectionistmeasures

Forecast risks

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Upside risks

. The catching up process (huge output gap) might imply a

quicker and longer economic growth of activity and tradethan expected

. Emerging countries could take the lead of world trade

growth to satisfy internal needs

Forecast risks