World trade 'set to grow by 8.5%'

Increasing oil prices may hit world trade in 2005

Global trade is set to grow by 8.5% in real terms in 2004 despite soaring oil prices, the World Trade Organisation (WTO) has said.

Growth this year was boosted by trade and output expansion in China, Latin America and Africa, and a stronger-than-expected recovery in Japan.

But the high price of oil and other commodities may affect output in 2005.

WTO data shows trade in merchandise rose by 4.5% in 2003, up from 3% in 2002 and a decline in 2001.

"Strong demand is behind rising prices for oil and other commodities (in 2004), and markets appear to be handling this well," said WTO director-general Supachai Panitchpakdi.

The WTO said that in 2003:

• Stronger activity in manufacturing and mining, and a continued expansion in agriculture, was behind the recovery in world trade.

• Trade in merchandise expanded faster than output.

• The prospect of European Union enlargement provided a stimulus for trade within Western Europe, with imports from its transition economies exceeding those originating from North America for the first time.

• Latin America registered a surplus in its merchandise trade, after 12 years of successive deficits,

• Trade in office and telecommunication equipment lagged well behind overall growth figures, after being the most buoyant product category in the 1990s.

• Asia's merchandise exports and imports expanded faster than overall world trade. China's surging import demand for oil, copper, soybeans, contributed significantly to higher prices for those commodities. Although its imports grew faster than exports, China still recorded a significant trade surplus.