24th Annual ICGFM International Conference

The Impact on Trade Resulting from the Financial Crisis

May 17, 2010

Miami, Florida

Stephen Lande
President, Manchester Trade
March 17, 2010 stepland@aol.com
Sudha
Stephen
Meiyappan.
Lande, Manchester Trade.
Trade 1
smeiyappan@manchestertrade.com
stepland@aol.com
www.manchestertrade.com
 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.

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 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

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 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, European
Union, France, Germany, India, Indonesia, Italy,
Japan. Mexico, Russia, Saudi Arabia, South Africa, South
Korea, Turkey, the United Kingdom and the United
States.

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 Agreement on Growth

 Countries enacted stimulus packages.

 IMF supported internal economic growth

policies.

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 Immediate Trade Reactions
 Worldwide approach to fighting protectionism
--
In the first days it seemed possible that there
would 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.
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 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.

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 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.

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 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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 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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 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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 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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 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

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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.

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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.

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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

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 THANK YOU

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