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New Finance Rules Have Potential to Alter the Path of Global Trade
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| Contributor | Jason |
| Last Edited | Jason May 16, 2009 06:34am |
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| Category | Editorial |
| Media | Newspaper - Wall Street Journal |
| News Date | Thursday, May 14, 2009 12:00:00 PM UTC0:0 |
| Description | If this proves to be the moment when the march toward ever-greater globalization and trade ends or slows significantly, look not only to tariffs or buy-American rules or street protests as the causes. Look also to changes now being contemplated in rules for global finance.
The collapse of world trade was more abrupt than friends or foes of globalization imagined possible. The World Trade Organization says the volume of trade -- an estimate adjusted to remove effects of price and currency changes -- will fall 9% this year, the most severe contraction since World War II.
The International Monetary Fund is even gloomier. It foresees an 11% decline in trade in goods and services this year. For "advanced economies" -- the U.S., Canada, Europe, Japan and the export powers of Asia -- it anticipates a 13.5% decline in exports this year. For emerging and developing countries, even more dependent on exports for growth, it expects a 6.4% decline in exports, a sharp contrast to the 9.5% increase they enjoyed in 2007 and the 6% increase seen in 2008.
Trade grew much faster than global demand in the boom and contracted more rapidly than demand in the bust, partly because global supply networks move components across borders, repeatedly inflating the volume of trade. The recent decline reflects both the steep drop in global demand as well as the evaporation of trade finance, essential to exporting and importing. But the tough-to-answer question is: How much and how quickly will trade come back once the world economy begins to grow? The IMF doesn't see a quick rebound: It projects the volume of trade in 2010 will be only 0.5% above this year's depressed level. |
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