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http://www.ft.com/cms/s/0/a3465b06-1bbe-11e3-94a3-00144feab7de.html#ixzz2f3WohxhE By Shawn Donnan in London Global trade is likely to remain sluggish for many years, and emerging economies that have depended on exports to fuel their transformation will have to find new sources of growth, says a UN report. The report, released on Thursday by the UN Conference on Trade and Development, makes clear that the effects of the 2007-8 financial crisis and the “great recession” that followed are still being felt in both the developed and developing world. The way the crisis has affected global trade patterns also calls into question the future value of the export-oriented growth model that fuelled the economic emergence of China and other developing world champions over the past three decades, Unctad’s economists wrote in their annual report. Unctad joins the debate at a time when many emerging economies – including Brazil, China and India – are facing slowing growth, and some, such as China, are working hard to rebalance their models towards more domestic sources of expansion. International trade has yet to return to the rapid growth rates seen before 2008, said Unctad economists, adding that growth is likely to remain subdued for years to come. Roberto Azevêdo, the World Trade Organisation’s new director-general, said this week that it would downgrade its 2013 growth forecast for global trade from 3.3 per cent to 2.5 per cent. Among rich countries, only the US had recorded a positive growth rate in its international trade in 2012, said Unctad. “Imports by all developed regions remain below their pre-crisis level,” its economists wrote, “and only the United States has managed to increase its exports to a higher level than their previous peak of August 2008.” Trade by developing economies had also “decelerated considerably” in recent years. Between 2002 and 2007, export volumes from those economies grew at an annual rate of 11.3 per cent. But that growth fell to 3.5 per cent between January 2011 and April 2013. The downward trend “highlights the vulnerabilities developing countries continue to face at a time of lacklustre growth in developed countries. It is also indicative of a probably less favourable external trade environment over the next few years,” Unctad economists wrote. While the pre-crisis rapid growth of exports from emerging economies to satisfy buoyant consumer demand in the rich world had been favourable for many developing countries, it “was built on unsustainable global demand and financing patterns”. “Reverting to pre-crisis growth strategies cannot be an option,” they wrote. “Rather, in order to adjust to what now appears to be a structural shift in the world economy many developing . . . economies are obliged to review their development strategies that have been overly dependent on exports for growth.” Encouraging greater domestic consumption and investment could come alongside the continuing development of exports. Bolstering domestic demand in emerging economies could also encourage the future development of “South-South” trade between developing countries, the report added. The share of South-South movements in international trade had increased from slightly less than 30 per cent in 1995 to slightly more than 40 per cent last year. The report also called for reform at the national and global levels to encourage more efficient financing of productive parts of the real sector such as industry, agriculture, services and infrastructure. Central and development banks needed to do more to finance productive investments, Unctad economists wrote. In the years since the financial crisis, credit had too often been directed to consumption rather than to investment. The result was that it was fuelling asset bubbles in sectors such as real estate “rather than innovation and production”. Taylor Scott International
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