Global trade forecast grim as epidemic 'promotes instability'

The spread of the deadly Sars virus could put the brakes on global trade growth in the year ahead, the World Trade Organisation (WTO) warned yesterday.

With the authorities in China and Hong Kong struggling to bring the disease under control, the WTO said its downbeat forecast of less than 3% for trade growth in 2003 might still prove optimistic if the outbreak worsened.

"These trade figures reflect the growing economic and political uncertainty in the world today," said the WTO's director general, Supachai Panitchpakdi presenting its latest assessment of the prospects for global trade.

"This uncertainty is detrimental to economic growth and development and can give rise to greater instability across the globe."

Mr Supachai urged governments to respond to the risky environment by accelerating the current round of trade negotiations, launched in Doha, Qatar, in November 2001.

Participating governments are due to meet in Cancun, Mexico, in September to review progress, but with western countries wary of opening their generous farm subsidies for negotiation, trade analysts are sceptical about the outlook for the "development round".

Global trade contracted in 2001 as the US slid into recession, while the September 11 terrorist attacks brought business to a halt. The WTO said trade bounced back in 2002 by 2.5%, although this was less than half of the average pace of the 1990s.

Asia, the region afflicted by Sars, was at the forefront of the recovery, and China, which joined the organisation in late 2001, saw the value of its exports surge by 20% last year, overtaking the UK as the world's fifth-largest trading nation.

As well as pressing for progress in the Doha round, the WTO used yesterday's report to express concern about the dampening effect of anti-terrorist measures on global trade.

"Some of these measures have resulted in restrictions on the movement of persons and goods," it said in the report. "The cost not only involves the direct expenditures ... but the indirect impact on trade in the form of more cumbersome procedures and delays."

While the Asian developing nations performed strongly last year, the WTO said that trade had remained stagnant in western Europe and Japan.

Crisis-hit Latin America also struggled, with imports declining by 5%.