CANBERRA: World trade has had its worst year since the global financial crisis, with almost no growth in the volume of goods shipped and average prices of traded goods falling sharply. Australia’s 6.6 per cent growth in exports of goods and services over the 12 months to September, boosted by the commissioning of liquefied natural gas plants, was one of the global standout performances, but the difficult trade outlook is hurting both manufacturing and rural industries. Australia’s main trading partners in Asia have been among the worst-affected by the downturn and there are concerns of further weakness if US president-elect Donald Trump acts on his threat to punish China’s exporters. The latest global trade report compiled by the authoritative Dutch Economic Policy Analysis Bureau shows the volume of goods traded internationally in the 12 months to October was only 0.8 per cent higher than in the previous year. It is the first time trade growth has fallen below 1 per cent since the global financial crisis ended in 2009-10. In the five years before the crisis, world trade increased by an average of 7.1 per cent annually, sufficient to lift trade volumes by 40 per cent.
The annual growth rate stabilised at just under 3 per cent once the worst of the 2008-9 crisis passed, but has weakened sharply over the past year. The emerging nations of Asia, led by China, were responsible for the dynamism of global trade before the GFC, with their exports rising by an extraordinary annual average of 14.2 per cent. However, in the latest 12 months, their exports growth rate has fallen to only 0.5 per cent. The historic disadvantage of Australia’s great distance from the major advanced nations’ markets was reversed during the Asian boom, as the region emerged as our dominant trading partner. The region’s share of Australian exports has risen from 50 to 80 per cent in the past 30 years. Australia has maintained strong growth in export volumes over the past five years because of the commissioning of resource projects and a strong performance by services exports, principally tourism and education. However, prospects for the year ahead are clouded by Donald Trump’s promise to narrow the US trade deficit of $US500 billion, ($694bn) of which 60 per cent is attributable to China. Mr Trump has vowed to impose a blanket 10 per cent tariff on Chinese imports and to name Beijing as a currency manipulator, which would clear the path for further punitive actions.
The president-elect has put a strong critic of China’s trade surplus with the US, Peter Navarro, in charge of a new trade advisory office in the White House, while his nomination for commerce secretary, Wilbur Ross, is a private-equity billionaire who is closely associated with the US steel industry and is expected to prosecute more protectionist trade policies. With 30-40 per cent of China’s exports arising from processing its imports from other Asian nations, any further clamp on Chinese exports growth could be expected to adversely affect the rest of the region, including Australian commodity exporters. The Dutch bureau’s trade figures show that as well as weak volumes, the prices of traded goods, expressed in US dollars, have also continued to fall, dropping 7.1 per cent over the 12 months to October. They are now 20 per cent lower than their peak in early 2012. That partly reflects the recent strength of the US dollar, in which global commodity prices are denominated, but also the weakness of worldwide demand.
