Economists from the World Trade Organization (WTO) expect a decline in world merchandise trade volume by 10 percent in 2009, according to the WTO's annual world trade report released on Wednesday.
This year's World Trade Report 2009: Trade Policy Commitments and Contingency Measures examines various trade agreement measures used by governments in times of crisis, their implications to an economy and to the trading system.
The challenge, according to the report, is in "designing disciplines for the use of contingency measures is to strike a balance between flexibility and commitments. Too much flexibility may undermine the value of commitments but too little may render the rules unsustainable."
It further noted that trade growth will be strongly negative this year.
"Continuing downside risks led WTO economists to revise further downward its forecast for 2009 world merchandise trade from a decline in volume of 9 percent to a decline of 10 percent," the report said.
Speaking at the launch of the World Trade Report 2009 on the sidelines of the Ministers Responsible for Trade Meeting of APEC 2009 held here, WTO director-general, Pascal Lamy said, "This adversity is severely testing the policy ingenuity of governments across the globe, and in today's interdependent world, their willingness to make common cause in addressing shared challenges."
"Effective international cooperation and open markets are as vital today as they have ever been." he added.
The report also noted that governments may be more willing to accept deeper commitments knowing that they have adjustment policy tools in the form of contingency measures.
An agreement that foresees the possibility to use certain measures to manage unforeseen circumstances of economic or non-economic difficulties has a better chance of remaining robust than an agreement that results in regular non-compliance.
"Since flexibility is not costless, exercising restraint is beneficial. Transparency and effective monitoring may make a decisive contribution to help manage trade policy, especially in adverse economic circumstances," the report concluded.