The financial crisis will drag global trade down by 9 percent in 2009 from a year earlier -- the largest contraction since World War II -- the World Trade Organization (WTO) forecast yesterday.

Developed nations will see a larger contraction in exports, by probably 10 percent, while developing countries will see a shrinkage of 2 to 3 percent, the WTO predicted.

"Economic contraction in most of the industrial world and steep export declines already posted in the early months of this year by most major economies -- particularly those in Asia - make for an unusually bleak 2009 trade assessment," the Geneva- based WTO said in its annual assessment of world trade.

But Dong Xian'an, economist and trade specialist at brokerage Southwest Securities, commenting on the WTO forecast, said he is confident that China will be one of the first nations to "walk out of the dark tunnel" of declining trade.

Although China's exports have fallen for four consecutive months from November, the economist said the nation may have seen the bottom of the crisis. He said the trade decline will start easing off in the next few months, before a mild rise in the second half of the year.

Releasing the forecast, WTO Director-General Pascal Lamy also pointed out that as millions of trade-related jobs are lost, governments must avoid resorting to trade protectionism which can protect no nation and may threaten the loss of more jobs.

Stressing that trade is a potent tool in lifting the world from its economic doldrums, Lamy sees the forthcoming Group of 20 (G20) summit in London next week as a "unique opportunity to unite" in moving to refrain from any further protectionist measure which will only "render global recovery efforts less effective".

A document released by the State Council Development Research Center before the G20 summit warned that Chinese exporters may face even worse market conditions when there is a possibility of China becoming a "primary target" for global trade protectionism.

According to the WTO, as a result of the financial crisis since September last year, global output growth slowed to 1.7 percent, compared to 3.5 percent in 2007, and is likely to fall by between 1 and 2 percent this year.

The decline in 2008 is the first since the 1930s, and its impact is magnified in trade. Monthly exports and imports of major developed and developing economies have been falling since September.

The WTO's preliminary estimate of growth in world trade volume for 2008 is 2 percent, substantially lower than the 4.5 percent forecast a year ago. Global trade tapered off in the last six months and was well down on the 6 percent volume increase posted in 2007.

In projecting trade growth for 2009, the WTO economists assume a normal pattern for a recession - where trade falls, remains weak for a time and then resumes its upward trajectory and begins to return to its previous trend.

If this basic scenario holds, "world merchandise trade is likely to fall some 9 percent in volume terms in 2009," said the WTO.

Since a global recession began to take hold in the fourth quarter of 2008, there has been little cause for optimism in the outlook for trade in 2009, said the WTO.

China cannot insulate itself from the global downturn when most of its main trading partners are in trouble, experts said.

According to the WTO, China's exports to its top six trading partners including the United States, the European Union and Japan, represented 70 percent of the country's total exports in 2007. All those trading partners are currently experiencing economic contraction or slowdown and are likely to exhibit weak import demand for some time.

According to Chinese Customs, the country's foreign trade in February by volume terms was $124.95 billion, down by 24.9 percent from the previous year. Exports were down by 25.7 percent year-on-year, and by 28 percent compared with January.

Source: China Daily