> Roberto Azevêdo’s speeches
Good morning everyone — welcome.
You’ve all seen the press release, so I’ll give a quick overview and pick out some of the key points as I see them.
Clearly 2015 was a tumultuous year.
Volatility and uncertainty were pervasive:
- World trade dipped ominously in the first half of the year before rebounding in the second half.
- Oil prices plunged by more than 60%.
- The US dollar appreciated around 20%.
- China’s economy slowed but bounced back somewhat by year end.
- On a more positive note, import demand strengthened appreciably in the EU and the United States, cushioning the slowdowns elsewhere.
The overall result in trade terms was growth of 2.8%, making 2015 another year of weak but positive expansion in global trade.
Turning to 2016, we are predicting that trade growth will remain constant, at 2.8%.
On this basis, 2016 will be the fifth consecutive year of sub 3% growth. While this is clearly a disappointing picture, it is not unprecedented. In fact, trade growth was weaker in the early 1980s. And we expect to come out of this pattern of low growth in the coming years.
For 2017, we are forecasting the trade growth will pick up to 3.6%.
These numbers are premised on world GDP growth of 2.4% this year and 2.7% next year.
Risks to these forecasts remain mostly on the downside, such as from a further slowing in emerging economies, and volatility in financial markets. Indicators of business and consumer sentiment have turned more negative recently. However there is also some limited upside potential if monetary policy, which is already in place, succeeds in lifting growth in the Euro area.
So that’s the overall picture — but there are a few points that I would like to draw particular attention to.
First, it’s important to note the distinction between trade growth in dollar terms and in volume terms.
Press reports of collapsing trade last year mostly referred to the dollar value of trade, which was down by a striking 13.5%.
The disruption caused by declines in the dollar value of trade is clearly very significant. In 2015 this was mostly attributable to big movements in commodity prices and exchange rates — not a decline in the number of goods that were moving across borders.
A decline in trade volumes would usually be associated with global recessions, and as such we tend to place more focus on this in our forecasting.
Second, while we expect growth in volume terms to remain fairly constant, the composition of trade growth is evolving.
A key driver of growth from 2011-2013 was import demand in Asia. But in the last two years this has shifted. Demand in the US and Europe is driving the modest growth we are seeing today, making up for slowdowns in Asia and elsewhere.
In fact, if Asia’s contribution to trade had matched its average of recent years, world trade would have grown 3.5% rather than 2.8% in 2015.
Although the slow growth of trade today is reminiscent of the early 1980s, the situation is also very different in some key respects.
Global trade has been transformed over the intervening decades, with a far wider range of major players now influencing and impacting on the growth we are seeing.
In the 1980s developed economies accounted for more than 70% of world imports, but this has since fallen to 57%. Meanwhile, import demand in Brazil, China, and India rose from less than 3% to around 14%.
Third, I’d like to mention the evolving relationship between trade growth and GDP growth.
According to our forecast, 2016 will be the fifth year that world trade will have grown at roughly the same rate as world GDP — rather than twice as fast as was the norm in the years before the financial crisis.
This contrast is striking — but actually it is not very illuminating.
The sluggish growth that we are seeing today is atypical — but so were the high rates of growth we saw before the crisis.
We should not be expecting a return to that kind of very high, atypical growth in the near future.
The post-war average for the trade growth to GDP growth ratio is actually around 1.5 to 1. We think a return to this level is more realistic in the medium term.
Finally, I want to underline again that WTO members have the power to influence this situation.
There are a number of steps we can take to ensure that trade lifts economic growth, job creation and development.
For example, WTO members can roll back trade restrictive measures put in place since the crisis, and they can act to implement the significant agreements which members have struck in recent times.
Implementing the WTO’s Trade Facilitation Agreement will cut global trade costs by up to 15%. This is a bigger impact than eliminating every remaining tariff around the world, and it could deliver a trillion dollar boost for global trade.
We are seeing excellent momentum in ratifications of the Trade Facilitation Agreement — but we need to complete this task in the near future so that it enters into force and its benefits can be delivered. Similarly, members are taking positive steps to follow through on other recent decisions — such as the deals struck at our Nairobi Ministerial Conference in December to scrap farm export subsidies and eliminate tariffs on a wide range of IT products.
And of course we can do more.
Members are having a robust debate right now on the potential forward path for our negotiating work — looking at how we can tackle the remaining Doha issues, and potentially discuss other non-Doha issues as well.
Since Nairobi I have reached out to members to facilitate this discussion. I’ve visited more than a dozen countries in recent weeks and met with leaders from around the world.
The level of interest in our activities here is surpassing anything that I have seen before. So I am optimistic about our future work and its potential to foster economic growth and job creation.
Thank you for listening.