Global trade is expected to remain sluggish in 2013 as the economic slowdown in Europe continues to suppress demand for imports - but a recovery in clothing and textiles trade may be under way.

In an update yesterday (10 April), the World Trade Organization (WTO) said it now sees global growing by 3.3% this year, down from earlier projections of 4.5%.

Next year, however, growth should rebound to about 5%, with exports from developed and developing economies increasing by 2.6% and 7.5%, respectively. On the import side, developed economies should advance by 3.2% while developing economies should rise 7.4%.

"The events of 2012 should serve as a reminder that the structural flaws in economies that were revealed by the economic crisis have not been fully addressed, despite important progress in some areas," WTO director-general Pascal Lamy said.

"Repairing these fissures needs to be the priority for 2013."

The forecasts follow an "abrupt deceleration" in 2012, when world trade growth fell to 2% in 2012 - down sharply on the 5.2% recorded in 2011. This was attributed to slow growth in developed economies and recurring bouts of uncertainty over the future of the euro.

Flagging output and high unemployment in developed countries reduced imports and fed through to a lower pace of export growth in both developed and developing economies.

In dollar terms, the value of world merchandise exports last year remained flat at $18.3trn, largely because of falling prices for commodities, including cotton, whose price declined 42% according to IMF commodity price statistics.

The WTO's quarterly analysis of merchandise trade suggests a recovery in clothing and textiles trade may be under way, with year-on-year growth in the sector improving from -8% in the third quarter to -1% in the fourth quarter of 2012.
Looking ahead, the WTO says 2013 "looks to be a near repeat of 2012, with both trade and output expanding slowly."

Diverging prospects for the US and EU add uncertainty to the forecast, it notes. Improved economic prospects for the US only partly offsetting the continued weakness in the EU, whose economy is expected to remain flat or even contract slightly this year.

China's growth should continue to outpace other leading economies, cushioning the slowdown, but exports will still be constrained by weak demand in Europe.

The WTO also warned there is an increasing risk of protectionism.

"As long as global economic weakness persists, protectionist pressure will build and could eventually become overwhelming," Lamy said.

"The threat of protectionism may be greater now than at any time since the start of the crisis, since other polices to restore growth have been tried and found wanting.

"To prevent a self-destructive lapse into economic nationalism, countries need to refocus their attention on reinforcing the multilateral trading system. Trade can once again be an engine of growth and a source of strength for the global economy rather than a barometer of instability."