Trade and Hard Times

(The New York Times)

Foreign trade has been a potent force for good over more than half a century. It propelled Japan’s emergence from the ashes of World War II and helped it become an industrial powerhouse. It is the cornerstone of development strategies from China to Brazil. It is what links countries all over the world in a network of production that underpins global prosperity.

Today, trade is collapsing, one more casualty of the global financial crisis. That is especially bad news for countries that are dependent on trade for economic growth, including many developing nations that had nothing to do with the financial mess.

Exports from the United States declined 30 percent and imports 34 percent in the first quarter of the year from the previous three months. Imports into countries that use the euro from outside the area were down 21 percent compared with the first quarter of last year. At this rate, the World Trade Organization’s dire projection in March that global trade would decline 9 percent this year will soon start to look outright boastful.

The drop in trade is spreading economic weakness across the world, as one country’s drop in imports translates into a fall in exports, and production, in another. Read more here.