There is great uncertainty about trade and growth developments in the fourth quarter of 2001

WTO annual trade review

The WTO's gloomy forecast represents a retreat from its prediction in May of 7% expansion in world trade this year.

But the world trade body still fears this could be over-optimistic given the as-yet-unknown economic impact of the terrorist attacks on the United States and its campaign of military retaliation.

Worse to come?

"There is great uncertainty about trade and growth developments in the fourth quarter of 2001, particularly in the light of tragic events of September 11," the WTO said.

The WTO highlighted three factors behind the drop in trade volumes: the stagnation of imports into the United States; an "unexpectedly strong" slowdown in demand from Western Europe; and the "dramatic downturn" in the IT industry worldwide.

The worst-hit countries were in Asia, the report said.

IT slowdown

Several Asian countries, notably Singapore and Taiwan, face recession this year because their economies rely heavily on exporting semiconductors and consumer electronics to the US.

Countries whose trade is less dependent on the United States have fared better - Eastern Europe, for example, has benefited from a 20% increase in exports to Russia.

China was a bright spot in Asia, with a 9% increase in exports in the first half of 2001, sustained in part by the relatively small role of IT equipment in its trade.

The value - rather than volume - of world trade shows a similarly bleak picture, growing by only 1% this year, whereas it expanded by 12.5% last year.

Overall, developing nations increased the volume of their exports by 15%, the WTO said, ascribing the gains to a mix higher oil prices and a bigger share of world trade in manufactured goods.

Hopes for Doha

The report comes less than a month before the WTO's summit in Doha, Qatar, where it will attempt to launch a new round of global trade talks.

To do so, it must overcome anger among developing nations at what they perceive as US and European domination of the agenda which derailed the last WTO Ministerial Meeting in Seattle in1999.

The summit will go ahead in Doha, Qatar, despite concerns about the security risks of bringing ministers from 142 countries together while the US is at war.

To lessen the risk, the meeting will be brisk, with shorter speeches than usual.