Downturn Choking Global Commerce

(Washington Post – Anthony Faiola and Ariana Eunjung Cha)

Sharply lower consumer spending in the United States and other high-income countries is stalling global trade, causing a surprise downturn in exports from China that is dramatically slowing its economy and rippling through other countries that rely on international commerce.

With recessions hitting the United States, Europe and Japan at the same time, China yesterday [Wednesday] said its November exports took their biggest dive in seven years. Weak holiday spending is taking a particularly hard toll on toymakers: Two-thirds of China’s small-toy exporters closed in the first nine months of 2008, according to government statistics. At the same time, tight credit and falling global demand are setting off the first decline in world trade in a quarter century, touching off a wave of job losses in rich and poor countries alike.

The drop in trade is both sharper and faster than many analysts had predicted only weeks ago, with freight lines that were sailing full this summer now slashing prices by as much as 90% as cargo traffic plummets and unsold goods pile up at ports from Baltimore to Shanghai. The World Bank this week said global trade is set to fall by 2.1% in 2009, marking the first decline since 1982. The drop is contributing to a more dire outlook for the world economy, which the World Bank said is close to falling into a global recession.

The slowdown illustrates how globalization, which fed rapid growth during times of plenty, can quickly turn against nations during times of bust. Depressed car sales in the United States, for instance, are spreading through the global supply chain, eliminating jobs for contract auto workers in Japan and laborers in South Africa who mine the metals used in car parts.

The impact on China, one of the rare lights in an otherwise gloomy global economy, is particularly troubling. Beijing announced yesterday that its November exports dropped 2.2% after a 19.2% surge in October. Imports took an even steeper drop, falling 17.9%. Analysts now say growth there is slowing to its lowest level since 1990, curbing Chinese demand. Read more here.