Since the financial crisis, exports have grown at a disappointingly slow rate, with trade volumes globally running at over 20% below their pre-crisis trend.
That represents a much weaker recovery than in the wake of previous economic downturns according to a new report from the EEF, the manufacturers’ organisation: Global Trade – Run Aground or Structurally Sound? (available via www.eef.org.uk).
This reveals that export volumes have grown at an annual average rate of 1.3% per year, compared with growth of 5.1% in the decade leading up to the financial crash.
Sluggish demand is only partly responsible for the low growth rate, the EEF suggests, citing international bodies such as the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) for evidence supporting that view.
These organisations have highlighted protectionism, lack of trade finance, and interventions by national governments in support of local businesses as factors which are holding back the recovery of world trade flows.
This perspective is at odds with many short-term business surveys hailing the benefits of a recovering global economy, the EEF points out.
In reality, it claims, many export destinations are not as open to trade as they were before the financial crisis.
Examples cited include: some 17% of exporters to China have seen their trade affected by moves to support local businesses while 10% of companies selling to the USA have experienced an increase in tariffs.
Such protectionist policies may have been justified in the wake of the crisis, the EEF accepts, but their ongoing impact – and the potential for them to be further ramped up – raises questions about trade growth potential in the UK.
