Trading Our Way Out of Crisis

GENEVA – Global trade contracted in 2009 at a rate not seen since the Great Depression, and those paying the heaviest price are those who can least afford it. So, when trade ministers from the World Trade Organization’s 153 members gather in Geneva later this month, the issue of how the WTO and the global trading system can help the poorest countries will be high on the agenda.

Driven largely by collapsing domestic demand and production levels, but also by a shortage of affordable trade finance, trade volumes will fall by more than 10% this year. Whether trade will recover next year is an open question. Despite some evidence that trade volumes grew over the summer, recovery has been patchy – and so fragile that a sudden shock in equity or currency markets could once again undermine consumer and business confidence, leading to a further deterioration of trade.

The world’s poorest countries face the greatest hardship when trade languishes. They do not have the luxury of cobbling together fiscal-stimulus packages or rescuing ailing industries in order to cushion the shock brought about by the economic crisis. For them, trade represents a huge share of overall economic activity and is unquestionably the best avenue for exiting a crisis that has hit them hard.

The irony is that trade has collapsed just when these countries were becoming increasingly active in global markets, with their exports rising by more than 20% during this decade. For nations that depend on trade, the sharp drop in exports this year was crippling. Since the crisis began, export earnings of the world’s poorest countries are down $26.8 billion, or 44%.