The OECD, World Trade Organisation (WTO) and the UN’s Conference of Trade and Development (UNCTAD) have called on the leaders of the G-20 (Group of Twenty) countries to make a stronger commitment to open trade and investment as the global economy begins its recovery from the crisis. World trade in June 2009 was 19 per cent below its peak level of April 2008.

In a combined report on G-20 Trade and Investment Measures, Angel Gurría, Secretary-General of the OECD, Pascal Lamy, Director-General of the WTO and Supachai Panitchpakdi, Secretary-General of UNCTAD said G-20 leaders must remain vigilant against protectionism.

“The global crisis cannot be deemed to be over yet, despite welcome recent indications of economic recovery in some parts of the world. Growing unemployment due to the crisis will continue to fuel protectionist pressures for the years to come,”they said.

“It is the responsibility of all world leaders, in particular those of the G-20 members, to take the appropriate policy actions so that trade and international investment can help economies recover from the global crisis on a sustained basis. In this regard, G-20 leaders should undertake a stronger commitment to open markets and make concrete their call to conclude the Doha Round in 2010.”

WTO and OECD rules have acted as a safety harness preventing the adoption of wide-scale protectionist policies. The heads of the three organisations said they were encouraged by investment policies in the G-20 countries as they had, on the whole, increased openness and clarity for foreign investors. At the same time, some governments have established support schemes that can discriminate against foreign-controlled companies or raise barriers to outward investment flows.

The OECD, WTO and UNCTAD heads also warned that some of the fiscal stimulus packages introduced to tackle the crisis contain elements that favour domestic goods and services at the expenses of imports.

“It is urgent that governments start planning a coordinated exit strategy that will eliminate these elements as soon as possible,”they said.

The report sees the volume of world merchandise trade falling by 10 per cent in 2009 and foreign direct investment plummeting by 30- 40 per cent this year, due largely to a sharp collapse of investment flows in OECD countries.

The report has been prepared for G-20 leaders at the Pittsburgh Summit due to be held on September 24-25th. The organisations will continue to monitor trade and investment measures, as requested at the London Summit on April 2nd 2009.

World merchandise trade in volume terms (average of exports and imports) rose 2.5 per cent in June 2009 according to the Netherlands Bureau for Economic Policy Analysis (CPB). This was the largest increase since July 2008 . June was the first month since the crisis began in which all major traders and most regions (except Africa/Middle East) recorded positive month-on month export growth, a good indication that international trade flows are beginning to normalise.

However, world trade in June 2009 was still 19 per cent below its peak level of April 2008. This is consistent with the WTO Secretariat's 2009 forecast of a decline of 10 per cent for merchandise exports, since it is expected that trade will grow, albeit slowly, for the remainder of 2009. Combined with the fact that world trade volumes fell sharply in late 2008, this suggests that the decline for 2009 as a whole will be smaller than 19 per cent.

Although the sharp contraction in trade flows evident from the second half of 2008 was attributed primarily to a contraction in demand, tighter credit conditions were increasing the cost of trade finance. The response of the G-20 to "ensure availability of at least $250 billion over the next two years to support trade finance through our export credit and investment agencies and through multilateral development banks" was welcomed by WTO Members.