“The figures show how trade has helped the world escape recession in 2010,” WTO Director-General Pascal Lamy said. “However, the hangover from the financial crisis is still with us. High unemployment in developed economies and sharp belt-tightening in Europe will keep fuelling protectionist pressures. WTO Members must continue to be vigilant and resist these pressures and to work toward opening markets rather than closing them. “Stability” should be the name of the game for 2011”.

The 14.5% rise was the largest annual figure in the present data series which began in 1950 and was buoyed by a 3.6% recovery in global output. It was a rebound from the 12% slump in 2009, returning trade to the 2008 peak level and to more normal rates of expansion. Nevertheless, the financial crisis and global recession continue to have an impact, they said.

For 2011, the economists are forecasting a more modest 6.5% increase, but with uncertainty about the impact of a number of recent events, including the earthquake and tsunami in Japan. If achieved, this would be higher than the 6.0% average yearly increase between 1990 and 2008.

These figures refer to growth in the volume of world trade, i.e., trade in real terms, adjusted for changes in prices and exchange rates. The projection is based on a consensus estimate of global output growth by economic forecasters, who predict a GDP growth rate of 3.1% in 2011 at market exchange rates.

The factors that contributed to the unusually large drop in world trade in 2009 may have also helped boost the size of the rebound in 2010. These include the spread of global supply chains and the product composition of trade compared to output. Global supply chains cause goods to cross national boundaries several times during the production process, which raises measured world trade flows compared to earlier decades. The quantification of this effect would require data on trade in value added that are not currently available. The goods that were most affected by the downturn (consumer durables, industrial machinery, etc.) have a larger share in world trade than in world GDP, which increased the magnitude of the trade slump relative to GDP in 2009, and which had a similar positive effect during the recovery of 2010.

The short-term outlook is clouded by a number of significant risks factors in addition to the catastrophes in Japan. These include rising prices for food and other primary products, and unrest in major oil exporting countries. Adverse developments in any of these areas could potentially set back the economic recovery and limit the expansion of trade in the coming year.

The full impact of the Japanese disaster is particularly difficult to gauge since it is complicated by a simultaneous nuclear incident, which is hampering relief and rebuilding efforts. The limited amount of research on the economic consequences of natural disasters suggests, however, that the trade impact should be relatively small, especially in the in the medium-to-long term.

Higher prices for primary commodities and the extraordinary growth of trade in developing Asia helped boost the combined share of developing economies and the Commonwealth of Independent States (CIS) in world exports to 45% in 2010, its highest ever.

Developed economies recorded export growth of nearly 13% in 2010, compared to a 16.5% average increase in the rest of the world. China’s exports increased in 2010 by a massive 28% in volume terms.

Prospects for 2011

World trade flows are continuing their recovery, building on the large gains of 2010, with slower but still slightly above average growth in 2011. However, recent events in the Middle East and Japan have raised the level of global economic uncertainty and tilted the balance of risk towards the downside.

WTO economists’ baseline projections for world merchandise trade in 2011 would see exports grow by 6.5%, with shipments from developed countries increasing by around 4.5% and those from developing economies and the CIS advancing 9.5%. These projections include the likely impact of Japan’s earthquake, but if the repercussions turn out to be worse than expected we would have to revisit the forecast in the coming months.