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World trade skyrockets in '10, unlikely to repeat in '11

posted on April 15, 2011

Despite feeling more pain at the pump due to higher energy costs, U.S. consumers continued their spending spree last month.

According to the Commerce Department, retail sales rose 0.4 percent in March, marking the ninth consecutive monthly increase.

But the biggest decline was in auto sales where - for the first time in more than a year - the brakes were put on significant gains.

Consumers have been more than willing to open their wallets and total retail sales was up by a mere 0.1 percent when sales at gasoline stations were excluded.

And the Commerce Department reports the U.S. trade deficit narrowed slightly, thanks to a decline in oil imports which offset fewer American-made products being sold abroad.

World trade skyrockets in '10, unlikely to repeat in '11

Despite declining sales of U.S. autos, industrial machinery and food overseas, the Commerce Department reports the U.S. trade deficit declined 2.6 percent in February to $45.8 billion, even with less foreign oil, autos and computers coming into this country.

Trade's impact on the U.S economy is expected to be neutral this year as gains from higher exports will be tempered by continued growth in imports. Growth slows when imports outperform exports because more U.S. jobs go to workers overseas.

Globally, trade rocketed to an all-time high in 2010 with an increase of 14.5 percent. This rebound comes after a dismal performance in 2009, but leaders of the WTO don't expect a repeat performance this year.

Patrick Low: WTO Chief Economist: "We have to remember that this still doesn't mean we're back on the trend growth, if we look at the long term growth of exports. We're still below that trend growth rate." The Geneva-based group recently released its projections for 2011 along with trade statistics. According to the WTO, the global economy is expected to grow 6.5 percent in 2011. Though positive, less than half of last year's expansion, which was driven in part by strong recoveries in China and Japan where exports were up dramatically.

Pascal Lamy, WTO Director-General: "Despite protectionist pressures, and we've had that in many places, markets remained by and large open during the economic crisis, permitting countries to use trade as an important took to facilitating economic stability."

Despite the impact of the global recession, world trade has expanded about 6 percent annually since 1990.

Lamy: "Although the 2010 expansion was strong enough to bring the volume of world trade back to its pre-crisis peak of 2008, a large of course gap remains between where we are now and were we would have been in the crisis had not happened, and this gap is likely to persist for some time."

Commodity prices continue to be volatile across the globe and are rapidly becoming a key wildcard in the economic recovery.

WTO's Chief Economist Patrick Low, sounded the alarm over rising prices.

Patrick Low: "A judicious use of trade policy particularly in exports measures will certainly help a valuable contribution to moderating price rises and price volatility."

Tags: China economy foreign relations news trade