Global trade slumped 12% last year

– Cheer up, folks.   12%’s not much – it’s just a flesh wound, really.

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Global trade flows contracted by a catastrophic 12% in 2009, the fastest pace since the second world war, Pascal Lamy, director general of the World Trade Organisation revealed today, as he urged its 153 member countries to breathe new life into the ailing Doha trade round.

This latest estimate is considerably worse than the WTO’s previous forecast of a 10% decline for last year, underlining the hefty costs of the financial crisis for the world economy.

Lamy said there were early signs that trade was now recovering, but it was not yet clear whether the upturn would last. “Certainly there is a pick-up. Whether this pick-up is short term … or whether this is sustainable … is difficult to say but we certainly are picking up.”

In the early phases of the credit crunch in 2008, there was hope that the worst of its effects would be confined to the US and other major economies, with emerging markets such as China and India escaping unscathed.

But after confidence collapsed in the wake of the Lehman Brothers bankruptcy in late 2008, policymakers throughout the world watched in horror as demand plunged in every market.

Bank of England governor Mervyn King subsequently described how one company after another in the UK reported that demand had “fallen off a cliff”.

“The main explanation for this freefall in trade has been the simultaneous reduction in aggregate demand across all major world economies,” Lamy told a conference in Brussels.

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– hat tip to Cryptogon

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