WTO news: what’s been happening in the WTO

WTO NEWS: 1999 PRESS RELEASES

Press/149
17 November 1999
WTO Secretariat releases 1999 annual report

The WTO's Annual Report for 1999, published today (23 November), underscores the fact that in the wake of the economic pressures that began with the financial crisis in a number of east-Asian countries, the good sense of governments and WTO rules and disciplines served to keep open markets for goods and services. Trade made a crucial contribution to the recovery. As governments now prepare for new trade negotiations, this recovery serves as a strong reminder of the value of maintaining and strengthening the open, rules-based multilateral trading system.

150pxls.gif (76 bytes)
SEE ALSO:
press releases
WTO news
Mike Moore's speeches
Renato Ruggiero's speeches, 1995-99



Gains in 1999 trade volume are expected to be in the order of 4 per cent, much the same as in 1998. Once again these gains are in excess of growth of overall output. For 2000, with growth stronger, trade volume could expand by 6 to 7 per cent, close to the average rate of the 1990's.

Chapter I notes that the economic situation is more healthy now than it was a year ago. At that time, with the financial crisis that had started in parts of east-Asia about a year old, there was still considerable concern about the risk of contagion and deep recession. Now recovery is well underway; disciplined macroeconomic policies and structural reform in the countries most affected by the crisis and open markets played their full role in making possible and supporting the ongoing recovery. World output growth is now expected to be in the order of 3 per cent in 1999, rising to some 3.5 per cent in 2000, and trade volumes have stabilized, after falling sharply in 1998, and are expected to show robust growth in 2000. The Report warns that there is no room for complacency, particularly as governments will continue to face pressure from special interest groups to take protectionist measures. Such action would not only be counterproductive, it could also serve to undermine a promising economic environment for the conduct of new multilateral negotiations.

Chapter II of the Report reviews 1998 world trade in aggregate terms, as well as on a commodity and geographic basis. Detailed data on trade flows for 1998 are provided in the volume on International Trade Statistics, which is issued at the same time as the Annual Report. More recent additional information on trade flows is also provided below. After growing at an historically high rate of 10.5 per cent in 1997, real merchandise exports grew at 4 per cent in 1998, comparable to the annual average export growth rate in the years 1990-93. The sharply lower growth had its origins in the financial crisis in the east-Asian countries and in the decline in commodity prices. Real exports of agricultural products actually declined, by 0.5 per cent, and although the volume of manufacturing and mining exports showed increases, they were sharply lower than in 1997. Nevertheless, trade growth in 1998 once again outpaced overall economic growth, adding further to the growing share of international trade in global economic activity.

Developments in trade policy, addressed in Chapter III of the Report, underscore that the state of the world trading environment is generally sound. The Report notes that there were no major trade policy reversals in 1998 and 1999 and that there is no evidence of a return to protectionist measures. On the contrary, a number of countries have undertaken concrete measures to further liberalize their economic and trade regimes. The Report underscores that by firmly rejecting protectionism, the countries most affected by events in east-Asia, and their trading partners, placed a high degree of confidence in the multilateral trading system. A feature of recent developments is the relative absence of recourse to new "legal" measures of protection. Although most countries directly affected by the financial crisis had significant leeway to raise applied tariffs without breaching their WTO bindings, by and large, they did not do so. Nor is there evidence of unusual levels of activity involving most measures to safeguard domestic industry, the balance-of-payments, transitional safeguard measures for textiles and clothing, or countervailing. There does appear to have been some increase in the initiation of anti-dumping actions, however, led by several high-profile cases involving steel, although actual measures in force have shown a decline.

Recent developments in international trade flows

Global output and trade growth decelerated sharply in 1998. All regions and all product categories were affected by the slowdown. Imports from Asia fell for the first time in two decades and the share of developing countries in world merchandise trade declined for the first time in a decade. In the worst performance of the 1990's, nearly two-thirds of the world's economies recorded a decrease in their merchandise export earnings. In value terms, merchandise trade fell by 2 per cent, to US$ 5.27 trillion. Trade in commercial services stagnated at some US$ 1.32 trillion in 1998. Beside reflecting the difficult economic situation, the overall decline in exports earnings was partly the result of the decline in commodity prices This decline helps explain the lower share of developing countries in world trade. In volume terms, trade was up by 4 per cent, virtually double the growth of world GDP.

In 1998, all primary product categories recorded a decline in export value, ranging from less than 5 per cent for food to about one-quarter for fuels. The export value of agricultural raw materials, and ores and minerals recorded a value decrease of nearly 10 per cent in 1998 – reflecting the fall in prices for unprocessed basic materials more strongly than food. The share of fuels in world trade shrank to 6.5 per cent, a record low for the post-World War II period. As the share of primary products in total trade decreased, that of manufactures exceeded three-quarters of total trade for the first time.

Trade in manufactures exceeded US$ 4 trillion for the first time, but nevertheless recorded its weakest nominal growth since 1993. Year-to-year changes were relatively uniform among product groups. Trade in automotive products showed a growth of almost 6 per cent and was the only group which posted accelerated growth in 1998. Trade in iron and steel decreased slightly in value terms but showed volume growth. North America and Western Europe recorded import increases of iron and steel, of 12 and 8 per cent respectively, while imports in Asia fell by more than one-quarter. These divergent trends gave rise to protectionist pressures in some major importing countries. Textile trade fell by some 5 per cent, the largest among manufactures, largely due to sluggish intra-Asian trade.

The stagnation in world exports of commercial services was the worst performance since 1980. As prices for commercial services stagnated or fell slightly, the real growth rate was probably slightly negative, thus remaining below the real growth rate of merchandise trade.

World economic growth is expected to strengthen moderately in 1999. Output growth is likely to be about 3 per cent and merchandise trade volume could average around 4 per cent, the same as in 1998 provided that the acceleration of world trade growth observed in the second quarter is maintained in the second half of 1999. For the first half of 1999, the value of world merchandise trade was unchanged from the preceding year's level. Negative dollar-value growth was recorded for the imports of Latin America, the transition economies and Western Europe. Asia's imports recovered markedly throughout the first six months of 1999 and exceeded those of the previous year by more than 5 per cent in the second quarter and by more than 10 per cent in the third quarter. Merchandise import growth in the United States in the first half of 1999 was close to 8 per cent, somewhat stronger than in 1998.

For 1999, growth projections are higher (some 3 per cent) thanks largely to the onset of recovery in east-Asia and continued strong growth in the United States. But growth for the year will be somewhat restrained by the expected lower growth in Western Europe, the transition economies and Latin America. The slower growth in Western Europe in early 1999 and the low expansion of output in Latin America are factors weighing on global trade growth, which at 4 per cent is expected to be of the same order as in 1998. However, recovery of Asia's imports could turn out to be stronger than expected, especially if the momentum of the upswing observed in the first half of 1999 is maintained. North America's import growth has remained strong, with United States imports up by nearly 10 per cent in the first half of 1999. Import growth is expected to exceed export growth in North America, Western Europe and perhaps parts of Asia, which will enable other regions, in particular Latin America and the transition economies, to record faster net-export growth.

It is difficult to predict the course for the world economy in the year 2000, although early indications suggest a continued recovery in both output and trade. The International Monetary Fund predicts an acceleration of output growth to 3.5 per cent in the year 2000 largely due to higher growth in the developing countries. Trade is likely to expand by 6 to 7 per cent, close to the average rate observed in the 1990's. These predictions depend significantly upon economic developments in the United States, Western Europe and Japan.

Trade developments by region

An outstanding feature of world merchandise exports in value terms was that all regions recorded negative export growth in 1998, with the notable exception of Western Europe, whose exports rose by some 3 per cent. The sharpest decline in exports among all major regions in 1998 was recorded in Africa, with a decline of over 15 per cent, and in the Middle East, down over 22 per cent. This was due to the fact that exports of both regions consist largely of crude oil. Decreases for North and Latin America were less than 2 per cent and that of the transition economies was close to 5 per cent, although export values in Central and Eastern Europe were up by over 9 per cent, based on good performance in manufactures.

On the import side, Asia's imports were down by almost 18 per cent, with those of Japan down by almost the same percent and the imports combined of Indonesia, the Republic of Korea, Malaysia, the Philippines and Thailand off by over 30 per cent; import growth in Asia remained below the world average for the third consecutive year. Import value was also down in the Middle East and in the transition economies, but recovered to almost 5 per cent in Western Europe while growth in North and Latin America was at roughly 5 per cent, albeit substantially lower than in the previous year.

The stagnation of commercial services exports was evident for all major regions with the exception of Western Europe, which recorded increased growth from 2 per cent in 1997 to 6 per cent in 1998. Asia recorded the strongest contraction of exports (down by 15 per cent) and imports (-11 per cent) among all regions; the sharper export contraction probably reflects the larger dependence on intra-trade for exports.

North America's growing import demand was the most dynamic factor of the global trade expansion in 1998. The strength of the North American market in 1998 relative to the weakening global economy is perhaps best seen in merchandise trade flows measured in constant prices, i.e. in volume terms. While North America's merchandise imports expanded more than two times faster than world trade (at 10.5 per cent), the region's growth in exports slowed to 3.5 per cent, somewhat less than the global average. As import and export prices decreased by 3.5 and 5 per cent, respectively, the value of North America's exports fell slightly and imports rose less than 5 per cent. In the aggregate, North American numbers hide quite divergent developments between the United States and Canadian economies. Canada's reliance on the strong US market, the depreciation of its currency and slackening domestic demand assured the maintenance of high export growth, while imports decreased. By contrast, the strength of US domestic demand led to an increase in US imports well in excess of exports. The role of the United States in sustaining global trade expansion has been very significant.

The sustained high output and trade growth experienced by Latin America throughout the 1990s faltered in 1998. Brazil and other primary commodity exporters were strongly affected by the repercussions of weaker demand in Asia and falling commodity prices. Mexico, a major exporter of manufactures, posted dramatically different results in 1998 than other Latin American countries due largely to strong export growth to the US market. While Mexico's merchandise imports rose by 14 per cent, those of other Latin American countries stagnated. For merchandise exports the difference is of similar magnitude, with Mexico's exports up by 6.5 per cent while those of other Latin American countries fell by about the same percentage. The average annual growth rates for the region's trade disguise a deceleration in the course of 1998 and in early 1999. Reduced export earnings, linked to lower prices and weaker demand in Asia, combined with shrinking net private capital inflows, caused a steep decline in imports in the second half of 1998, which carried over into the first part of 1999.

Western Europe's real export growth was 5 per cent in1998, due largely to the strength of intra-trade and shipments to North America and despite a decline in demand from Asia and the transition economies. Merchandise import growth was 7.5 per cent in volume terms in 1998, only slightly less than in the preceding year. Largely due to exchange rate developments, both import and export US dollar values shifted from negative growth in 1997 to positive rates of 3 and 5 per cent, respectively, in 1998. Western Europe's exports of agricultural products decreased slightly in 1998 but there was a sharp increase in automotive products, which rose by 10 per cent. Its intra-trade, which accounts for more than two-thirds of total trade, recovered strongly in US dollar terms; Western Europe's exports to North America, Latin America and Central and Eastern Europe grew faster than its intra-trade. Exports to Asia and Russia showed double digit declines – shipments to the east-Asia crisis countries were down by over one-quarter – but imports from Asia rose by 8 per cent, faster than total West European imports. Largely as a result of declining oil and commodity prices, West Europe's imports from Africa were down for the second year in a row.

The merchandise trade of the transition economies as a group decreased in 1998, with the double digit fall in Russia's exports and imports not offset by the strong expansion of merchandise exports and imports of Central and Eastern Europe. These latter countries showed an acceleration of trade growth over the previous year, largely due to their increased economic integration with Western

Europe. The share of Western Europe in Central and Eastern European exports exceeded two-thirds in 1998, while the share of Russia in their exports fell to less than 5 per cent. another important factor is the product composition of merchandise trade: more than 50 per cent of Russia's merchandise exports consist of primary product while over 80 per cent of Central and Eastern Europe's exports are manufactures.

Africa's economic growth was over 3 per cent in 1998, roughly unchanged from the previous year, and with sharp export declines offset by a good performance in the agricultural sector. Weak demand in commodity markets, caused partly by import contraction in Asia, together with a steep decline in oil and other primary product prices, seriously affected the export earnings of the many raw material exporters in the region; South Africa's export values were down almost 9 per cent and those of the major fuel exporters declined by 31 per cent. Fuels, metals and agricultural products still account for more than two-thirds of Africa's merchandise exports. Merchandise exports of the Middle East still depend largely on fuel exports. The sharp fall in oil prices was largely responsible for a decrease of over one-fifth in Middle East merchandise export earnings and a new stagnation of GDP growth. This took place despite an increase in crude oil production and in the volume of oil exports, due to sharply higher output and trade of Iraq. With oil revenues down, Middle East imports declined by about 5 per cent.

The East Asian financial crisis resulted in stagnation in Asia's economic output in 1998 for the first time since World War II. Although China and India recorded high growth rates, Japan's GDP and that of the five crisis countries (Indonesia, the Republic of Korea, Malaysia, the Philippines and Thailand) decreased for the first time in 25 years. Japan's recession and the financial crisis caused the value of Asia's merchandise imports to decline by nearly 20 per cent; merchandise exports decreased by 6 per cent as the sharp contraction of intra-Asian trade – which accounts for more than half of total trade – was only partially offset by shipments to the Americas and Western Europe. Relatively weak global demand and falling prices for office and telecom products, which account for one-quarter of Asia's exports, was a further factor contributing to the decline in the value of Asia's exports. Among manufactured goods, exports of textiles recorded the strongest decline (down 11 per cent), while exports of clothing stagnated.

The IMF estimates that GDP growth for the 48 least-developed countries was 4.5 per cent in 1998. Their merchandise exports are estimated to have declined by nearly 10 per cent in 1998, largely due to the fall in prices of oil, metals and cotton. Imports of the major industrial countries from the least-developed countries decreased slightly in 1998. While imports of manufactured goods continued to increase, those of agricultural products and fuels decline sharply. Manufactures accounted for one-half of the merchandise imports of the European Union, Japan and the United States from the least-developed countries, rising from one-quarter at the start of the 1990s. Exports of the industrial countries to the least-developed countries are estimated to have been 5 per cent lower in 1998 than in the previous year.