Lower economic output, brought on in part by the sharp rise in oil prices, will slow world trade growth in 2005, according to World Trade Organization economists. World merchandise exports are expected to grow by 6.5 per cent in 2005, markedly less than the 9 per cent growth recorded in 2004.

"While growth in trade will remain satisfactory in 2005 the decelerating trend is cause for some concern," said WTO Director-General Pascal Lamy.

"To set us on the right course we need to create more opportunities for trade, particularly in developing countries, and we need to adjust global trade rules to better meet the needs of entrepreneurs in the 21st century. The way to achieve this is through the successful conclusion of the Doha Development Agenda round of global trade negotiations."

Trade growth picked up in OECD countries in the second quarter of 2005, but available information points to significant growth deceleration in intra-Asian trade and in US imports in the first half of 2005.

The steep rise in real oil prices, to their highest level in more than two decades, has negatively affected consumer and business confidence in the oil importing countries.

The full impact of the price increases is still to be felt in consumer and business expenditure.

The main statistics show that world merchandise exports increased in nominal terms by 21 per cent to $8.9 trillion in 2004.

In real terms, merchandise exports rose by 9 per cent in 2004 compared with nearly 5 per cent in 2003.

Trade in commercial services grew in nominal terms by 18 per cent to $2.1 trillion in 2004, which was also stronger than the 14 per cent growth recorded in the preceding year.

Highlights of the report are:

Key features of the world trade developments in 2004 include the following:
- Strong economic growth and rapid trade expansion were present in all regions in 2004.

- The expansion of merchandise trade continued to exceed merchandise output growth by a large margin. The excess of trade over output growth was again particularly large for manufactures.

- The sharp rise in prices and traded volumes of many primary commodities has often been a major factor explaining the relative strength of regions and product groups in international trade flows. The most prominent illustration of this is, of course, export growth of net oil exporters. The sharp increase in net oil imports of China, the United States and India since 2000 had been a major factor behind the expansion of oil trade and the increase in oil prices.

- Sharp price increases for iron and steel, ores, non-ferrous metals and fuels combined with a further depreciation of the US dollar vis-à-vis the currencies of major European traders led to a double-digit price increase for world merchandise trade, the largest annual increase since 1995. These four product groups ( iron and steel, ores, non-ferrous metals and fuels) recorded export growth in excess of 30 per cent in 2004.

Product groups with the weakest nominal growth in 2004 included agricultural products, textiles and clothing.

- Transportation services expanded by 23 percent to $500 billion, the fastest increase among all services categories. The expansion was boosted by rising transportation costs and a strong increase in the volume of merchandise trade.

- Oil exporting regions (the Commonwealth of Independent States, the Middle East and Africa) increased their merchandise exports much faster than the global average. North America and Europe are the two regions whose merchandise export and import growth remained below the global average growth in 2004.

- The merchandise exports of least-developed countries (LDCs) are estimated to have increased by one third to $62 billion in 2004. Higher commodity prices and an increase in the volume of crude oil contributed to this strong performance. Non-oil exporting LDCs recorded lower than average export growth for the group.

- The emergence of China as a major import and export market for goods and services continued unabated in 2004. The share of China in the exports and imports of many countries has doubled between 2000 and 2004. By 2004, China had become the world's third largest merchandise trader.

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