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World trade: the warning signs-2015

Мировая торговля: тревожные симптомы 2015 года

At the end of February was one of the first unofficial estimates of the outcomes of global trade for 2015 prepared by the Bureau of economic policy analysis of the Netherlands (the Hague). Assessment is shocking: for the first time since 2009 in 2015 there was a decrease in the volume of international trade. And not some fraction of a percent, but 13.8% (we are talking about monetary amounts expressed in U.S. dollars). Note that the global GDP growth in 2015 was estimated by the IMF at 3.1%.

Before the crisis, 2007-2009 for nearly a decade, international trade had a growth rate far exceeding the growth rate of world GDP on average in 2 times. After the crisis the growth rate of the world economy and world trade have started to converge, and then came the lag-Commerce from the global economic growth.

It signals the end of an era of economic globalization. Arising in 2015, the combination of moderately positive GDP growth and strongly negative dynamics of world Commerce face the fact that the 2016 world GDP may be in the red, there will be global economic collapse.

Can you explain such a sharp drop in global trade during the past year in different ways. First of all, talking about a sharp drop in oil prices, whose share in world merchandise trade, highly visible. Say about the lower courses of most national currencies against the U.S. dollar, in which the measured value of the volume of world trade. According to some estimates, the growth of the physical volume of world trade last year was still in positive territory (2.5 per cent). However, such a “physical plus” is ephemeral and will quickly disappear. Many countries in 2015, continued to supply drastically cheapened the goods to preserve their position in the markets, but exports with zero or negative financial results can’t last. In 2016 the price of oil and many other commodities will remain low. Is sure to continue and what is today called currency war, that is, exporters are deliberately lower exchange rates of national currencies against the US dollar. Attempts to compensate for the loss of foreign exchange earnings from exports increasing export volumes will further Deplete the national economy. Export stimulation through currency dumping is a boondoggle. I think that global trade in 2016 will take in the negative not only in monetary but also in physical terms.

As for the Outlook for global economic growth in 2016, they are, in our opinion, overly optimistic. At the beginning of the current year, the IMF assessed the growth of world GDP, equal to 3.6%. The OECD estimate was much lower – 3.3 percent. After a few weeks, both organizations have revised their estimates downward, respectively, to 3.4 and 3.0%. I believe that during the year such revisions will be given a number and all the downwards. Indeed, a key tool of economic management today is so-called the formation of expectations of market participants. IMF, OECD, IBRD and other international organizations in their evaluations try to create the optimistic expectations.

The bulk of world trade accounted for by China and the United States. China in 2014 surpassed the United States, taking the most traded first place in the world. In 2015, the United States continued to suffer losses in foreign trade due to rising relative to most currencies in the dollar. US exports, according to preliminary estimates, in 2015 fell by 6.3%. Apparently, most of the reduction in world trade in 2015 came in China. Cost volume of China trade in RMB decreased by 7%, in USD – 8% (difference in rates is due to the depreciation of the Chinese currency to the U.S. dollar in the past year).

The official Chinese Agency “Xinhua” reported on 1 March that the plan for socio-economic development of the PRC for 2015 successfully performed in 24 of the 25 core indicators. The only losing index gave China’s foreign trade. The growth of China’s GDP amounted in 2015 to 6.9%, but the lowest figure for the last 25 years. That is, in China, there is the same asymmetry as in the global economy: modest positive GDP dynamics on the background of negative dynamics of international trade. This is a very serious call to the Chinese authorities, which for several decades pursued a policy orientation of the economy to external markets.

In the past year, despite the decline in international trade, its role for the economy of China remained important. With the General fall in the value of trade in China achieved a record positive balance of trade of 3.69 trillion. yuan (560 billion dollars). However, it is unlikely trade partners of China will agree to continue to tolerate such a lopsided trade in his favor. It is expected a more vigorous application of anti-dumping duties on Chinese goods on the European market (this is allowed by the rules of the WTO against countries that do not have the status of “market economy”; China this status is still not received). You can also expect a strengthening currency war against the yuan, the introduction of non-tariff barriers, etc. While China is not as actively to have recourse to a trade war as other States. He obtained the inclusion of the yuan in a “basket of reserve currencies”, and reserve currencies ought not to engage in currency wars. The Chairman of the people’s Bank of China in February this year on the eve of the meeting “financial twenty” in Shanghai solemnly declared that the Chinese Central Bank sufficient funds to maintain a stable yuan exchange rate.

But other countries such obligations are not burdened. The same Brazil last year has lowered the rate of its real against the US dollar by 40% and significantly increased their exports (in physical terms) in Asia. China fears that its balance of trade with Brazil can change significantly in favor of the latter. It is noteworthy that despite the sharp increase in Brazil’s exports to China, in 2015 the total turnover of the two countries decreased. Among other things, reduced trade with China and other BRICS countries. In particular, with Russia, the trade fell, according to preliminary estimates, by 30%.

Many experts believe that China is the weakest link in world trade. Introduced in mid-February, data on the foreign trade of China for January 2016 was far below analysts ‘ forecasts. In January the foreign trade of China declined by 14.3% in annual terms (before 291,7 billion us dollars). Index of Chinese exports has fallen by 11.2% (up to 177,5 billion dollars). Imports fell by 18.8% (114,2 billion us dollars). The continuous fall of Chinese exports has continued for 7 months, while imports to 15 months.

Collapsing world trade is not only an indicator of adverse changes in the economy, but symptom worsening in the international situation. In the late XIX – early XX centuries, the world experienced the “internationalization of economic life”, as they called it then processes called today economic globalization. Then the internationalization lasted 25-30 years and resulted in the final section of the world market monopolies. The extensive development of capitalism on the planet ended. The monopolies arose the need for economic redivision of the world by military force. Such a redistribution was implemented during the First world war. After, in the 20-ies of the twentieth century, a boom of international trade, which in turn ended with the stock market slump in new York in October 1929. For a decade the world of capitalism plunged into an economic crisis that gave rise to first a stagnation in world trade, and then her collapse at times. Countries turned to the autarkic economy. This new protracted recession in capitalist internationalization, the ruling circles of the West were overcome, preparing and unleashing world war II.

Something similar we see today. The military conflict in Syria and other points near and Middle East, Plenum NATO tensions Russia’s borders, provoking territorial disputes between China and its neighbors are a painful reaction of the West on the completion of economic globalization and the ongoing collapse of international trade.

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