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Impact on Trade Resulting from the Financial CrisisStephen Lande, Adjunct Professor, Georgetown University School of Foreign ServiceWhile trade continues to be a major part of world economic activity and the source of much public revenue, the impact of the financial crisis on worldwide trade will be the subject of this session.
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Stephen Lande, Manchester [email protected]
March 17, 2010 Sudha Meiyappan. Manchester Trade. [email protected]
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The Impact on Trade Resulting from the Financial Crisis
May 17, 2010 Miami, Florida
Stephen Lande President, Manchester Trade
[email protected] www.manchestertrade.com
24th Annual ICGFM International Conference
Stephen Lande, Manchester [email protected]
March 17, 2010 2
Two lessons from the experience in international trade after the 2008
meltdown
Thank goodness the world learned from history in reacting to the meltdown.
New players have arisen as movers of the world economy.
Stephen Lande, Manchester [email protected]
March 17, 2010 3
Reaction to the Great Depression
The mistakes of the 1929 reaction to the meltdown in stock market value in the United States is well-known. There was -
No international cooperation Restrictive fiscal and monetary policies Beg thy neighbor trade policy
Stephen Lande, Manchester [email protected]
March 17, 2010 4
Reaction to the 2008 financial meltdown
The reaction in 2008 has been the opposite.
International Cooperation Almost continuous consultations most under
the G-20
Replaced the group of G-8 to be more effective:Argentina, Australia, Brazil, Canada. China, EuropeanUnion, France, Germany, India, Indonesia, Italy,Japan. Mexico, Russia, Saudi Arabia, South Africa, SouthKorea, Turkey, the United Kingdom and the UnitedStates.
Stephen Lande, Manchester [email protected]
March 17, 2010 5
Agreement on Growth
Countries enacted stimulus packages.
IMF supported internal economic growth policies.
Stephen Lande, Manchester [email protected]
March 17, 2010 6
Immediate Trade Reactions
Worldwide approach to fighting protectionism--
In the first days it seemed possible that therewould be a repeat of the 1929 experience
85 verified and 14 non-verified trade measures imposed by 23 countries and 12 countries respectively between September 2008 and March, 2009.
Most imposed Argentina. China, EU, Indonesia and Russia.
Measures could result in an 8 percent decline in world trade.
Stephen Lande, Manchester [email protected]
March 17, 2010 7
Reaction by the U.S.
The U.S. huffed and puffed but took few protectionist actions.
Stimulus package required government procurements
However required respect for international obligations Clunkers program could be used to purchase non-gas guzzlers from any country.
Stephen Lande, Manchester [email protected]
March 17, 2010 8
Actual Impact on Trade
Report on trade issued 12 months later—March, 2009 stated:
There was no indication of any pattern of protectionist measures.
Actual protectionist measures accounted for only eight tenths of one percent of world trade.
Most were usual measures such as antidumping action, sanitary and phytosanitary measures.
Stephen Lande, Manchester [email protected]
March 17, 2010 9
Reasons for Such Impact
1. Greater awareness of self-defeating nature of beg-thy-neighbor policies.
2. China continued buying especially from poorer countries.
3. Respect for trade rules.
4. Support from multilateral financial institutions
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March 17, 2010 10
Trade Numbers
World Trade nevertheless fell 2009.Widespread nature of the decline was due
to: Fall off in demand impacted all regions Global supply chains Shortage of trade finance
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March 17, 2010 11
Trade Numbers Cont’d...
World Trade flow did suffer but now is definitely recovering
World Trade declined by 12.2 percent in 2009. World Trade is expected to increase by 10.5
percent in 2010.
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March 17, 2010 12
Performance of Individual Countries
Performance uneven with some countries doing worse than others.
Performance may have reflected changing world power division.
Are we living through evolution of power moving eastward?
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March 17, 2010 13
Performance of Individual Countries Cont’d...
Relative rate of growth in 2009 showed new power balance
Developed countries grew 0.8 percent Developing countries grew 5.6 percent North America grew 1.0 percent China grew 9.5 percent Africa grew
March 17, 2010 Stephen Lande, Manchester [email protected]
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Performance of China
China emerged as the leader of world recovery.
Able to maintain internal growth through domestic stimulus program.
Used stimulus to develop infrastructure. Provided markets for poorer countries in Africa who sell
raw materials. Escaped without the serious dislocations which impacted
developed countries Looked at for world leadership.
March 17, 2010 Stephen Lande, Manchester [email protected]
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Performance of Africa African countries also escaped from worse
effects. Not as enmeshed with world economy as
others. As a result of economic reforms better able to
absorb shocks. China continued to buy raw materials and
invest in infrastructure in these countries.
March 17, 2010 Stephen Lande, Manchester [email protected]
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Performance of Other Developing Economies
Countries like Pakistan, Vietnam, Eastern Europe significantly hurt since had no real domestic market and relied on manufactured goods for exports.
Did not have sufficiently large domestic market to stimulate.
Relied on exports to declining markets specifically. Were not large raw material producers
