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1. INTRODUCTION: RECOVERY OF GLOBAL OUTPUT AND WORLD TRADE
The expansion of global output and trade gained considerable momentum in the second half of 2003 
resulting in an annual average increase of world GDP and world merchandise exports of 2.5 per cent and 
4.5 per cent respectively. These changes represent stronger than expected improvements when compared 
with the preceding year although trade growth remained below the average rate recorded in the 1990s. These 
annual results were negatively affected by a combination of unusual, temporary factors and longer-term 
structural weaknesses in a number of major economies (in particular the state of the banking system in Japan 
and the labour markets in Western Europe). One of the influencing temporary factors was the emergence of 
the severe acute respiratory syndrome (SARS) in East Asia. Although SARS remained a limited epidemic relative 
to malaria and the acquired immunity deficiency syndrome (AIDS), it had a dramatic short-term impact on 
the movement of people and on the tourism industry in the region.1 The build up of tensions resulting in the 
military conflict in Iraq weakened consumer and business confidence in many regions in the first quarter of 
the year. In OECD countries the composite leading (business) indicator hit its lowest level in March 2003 then 
displayed a trend increase from May 2003 onwards. The major stock markets showed a similar development, 
dropping sharply until March but recovering thereafter and then expanding sharply until the end of the year.
Once the SARS outbreak was under control and the open military action ended in Iraq the world economy 
strengthened in the third quarter. Trade in goods and services strongly rebounded in the third quarter in both 
the United States and East Asia.
The moderate growth in output of the global economy precluded an improvement in the employment 
situation in most regions. This is not an unexpected development since employment indicators typically lag 
in cyclical recoveries. It requires several quarters of strong and sustained output growth before employment 
gains and a reduction in unemployment rates can be observed.2 Rapid growth in productivity in the US also 
contributed to the lack of improvement in employment levels.
Monetary and fiscal policies have been expansionary in most regions. Consequently, fiscal deficits widened 
and interest rates declined or remained low. The fiscal deficit of the major developed economies in 2003 over 
2002 rose from 3.4 per cent to 4.9 per cent of GDP in the United States, from 2 per cent to 2.7 per cent in the 
European Union and from 7.1 per cent to 7.4 per cent in Japan. Interest rates decreased markedly especially at 
the longer-term end in all developed markets. A sharp increase in the monetary aggregates in the developed 
countries, together with gains in confidence in South American markets, contributed to an improved credit 
rating of many developing countries. Consequently, emerging-market spreads dropped sharply from late 2002 
onwards, reducing the debt-servicing costs of many developing countries. 
Exceptional exchange rate developments in 2003 comprise the rise of the euro and, to a lesser extent, that of 
other West European currencies and the yen vis-à-vis the United States dollar.3 The direction of the exchange 
rate changes is generally considered a positive development given the current account imbalances prevailing 
in early 2003. However, some observers view the magnitude and pattern of exchange rate changes in 2003 
as insufficient given the size and regional structure of current account imbalances. Despite the depreciation 
of the dollar, the US current account deficit still continued to widen in the course of the year, amounting to 
$542 billion in 2003 – a sum equivalent to 4.9 per cent of US GDP and nearly 6 per cent of world trade in I  TRADE AND TRADE POLICY DEVELOPMENTS
1  According to WHO (2004), 8,096 people were infected of which 774 persons died of SARS during the period from 1 November 
2002 to 31 July 2003.
2 ILO (2004) reports a decline in unemployment in the transition economies and South East Asia. An increase in unemployment 
occurred, however, in Africa and the Middle East. In South Asia, the regional unemployment rate remained unchanged in 2003 from 
the preceding year. CEPAL (2003) indicates a small increase in the average unemployment rate for Latin America in 2003, while OECD 
(2003a) reports an average increase in unemployment rates for both North America and Western Europe in that year.
3 Other appreciating currencies in 2003 comprise the Canadian dollar, the Czech kouruna, the Hungarian forint and the South 
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2goods and services. Financing of the US current account deficit in 2003 went smoothly as is indicated by low 
US interest rates. In the course of 2003, this financing of the US deficit was increasingly shifted to a number 
of Asian central banks which increased their foreign exchange reserves rather than appreciate their currencies 
in relation to the dollar.
Having strongly supported international trade flows in the second half of the 1990s, global FDI flows remained 
almost flat in 2003, at the five-year low of approximately $600 billion recorded in 2002.4 FDI inflows into 
developing countries, excluding China, decreased for the third year in a row in 2003, amounting to less than 
$100 billion for the first time in eight years. However, capital flows to the developing countries – other than 
FDI – increased in 2003. Private capital flows to emerging markets in the developing world are estimated to 
have increased mainly as a result of increased portfolio investments and credits from commercial banks and 
non-banks.5 In the past, FDI inflows to the transition countries were generally directed to those economies 
which had been in the process of joining the EU. In 2003, however, FDI inflows expanded faster to the CIS 
countries than to those acceding to the EU in 2004. Debt relief under the enhanced Heavily Indebted Poor 
Countries Initiative (HIPC) made further progress, covering 26 countries at the end of 2003. Debt of these 
countries will be reduced over time by about $50 billion (measured on a present net value basis).6
Despite strong monetary expansion in developed and many developing countries, domestic inflationary 
pressures were kept in check by a moderate increase in global economic activity. Dollar prices of internationally 
traded goods, however, increased by 11 per cent in 2003, their strongest increase since 1995. Prices of fuels 
– up by 16 per cent – were boosted by temporary supply shortfalls linked to the conflict in the Middle East and 
by civil unrest in Venezuela. Several developments on the demand side also contributed to the strengthening 
of energy prices. China’s oil demand rose by 11 per cent in 2003, amounting to more than one third of the 
estimated 2 per cent increase in global demand. Net-oil imports rose by 30 per cent and accounted for 
38 per cent of domestic demand in 2003. In the United States, the combination of increased demand and 
falling domestic output resulted in a 7.5 per cent increase in crude oil imports.7 In other words, the role of 
international trade in global energy markets continued to rise, sustaining the rapid expansion of fuel exports 
in recent years from Africa and the transition economies. 
Prices of non-fuel commodities in 2003 rose on spot markets by 7 per cent on average, including a 12 per 
cent increase in metal prices. Prices of manufactured goods evolved quite differently by region in 2003 due to 
exchange rate developments. Dollar prices of manufactured goods exported by Germany and other European 
countries increased much faster than those of the United States or Asian countries.8 On average it is estimated 
that these prices rose nearly 10 per cent, the first annual increase since 1995. One reason why price increases in 
manufactures were not as vigorous as in other sectors is that prices of electronic goods fell steadily in 2003. 
Manufactured goods represent by far the largest share (about 75 per cent) in world trade of goods and 
services, although the manufacturing sector accounts for only about 20 per cent of world GDP. The most 
dynamic segment of international trade in manufactures throughout the 1990s had been trade in office and 
telecom equipment, with dollar values expanding at 10 per cent per annum or twice as fast as total trade in 
manufactured goods. In 2000, the share of office machinery and telecom equipment in world trade exceeded 
the share of agricultural products, chemicals or automotive products by 12.1 per cent. Since the burst of the 
IT bubble in early 2001, international trade in computers9, semiconductors10 and telecom equipment lagged 
4 UNCTAD, Press Release 12/01/04, “Global FDI decline bottoms out in 2003”.
5 Institute of International Finance, Inc, 15 January 2004, “Capital flows to emerging market economies”.
6 Information based on World Bank, News, 23 January 2004.
7 IEA, Oil Market Report, 11 February 2004 available at www.oilmarketreport.org and US Department of Commerce News, 
US International Trade in Goods and Services, December 2003.
8 Germany’s export price for manufactured goods went up by 20 per cent while those of the US and Japan increased by 
0.4 per cent and 3.7 per cent respectively in 2003.
9 Gartner Dataquest, Press Release, 14 January 2004, reports that unit sales of personal computers rose by nearly 11 per cent 
to 168.9 million in 2003.
10 The Semiconductor Industry Association (SIA) announced on 2 February 2004 an increase in worldwide sales of semiconductors 
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4behind the expansion of world trade in manufactures. Despite a recovery in the global sales of computers, 
semiconductors and telecom equipment, the increase in the dollar value of trade in office and telecom 
equipment continued to lag behind overall trade expansion in 2003. It is partly because of the end of the IT 
boom that the volume of international trade expanded less than GDP in 2001, and that the typical excess of 
trade over output growth was unusually small in 2002 and 2003.
Globalization trends are often illustrated by an excess of trade (goods and services) over output growth and the 
faster increase in worldwide FDI flows compared to global fixed-investment expenditure. Since the recession 
in 2001 these two measures indicate – at least temporarily – a slowdown in the globalization process. The 
ratio of world trade to world GDP decreased in 2001 and increased only slightly thereafter. Foreign direct 
investment flows collapsed after the burst of the IT bubble and the stock market crashes in 2001. Due to the 
steep fall of FDI flows, the ratio of FDI flows to gross fixed investment decreased to 11 per cent, after a fivefold 
increase between the early 1990s (4 per cent) and 2000 (20 per cent) (Chart IA.1). 
A comparison of trade (exports plus imports) to 
GDP ratios by region reveals that the sluggishness of 
the trade output ratio over the last three years was 
widespread. The overall stagnation of many of these 
trade to GDP ratios originates from contrasting 
country developments. During the 2000-2003 
period US exports fell while imports continued to 
rise in line with output, leading to a near stagnation 
in the total trade to GDP ratio. In MERCOSUR, 
exports expanded strongly while imports declined 
sharply relative to output, leaving the average 
trade to GDP ratio rather flat over the 1997-2003 
period. The five Asian developing countries most 
affected by the financial crisis in 1997 recorded 
such strong export expansion between 1996 and 
2000 that even a dull recovery in imports could not 
arrest the increase in their total trade to GDP ratios. 
The output decline of the IT sector in 2001 led to 
a temporary dip in both the exports and imports to 
GDP ratios. Following a sharp increase in EU export 
and import ratios between 1992 and 2000, the two 
ratios roughly stagnated between 2000 and 2003. 
Japan’s export and import to GDP ratios dipped in 
2001 but recovered moderately thereafter. In 2003, its overall trade to output ratio reached 10.5 per cent, 
exceeding the level of 2000 by one half of a percentage point. In contrast, China is the only country which 
continued to record a sharp increase in both export and import ratios over the 2000-2003 period, reflecting 
both the increased openness of the Chinese economy and its role in sustaining the global trade expansion over 
the last three years (Appendix Chart IA.1).
Major trade developments in 2003
A preliminary assessment of the major developments of international trade flows in 2003 reveals the 
following:
• After very sluggish growth in the first half of 2003, global trade expansion markedly accelerated in the 
second half and registered an average real increase of 4.5 per cent for the entire year.
• Trade acceleration in 2003 was much stronger in dollar values (or nominal terms) than in real terms. The 
dollar value of world merchandise rose by 16 per cent and average dollar prices rose by 10.5 per cent. Chart IA.1      
Ratio of world trade to GDP and ratio of global FDI 
flows to world fixed investment, 1990-2003
(Percentage)
Source: World Bank, World Development Indicators; UNCTAD, 
World Investment Report and  WTO estimates.��������������
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4• Price developments in 2003 represented a marked reversal of the downward trend observed for trade 
prices since 1995. Nevertheless, despite the recovery in dollar prices in 2003 they averaged below the level 
observed in 1995.
• Price increases in 2003 are mainly attributable to higher commodity prices – in particular for fuels (16 per 
cent) and metals (12 per cent) – and exchange rate movements, particularly the rise of the euro vis-à-vis 
the dollar.
• In 2003 there were marked differences in the growth of merchandise trade flows by region. The highest 
year-to-year growth in export values was in the major fuel exporting regions such as the transition 
economies (CIS) and Africa. Merchandise exports in dollar terms of Western Europe, Asia and the Middle 
East slightly exceeded the global average. This similarity in the three regions hides quite divergent price 
and volume developments. While the expansion of exports from Western Europe is almost entirely due to 
exchange rate changes, more than two thirds of Asia’s export growth can be attributed to volume changes. 
The nominal rise in the Middle East’s exports, however, is mostly (two thirds) accounted for by higher oil 
prices.
• Lowest export growth in dollar values in 2003 was reported for North America and Latin America.
• Together with the Middle East, these two regions also recorded markedly weaker nominal import growth 
than all the other regions. The transition economies, Western Europe, Asia and Africa were the regions with 
import growth exceeding the global average. China’s trade was again outstanding, with import growth of 
40 per cent. For the first time in more than 50 years China’s imports exceeded those of Japan. If imports 
and exports are combined then China’s total merchandise trade almost matches that of Japan in 2003.
• Commercial services trade, which accounts for about one fifth of world trade in goods and services, expanded 
by 12 per cent in 2003 and thus less rapidly than merchandise trade. In the two preceding years (2001 and 
2002) commercial services resisted the slowdown in the world economy better than merchandise trade.
2. REAL MERCHANDISE TRADE AND OUTPUT DEVELOPMENTS IN 2003
In 2003 the average volume increase11 of world merchandise trade was 4.5 per cent, somewhat higher 
than in the preceding year but well below the rate recorded in the second half of the 1990s. This modest 
annual increase was the result of sluggish growth in the first half of the year and accelerated growth in the 
second half. Trade growth exceeded output growth by an atypically small margin. In the 1990s, average 
trade expansion was 6.5 per cent, approximately twice as fast as merchandise output growth. Most regions 
experienced a cessation in the rise of the trade to GDP ratio, which is a typical cyclical feature in a period of 
stagnation or recession (Table IA.1).
The most dynamic trading regions in 2003 were 
Asia and the transition economies, recording 
double-digit import and export expansion of their 
merchandise trade in real terms. Sustained by 
depreciated currencies and a recovery in demand for 
many primary commodities, Latin America recorded 
a sharp volume increase in its merchandise exports. 
However, the region’s imports grew by less than 
2 per cent. North America’s import growth exceeded 
not only the global rate of expansion but was again 
much stronger than its own export growth. US 
merchandise imports went up by 5.7 per cent 
while exports rose somewhat less than 3 per cent, 
although this was the first annual increase after 
two years of contracting export volumes. In 2003, 
11 The real or volume increase in trade is based on nominal trade values adjusted for price and exchange rate changes. It is not 
a measure for the physical quantity of goods traded internationally.Table IA.1
World trade and output developments, 1990-2003
(At constant prices, annual percentage change)
1990-2000 2001 2002 2003
Merchandise exports 6.4 -0.5 2.8 4.5
Merchandise        
   production2.5 -0.7 0.8 ...
GDP at market 
   exchange rates2.3 1.3 1.9 2.5
GDP at PPP 3.4 2.4 3.0 3.5
Note: GDP data are taken from IMF, World Economic Outlook except 
for 2003.
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6Western Europe’s merchandise exports rose by less than 1 per cent while imports edged up by nearly 2 per 
cent. Sluggish investment and consumer expenditure in the largest economies of the euro zone were the 
principal factors in Western Europe’s disappointing trade performance (Chart IA.2).
3. NOMINAL TRADE DEVELOPMENTS IN 2003
It is estimated that the value of world merchandise trade rose by 16 per cent, to 7.3 trillion dollars and that of world 
commercial services by 12 per cent, to 1.8 trillion dollars in 2003.  For world merchandise trade, it is estimated that 
more than two thirds of the rise in value terms must be attributed to dollar price changes (Table IA.2).
Nominal trade developments in 2003 were strongly 
affected by highly divergent price and exchange 
rate developments. At a global level, it is estimated 
that dollar prices for merchandise trade rose by 
10.5 per cent. For a more detailed review at the 
product group level, trade prices of some major 
traders can provide additional information. Price 
changes of US imports in 2003 varied, ranging 
from a 22 per cent increase for mining products, 
a more than 4 per cent increase for agricultural 
products, and a stagnation in manufactured goods. 
Within the manufactured goods sector, the prices 
of office and telecom products decreased by 5 per cent while those of iron and steel products increased by 
5.5 per cent.12 These relative sectoral price developments on the import side are very similar to those reported 
for US exports. The US price data are likely to reflect global price trends since corresponding relative price 
developments were found for German and Japanese trade flows.Table IA.2
World exports of merchandise and commercial 
services, 2003
(Billion dollars and percentage)
Value Annual percentage change
2003 2001 2002 2003
Merchandise 7274 -4 4 16
Commercial services 1763 0 6 12
Source: WTO.
12 Price data for US merchandise imports are based on the detailed import price statistics of the US Department of Labor 
aggregated by the WTO Secretariat to match the standard WTO product groups.Chart IA.2
Merchandise trade volume growth by region, 2003
(Annual percentage change)
Source: WTO.� � � � � �� �� ���������
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6The major features of nominal merchandise trade in 2003 include the following:
• Six out of seven geographic regions identified in this report recorded a merchandise trade surplus (on a 
f.o.b.-f.o.b. basis), while the seventh region (North America) registered a trade deficit. Four out of these six 
regions increased their surplus position in 2003 while the North American deficit widened further. The US 
merchandise trade deficit (f.o.b.-f.o.b.) reached 550 billion dollars, corresponding to 7.6 per cent of world 
merchandise exports in 2003. 
• In the transition economies, a combination of relatively strong regional output growth, favourable price 
developments and the appreciation of many currencies in the region contributed to the exceptional 
expansion of trade. The region’s merchandise exports and imports rose by more than one quarter, the 
strongest growth of all regions in 2003.
• As in 2002, Latin America recorded the lowest import growth of all regions in 2003 while the lowest export 
growth was again reported for North America.
• Africa and the Middle East recorded a steep acceleration in merchandise export growth between 2002 and 
2003, largely due to the sharp rise in oil prices.
• Western Europe’s merchandise exports and imports both expanded faster than world trade in 2003, 
mostly driven by exchange rate developments which boosted its trade measured in dollar terms. German 
merchandise exports exceeded those of the United States for the first time since 1990.
• Asia’s merchandise imports and exports expanded faster than world trade, driven strongly by the expansion 
of China’s trade. Intra-Asian trade grew considerably faster than trade with the rest of the world. For the 
first time since 2000, Asia’s merchandise imports rose faster than merchandise exports (Table IA.3).
The dollar value of commercial services trade rose by 12 per cent to $1.8 trillion. Last year’s increase was twice 
that of the preceding year and by far the strongest increase since 1995.
All seven major regions benefited from the strengthening of services trade, with higher export and import 
growth than in the preceding year. Western Europe’s and the transition economies’ commercial services trade 
was particularly buoyant, boosted by the strength of the regions’ currencies vis-à-vis the US dollar. North 
America recorded the weakest export growth, at 4 per cent, while Latin America recorded the smallest import 
increase of all major regions, at 3 per cent. Partial data available for Africa points to strong expansion of the 
region’s commercial services exports and imports in 2003. Despite the tensions prevailing in the Middle East, 
it is estimated that the region’s services exports and imports recovered from their contraction in 2002. Services 
trade growth in Asia was modest compared to the preceding year. North America and Western Europe are Table IA.3
World merchandise trade by major region, 2003
(Billion dollars and percentage)
Exports Imports
Value Annual percentage change Value Annual percentage change
2003 2001 2002 2003 2003 2001 2002 2003
World 7274 -4 4 16 7557 -4 4 16
North America 996 -6 -5 5 1552 -6 2 9
United States 724 -6 -5 4 1306 -6 2 9
Latin America 377 -4 0 9 366 -2 -7 3
Western Europe 3141 0 6 17 3173 -2 5 18
European Union (15) 2894 0 6 17 2914 -2 4 18
Transition economies 400 5 10 28 378 11 11 27
Africa 173 -6 2 22 165 4 4 17
Middle East 290 -8 1 16 188 5 3 9
Asia 1897 -9 8 17 1734 -7 6 18
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8the two net exporters in world services trade. As the North American surplus diminished and that of Western 
Europe increased, both regions recorded a surplus of approximately $55 billion in 2003. After more than a 
decade, Western Europe’s share again rose above one half of world commercial services exports.
Travel services continued to suffer as a result of increased security concerns (particularly affected areas were 
the Middle East and the United States) and the threat of SARS (mainly East Asia).13 Although some tourist flows 
were diverted to other regions, global revenues from travel services again declined in 2003. Consequently, the 
share of travel services in total commercial services decreased further, reaching 29 per cent in 2003 compared 
to 34 per cent ten years ago.
4. OVERVIEW OF REGIONAL TRADE DEVELOPMENTS
North America’s trade recovered in both value and volume terms in 2003 despite a pronounced weakness 
in the first half of the year. In nominal terms, the expansion remained below that of global trade expansion 
leading to a further erosion of the region’s shares in world merchandise and services trade. Import growth for 
both merchandise and services trade continued to exceed export growth (Chart IA.3).
Canada’s trade growth - in particular merchandise 
trade - expanded faster than US trade, partly due 
to the appreciation of the Canadian dollar. US 
merchandise imports rose by 9 per cent in dollar 
values, faster than US merchandise exports, which 
grew by 4 per cent, leading to a new record 
merchandise trade deficit (f.o.b.-f.o.b.) of $550 
billion in 2003. Although half of the US merchandise 
trade deficit occurred in trade with Asia, the US 
also recorded an excess of imports over exports 
with all other major geographic regions. The US 
trade deficit has become an important element 
in sustaining global trade levels, corresponding to 
6.7 per cent of world merchandise trade in 2003.
In 2003, US merchandise imports from the oil-
exporting countries surged, increased quantities 
having to be paid for at significantly higher prices. 
US imports from China rose by 22 per cent and 
exceeded, for the first time, those of Mexico, 
becoming second only to those from Canada. 
Linked to the rise in imports from China is the 
decline of US imports from Japan and Hong Kong, 
China. Between 1991 and 2003, Japan’s share was 
cut steadily by more than half (from 18.8 per cent 
to 9.3 per cent) while China’s share in US imports 
tripled to reach 12 per cent in 2003. Asia’s share 
in US imports decreased steadily over the last ten 
years by five percentage points, to 36.5 per cent. 
Most of the corresponding gains over the ten-year 
period accrued to imports from Mexico. Canada’s share in US imports decreased for the second year in a row, 
and fell to their lowest level in more than 20 years. However, the steady rise of Mexico’s share in US imports 
13  According to preliminary estimates by the World Tourism Organization the number of international tourist arrivals fell by 
1.2 per cent in 2003, some 8.5 million less than in 2002. See http://www.world-/newsroom/2004/janvier/data.htmChart IA.3
North America’s merchandise and commercial 
services trade, 2000-2003
(Annual percentage change in value)
Source: Appendix Tables IA.1 and IA.2.�����������
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8for more than a decade was – at least temporarily – arrested in 2003. US imports from Western Europe went 
up by somewhat more than 8 per cent in 2003, and accounted for slightly more than one fifth of US imports, 
a share very similar to that at the beginning of the 1990s. US imports from LDCs recovered by 20 per cent, 
partly due to increased oil imports.
In 2003, the Latin American region started to recover from its recession. Rising import demand in Asia and 
the United States, combined with higher commodity prices, helped to sustain merchandise exports which 
increased by 9 per cent in nominal terms, having stagnated the previous year. Merchandise imports, on the 
other hand, only grew by 3.5 per cent, albeit from strongly negative growth in 2002. The pattern on the 
services side was similar, with strong export recovery and weak import recovery.
An important feature of the region’s trade developments was the sluggish growth of Mexican trade in 2003. 
Mexico is the region’s largest trader and recorded a significantly more dynamic trade performance in the 1990s 
than other countries in the region. The weakness of US import demand for automotive products and the lack 
of competitiveness of Mexican goods in its major market contributed to this lacklustre export performance. 
Brazil was particularly successful, expanding its merchandise exports by more than 20 per cent, partly due 
to commodity price increases and strong demand from China.14 As imports recovered only marginally, the 
Brazilian trade surplus (f.o.b.-f.o.b.) rose to a record level of $25 billion in 2003. Central America and the 
Caribbean countries continued to record a large merchandise trade deficit, although exports expanded by 
about 10 per cent, much faster than imports (Table IA.4).
Western Europe’s trade was principally shaped by two factors; weak economic growth in the region and the 
appreciation of European currencies, in particular the euro against the US dollar. Since Western Europe is 
the largest trading region in the world, the sluggishness of its economy was a retarding factor in the global 
recovery. Western Europe’s GDP growth remained below even the disappointing growth performance in 
2002, whereas all other regions recorded stronger growth over the previous year. Western Europe’s real trade 
growth was the weakest of all regions (Chart IA.2). The picture of West European trade changes dramatically if 
one looks at these trade flows in dollar value terms. Merchandise and services trade both expanded at double-
digit rates due to exchange rate changes (Chart IA.4). When measured in euro terms, both merchandise and 
services trade report a small decrease as compared with 2002.Table IA.4
Latin America’s merchandise trade, 2003
(Billion dollars and percentage)
Exports Imports
Value Annual percentage change Value Annual percentage change
2003 2001 2002 2003 2003 2001 2002 2003
Latin America 377 -4 0 9 366 -2 -7 3 
Mexico 165 -5 1 3 179 -4 0 1 
Central America (6) 14 -8 0 10 28 3 5 6 
Caribbean countries (15) 16 -6 -6 11 28 0 -2 0 
South America 181 -2 -1 14 131 -1 -18 7 
Argentina 29 1 -3 14 14 -20 -56 54 
Brazil 73 6 4 21 51 0 -15 2 
Chile 21 -4 -1 14 19 -4 -4 13 
Venezuela 24 -14 -11 -3 9 11 -34 -21 
Note: For regional definitions see Technical Notes.
Source: WTO.
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10While the EU’s overall merchandise trade growth 
is almost identical to that of Western Europe, the 
EU’s imports from non-EU countries expanded 
somewhat faster than intra-EU trade. Trade growth 
diverged significantly among the EU member 
countries. While UK export and import performance 
was, in value and volume terms, much weaker 
than the EU average, the merchandise exports and 
imports of Germany, Spain, Sweden and Austria 
expanded by more than one fifth in dollar terms. 
German merchandise exports, driven by exchange 
rate changes, exceeded US merchandise exports in 
2003 for the first time since 1990. The strongest 
merchandise trade performance in Western 
Europe, however, was recorded by Turkey which 
expanded its exports and imports by one third. 
One major element common to three of these 
dynamic European traders is their geographical 
proximity and the intensity of their trade links with 
the transition economies, the most dynamic global 
trading region in 2003.15 
Ireland, Western Europe’s most dynamic trader in 
the 1990s, recorded by far the weakest export and 
import expansion of all European countries in 2003 
due to its sluggish trade in IT products. In contrast, 
the Balkan states which experienced difficult times 
in the 1990s recorded a strong trade expansion 
in 2003. The five successor states of the former 
Yugoslavia, and Albania, recorded an expansion of 
exports and imports by one quarter.
For the second year in a row, the transition economies recorded the most rapid output and trade growth of all 
major regions. Merchandise exports and imports expanded by more than one quarter and services by one fifth 
measured in dollar terms. Strong currencies and higher fuel prices contributed to this outcome as did strong 
regional demand. In particular, the recovery of the Russian Federation’s GDP and trade had a stimulating effect 
on the neighbouring economies. Rising FDI flows and the steady deepening of westward integration of those 
economies that join the EU in May 2004, sustained the rapid overall trade growth of the region (Chart IA.5). 
The recent impressive trade performance of the Russian Federation, and most CIS member countries, should also 
be viewed in a medium-term perspective, taking into consideration the poor performance of the 1990s. Much of 
the recent trade gains are linked to volume and price increases for fuels. Despite their rapid rise between 1999 and 
2003, it was only in 2003 that the Russian Federation’s imports regained the level reached before the outbreak of 
the financial crisis in 1997.
Economic growth in Africa and the Middle East again remained close to, or even below, population growth, 
with no improvement in the employment situation or the general standard of living. The rise in the price of 
fuels, the major export category for both regions, resulted in sharply higher regional export earnings in 2003.16 
In both regions, marked differences in output and trade performance can be observed at the country level, 
and this should be taken into account in any consideration of the aggregate regional numbers.Chart IA.4
Western Europe’s merchandise and commercial 
services trade, 2000-2003
(Annual percentage change in value)
Source: Appendix Tables IA.1 and IA.2.���������� �
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15  The share of the transition countries in the merchandise exports of Austria, Germany, and Turkey is 13 per cent, 11 per cent 
and 11 per cent respectively, and more than twice the rate of the remaining EU Members combined.
16  The share of fuels in merchandise exports of Africa and the Middle East was 49 per cent and 70 per cent respectively in 2002.I TRADE AND TRADE POLICY DEVELOPMENTS
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10Africa’s merchandise exports are estimated to have 
increased by more than one fifth, to $172 billion in 
2003. For the first time since 1991, Africa recorded 
a trade surplus (f.o.b.-c.i.f.), as import growth 
was somewhat less strong than export growth, 
reaching $165 billion (Table IA.3). While the share 
of Africa in world merchandise exports increased in 
2003, at 2.3 per cent it remained below the level 
recorded ten years ago.
South Africa’s merchandise trade growth was 
particularly buoyant on the import side (30 per 
cent), while the seven major African oil exporters 
experienced a surge in their exports (also about 
30 per cent). The strength of South Africa’s trade 
(merchandise and services) measured in dollars 
can be largely attributed to increased appreciation 
of the rand.17 The sharp rise of merchandise 
imports benefited the EU, Asia and oil-exporting 
countries in the Middle East, which increased 
their shipments to South Africa by more than 
one third in dollar terms. Exports and imports 
of other non-oil exporting countries in Africa are 
estimated to have increased by more than 10 per 
cent in 2003.
One of the various initiatives to boost Africa’s 
participation in world trade is the US African 
Growth and Opportunity Act (AGOA). This non-
reciprocal preference scheme for exporters from 
selected African countries has stimulated African 
shipments to the United States. In 2003, US 
imports from 37 African countries, beneficiaries of 
the scheme, rose by 43 per cent to nearly $25 billion. Although 70 per cent of these imports originate from 
five oil-exporting countries (Nigeria, Angola, Gabon, Congo and Cameroon), substantial increases are also 
reported for US imports from Kenya, Lesotho and Swaziland.18
Middle East trade developments in 2003 were strongly affected by political unrest in Israel and the Iraq war. 
The repercussions of these political developments on nominal trade flows have been partly tempered by 
increased regional oil output and by higher oil prices. The dollar value of the region’s exports is estimated 
to have increased as fast as world trade, while merchandise import growth was less than 10 per cent (Chart 
IA.6). Consequently, the region’s overall trade surplus is estimated to have risen to $100 billion, only partly 
offset by the region’s traditional commercial services deficit, estimated to be in the order of $15 billion in 
2003.
17  Measured in rand, merchandise exports and imports decreased by 12 per cent and 6 per cent respectively in 2003.
18 US imports from these countries nearly doubled between 2001 and 2003.Chart IA.5
Transition economies’ merchandise and commercial 
services trade, 2000-2003
(Annual percentage change in value)
Source: Appendix Tables IA.1 and IA.2.�����������
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12Despite the outbreak of SARS in the first quarter 
of 2003, the Asian region achieved an unexpected 
acceleration in GDP growth, to 3.5 per cent in 2003.19 
The surprisingly strong recovery of non-residential 
investment, together with sharply higher net exports, 
have been the principal factors in Japan’s GDP growth 
of 2.7 per cent in 2003. The Chinese economy 
continued its outstanding expansion and despite 
temporary weakness in the first half of the year, 
reported an annual increase in GDP of 9.1 per cent 
for 2003. India’s strong GDP growth benefited from 
good weather conditions, which boosted agricultural 
output and stimulated consumption. The Republic of 
Korea’s economy was sustained by the sharp rise in 
exports to China and recovery of the IT sector.
The accelerated growth in Asia’s largest economies 
provided a major stimulus to regional trade 
expansion in 2003. Intra-regional trade was 
particularly dynamic, the negative impact caused by 
SARS in the first half of the year being more than 
offset by the large flow of capital goods to China. 
This was financed by strong FDI inflows related to 
the relocation of manufacturing assembly operations 
and to the recovery in the electronic goods industry. 
Merchandise exports and imports expanded by over 
10 per cent in real terms, more than twice as fast as 
global trade. Asia’s merchandise exports measured 
in dollars expanded by 17 per cent, again faster than 
world trade, but somewhat less rapidly than the 
region’s imports (Chart IA.7).
Preliminary data point to a far less dynamic growth of Asia’s trade in commercial services compared to the 
region’s merchandise trade in 2003. The differences at country level also seem to be far more pronounced 
than those reported for merchandise trade.Chart IA.6
Merchandise trade of Africa and the Middle East, 
2000-2003
(Annual percentage change in value)
Source: Appendix Table IA.1.������
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19  GDP aggregated using market exchange rates. Measured at purchasing power parity, Asia’s growth was about 5.5 per cent. Chart IA.7
Asia’s merchandise and commercial services trade, 2000-2003
(Annual percentage change in value)
Source: Appendix Tables IA.1 and IA.2.�����������
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125. PROSPECTS FOR 2004
The accelerated growth momentum in the world economy over the second half of 2003 is projected to continue 
in 2004. Global GDP growth is expected to reach 3.7 per cent in 2004, up from 2.5 per cent in 2003.20 Stronger 
global economic activity will lead to faster growth of world trade. In the OECD countries, for example, exports 
of goods and services expanded by 9 per cent in the second half of 2003 (Chart IA.8). Overall, global trade is 
expected to expand by some 7.5 per cent in 2004, more than twice as fast as projected GDP growth. 
Most of the acceleration in global output growth can be attributed to expected developments in North 
America, Western Europe and Latin America. Asia and the transition economies are expected to record 
unchanged or weaker GDP growth in 2004 compared to 2003, but still above the world average.
US GDP growth is expected to expand by 4 per cent, again significantly faster than the GDP of other developed 
countries. In Western Europe, output is expected to pick up to almost 2 per cent in 2004, following a year with 
nearly stagnating output. Latin America’s economy is expected to expand by some 3 to 4 per cent, driven by 
recoveries in Brazil and Mexico, the region’s largest economies.
There are a number of risks associated with these output and trade projections. Among the risks are:
(a)  The US current account deficit is projected to increase further in 2004, although its size is considered to be 
unsustainable in the medium-term. A stronger than expected rise in the US private savings ratio, provoked 
by a correction of house or stock prices, could lead to a slower than projected increase in imports, with 
negative repercussions on exports of countries dependent on the US market;
(b)  Western Europe’s demand recovery could falter. Growth in fixed investment could be dampened if the 
real appreciation of European currencies observed in the fourth quarter of 2003 and the first months of 
2004 continues. Consumer expenditure could also be weaker if uncertainty about financial reforms in the 
pension and health systems lead to a marked rise in precautionary savings;
(c)  most projections for world economic growth assume a fall in average oil prices in 2004. However, in the 
first months of 2004 oil prices remained stronger than most forecasters had expected.
Chart IA.8
Quarterly developments of trade and GDP in OECD countries, 2001-2003
(Quarterly percentage change in volume at annual rate)
Source: OECD, Olisnet and WTO estimates.�����������
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20  Global output projections are based on those provided for the OECD countries and the transition economies in OECD 
(2003a) while those for the other developing countries are those provided by the World Bank (2003a).I TRADE AND TRADE POLICY DEVELOPMENTS
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146. SELECTED MEDIUM-TERM TRADE DEVELOPMENTS BY PRODUCT
The review of 2003 developments outlined above, prepared early in 2004, was based on preliminary and 
incomplete trade information which does not allow a more detailed global trade flow analysis by product 
group or by destination or origin.21 Moreover, focus on a single year’s changes is largely influenced by cyclical 
and temporary factors and may cloud longer-term trends. It would, therefore, seem useful to complement 
the preliminary estimates for 2003 with a broader review of some medium-term trade developments. As a 
first step, an overview of world trade developments (combining goods and commercial services) by broad 
categories is provided. Thereafter, agricultural trade flows are reviewed, reporting trends since 1990, including 
towards more processed goods in world agricultural exports.
There is a general perception that world commercial services trade is growing faster than trade in goods. Indeed, 
trade in commercial services expanded faster than goods trade in the second half of the 1980s, but thereafter 
the record is mixed. While at the aggregate level services and merchandise trade growth have evolved in a 
roughly similar way since 1990, developments are more varied at a disaggregated level. A summary of world 
trade developments by six broad sectors is provided in Chart IA.9 for the period 1985 to 2002.22
This breakdown reveals that since 1985, one 
services category (transport) and two merchandise 
product groups (agricultural and mining products) 
expanded less rapidly than world trade. The share 
of the travel category rose between 1985 and 
1995 but decreased thereafter. In contrast, trade 
in manufactured goods and in the “other” services 
category, was more dynamic, showing steadily 
increasing shares over the period. Among all 
product and services categories, mining products 
(including fuels) stand somewhat apart from other 
categories. The share of mining products shows 
the biggest variations owing to the impact of 
fluctuating oil prices throughout the 1985-2002 
period. Overall, there is no indication that services 
categories in general have increased their share in 
international trade.
Within the fastest growing goods and services 
categories, a few subcategories play an important 
role in dynamic long-term growth. A further 
breakdown of world exports of manufactured 
goods reveals that the most dynamic product 
subcategory by far was office and telecom 
equipment, which expanded at twice the rate 
observed for total manufactured goods in the 
1990s. Consequently, the share of this product 
group gained five percentage points between 
1990 and 2000 and accounted for 12.1 per cent of 
21 Such analysis is to be found in the WTO Secretariat’s report International Trade Statistics, which is published in November 
each year. 
22 The breakdown of goods into agricultural products, mining products and manufactured goods is based on customs statistics.Chart IA.9
Share of major goods and services categories in 
world exportsa, 1985-2002
(Percentage)
a  Goods and commercial services exports combined.
Source: WTO, International Trade Statistics, 2003.����
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14world merchandise and services exports. The gains of this group exceeded the gains made by all manufactured 
goods combined.23 The crisis in the IT sector in 2000 arrested this trend, and the share of the sector in total 
manufactures has stagnated since then. Among the subcategories of manufactured goods which recorded 
below average trade growth in the 1990s are iron and steel products and textiles products, both showing a 
significant decline in their share in world trade over the 1990-2002 period.
Detailed statistics on commercial services trade are not yet systematically available. Improvements in coverage 
and reporting are made each year, but these may in some cases compromise the historic comparability of a 
country’s services trade statistics.24 Nevertheless, it appears that on the basis of a sample of large services 
traders, one can indicate a few subcategories of international services (other than travel and transportation) 
trade which report outstandingly strong export growth between 1995 and 2002. These subcategories 
comprise (in descending order of their estimated growth rate) computer and information services, financial 
services, insurance, personal, cultural, and recreational services; and royalties and licence fees.25 An absolute 
decrease in trade values could be observed for trade in construction services between 1995 and 2002. 
In summary, global trade flows have experienced major structural changes at the disaggregated product level 
over the last decade. The share of agricultural trade in world trade has decreased steadily in the longer term. 
Nevertheless, agricultural trade remains very important for many countries and exports of some agricultural 
products have also expanded strongly.
Selected medium-term developments in agricultural trade
Major highlights of agricultural trade26 between 1990 and 2002 include the following:
• The volume growth of world agricultural trade during the 1990-2002 period was close to 4 per cent 
annually, roughly twice that of agricultural production. Taking a longer-term view, one observes that real 
trade growth in agriculture during the 1990-2002 period exceeded growth over the 1973-1990 period 
(2.4 per cent) and nearly matched the expansion recorded in the 1963-73 period.27
• The dollar value of world agricultural trade rose by 40 per cent between 1990 and 2002, to $583 billion. 
The growth in agricultural trade was less strong than total merchandise trade so the share of the former 
decreased, reaching 9.3 per cent in 2002. This medium-term relative decline of agricultural trade can also 
be observed over the longer term. In 1963, the share of agricultural products in merchandise trade stood 
at 29 per cent. However, a small recovery of the share of agricultural exports could be observed between 
2000 and 2002 as the value of agricultural trade expanded by 5.5 per cent while that of world merchandise 
trade stagnated over that period (Chart IA.10).
23 These gains are measured in value terms. As prices for office and telecom equipment declined sharply in the 1990s while 
those of other merchandise products remained roughly unchanged, the gains are even more pronounced if trade is 
measured at constant prices.
24 In addition BOP statistics only cover transactions between residents and non-residents and exclude important services flows 
covered under the GATS and delivered through commercial presence.
25 A major uncertainty associated with these estimates derives from the fact that detailed services statistics by subcategory are not 
available for US intra-affiliated company trade. 
26 The definition of agricultural products in this report is that applied in WTO International Trade Statistics 2003, which differs from 
the definition applied in the WTO trade negotiations on market access in agriculture. One of the major differences is the inclusion 
of fish and fish products in the former but not in the latter.
27 The calculation of the shares and of nominal and real trade growth is based on WTO International Trade Statistics 2003, Appendix 
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16• The steadily declining share of agricultural 
products in world merchandise exports in the 
1990s could be observed in most regions. Only in 
Africa and the Middle East is it estimated that the 
share of agricultural trade in 2002 was roughly 
similar to that observed in 1990, at 15.8 per cent 
and 3.5 per cent respectively.
• In 2002, the share of agriculture in regional 
merchandise exports was highest in Latin America 
(19.3 per cent) and in Africa (15.8 per cent). 
Excluding Mexico from Latin American exports 
lifts the share of agricultural products in the 
region’s trade to 29 per cent in 2002, still five 
percentage points less than in 1990.
• Agricultural products remain, for many countries, 
the mainstay of their merchandise exports. In 
recent years (1999-2001) agricultural exports 
accounted for more than one quarter of total 
 merchandise exports in more than 55 countries (developed and developing). For 32 countries, agricultural 
exports exceeded one half of their merchandise exports.
• Only small changes were recorded in the regional shares of global agricultural trade between 1990-2002. 
Western Europe’s and North America’s share in world exports of agricultural products each recorded 
a decline of two to three percentage points. Western Europe’s share shrank above all between 1990 
and 1997 while that of North America decreased mainly between 1997 and 2002. The export share of 
Australia/New Zealand (combined) is about 4.5 per cent in 2002, unchanged from 1990. Latin America and 
the transition economies increased their share by about two percentage points between 1990 and 2002. 
Developing Asia recorded only marginal gains over the entire period, while the share of Africa is estimated 
to have decreased slightly as losses in the early nineties were partly offset thereafter. For the developing 
countries as a group, the share amounted to 30 per cent in 2002 compared to 27 per cent in 1990.
• The share of agricultural products in trade among the developing countries has decreased from 15.5 per 
cent in 1990 to 10.7 per cent in 2002.
• The share of intra-developing country trade 
in developing country agricultural exports has 
increased from 31 per cent in 1990 to 43 per cent 
in 2002. Most of this increase occurred between 
1990 and 1996. 
• The share of intra-developing country trade 
in developing country imports of agricultural 
products is even larger than for exports. In 2002, 
nearly one half (47.6 per cent) of developing 
country imports originated from other developing 
countries, an increase of ten percentage points 
since 1990 (Chart IA.11).
• A breakdown of agricultural trade by 15 product 
groups28 reveals that expansion rates among 
the groups differed sharply over the 1990-
2002 period. High average annual growth rates 
are found for three groups: beverages, other 
agricultural products (including cut flowers), and 
fish. For three other product groups (natural 
fibres, hides and skins, and tobacco) the valueChart IA.10
World exports of agricultural productsa, 1990-2002
(Billion dollars)
a Refers to WTO, ITS definition of agricultural products.
Source: WTO, International Trade Statistics, 2003.������������������������
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Chart IA.11
Share of intra-trade in developing countries’ exports 
and imports of agricultural productsa, 1990-2002
(Percentage)
a Refers to WTO, ITS definition of agricultural products.
Source: WTO, International Trade Statistics, 2003.��������������
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28  Based on WTO, Committee on Agriculture (2000).I TRADE AND TRADE POLICY DEVELOPMENTS
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16  of trade is unchanged or lower in 2002 than in 1990. The two largest agricultural product groups (cereals, 
and meat and live animals) recorded an expansion in their trade value that was less than for agricultural 
products in general.
• Agricultural trade can be also analysed by grouping agricultural products by their stage of processing (or value-
added content) rather than by sectors. Various analyses have been undertaken which reach the same basic 
finding that the most dynamic segment of world agricultural trade has been in processed agricultural goods.
The rise of processed goods in world exports of agricultural products, 1990-2002
Available trade classifications under which international trade is recorded only allow for an approximate 
categorization of products by stage of processing. Out of the four available categorizations29, the one applied 
in a previous WTO evaluation of GATT/MTN trade negotiations was retained in its updated version for this 
review.30, 31 
The main finding of the review is that exports of processed agricultural products expanded significantly faster 
than those of semi-processed and unprocessed agricultural products between 1990 and 2002. The share of 
processed products showed a clear upward trend throughout the 1990s, rising from 42 per cent in 1990-91 
to 48 per cent of global agricultural trade in 2001-02 (Chart IA.12).32
The trend towards more processed goods in world 
exports of agricultural products has been observed 
by Gehlhar and Coyle (2001) for the 1962-97 
period and more recently by the OECD Secretariat 
(in respect of OECD countries). The empirical 
evidence of a shift from unprocessed to more 
processed agricultural products is consistent with a 
well-known trend in world trade – the shift to an 
increased share of manufactures at the expense of 
primary products. Two factors favour the expansion 
of processed goods over unprocessed goods. First, 
processed goods have a larger potential for intra-
industry trade and offer more possibilities for 
product differentiation than unprocessed goods. 
Cocoa-producing countries will not see much 
bilateral trade in cocoa beans, for example, while 
chocolate-bar/snack producing countries can 
exchange their products, satisfying a broad variety 
of different tastes. Second, the potential to increase 
29  There are at least four categorizations of agricultural trade by stage of processing or value-added content. Gehlhar/Coyle 
(2001) distinguish between “bulk commodities”, “processed intermediates”, “produce and horticultural products” and 
“high value processed goods”. OECD (2003b) is using three categories: agricultural commodities, agricultural raw materials 
and agricultural processed products. The WTO Secretariat used two classifications in the past. One distinguished high value 
added (mostly processed products) and medium and low value-added products (WTO 2000) which can be assimilated only 
roughly with stages of processing, and the second was used in past trade negotiations (GATT, 1980).
30  GATT, The Tokyo Round of Multilateral Trade Negotiations, Volume II, Geneva 1980. This classification distinguishes three 
categories: unprocessed, semi-processed and processed goods. The choice of the classification was also determined by the 
fact that the distinction by stages of processing is available for all products and is not limited to agricultural products as 
defined in GATT/WTO negotiations (which excludes fish and wood).
31  This review applies the standard WTO/ITS definition of agriculture and includes EU intra-trade in global trade flows. 
Limitations on detailed data availability reduce the global coverage. In particular, trade of the transition economies could 
not be included in the world aggregate. The trade flows of all excluded countries represent less than 10 per cent of world 
agricultural exports.
32  This observation remains valid if one excludes non-MTN agricultural products – fish and wood – and also if one excludes 
EU intra-trade. By excluding fish and wood, the share of processed agricultural products is always larger and by gaining 
five percentage points reaches 51 per cent in 2001. Conversely by excluding EU intra-trade, the corresponding ratios fall to 
lower levels but the gains in percentage points are very similar.Chart IA.12
Share of processed goods rises in world exports of 
agricultural products, 1990-2002
(Percentage)
Source: Appendix Table IA.3.������������
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18value added for a given consumer food product is, in general, far larger than for unprocessed foods.33 As 
per capita income levels increase, consumers appreciate a larger variety of similar products and increasingly 
buy goods with a brand label. In developed countries, the trend to smaller household size and an increase in 
participation by women in the labour force strengthens consumption trends towards more processed food at 
the expense of unprocessed food.
Having observed a global trend towards an increased share of processed goods in agricultural trade, the 
question arises as to whether all regions and countries shared in this development. The general answer to this 
question is affirmative, with some noticeable exceptions. About three quarters of the countries for which data 
were available in the UN Comtrade database recorded an increase in the share of processed goods in their 
agricultural trade between 1990-91 and 2001-02. This observation holds for both exports and imports.34
At the country level, there was a marked increase in the share of processed products in total agricultural 
exports for the 14 major global exporters35 with the exception of two Latin American countries (Brazil and 
Chile). The largest shifts to more processed agricultural products could be observed in Asian developing 
countries (China, Indonesia, Malaysia and Thailand, with gains in shares of processed over unprocessed 
agricultural exports of 14, 17, 28 and 11 percentage points respectively). Marked increases could also be 
observed for Canada and Mexico (13 and 21 percentage points respectively). The share of processed trade 
in agricultural exports in 2001-02 appears not to be as strongly related to income levels as one might have 
expected. Lower income countries such as Bolivia and Peru have a higher share of processed goods in their 
agricultural exports than New Zealand. While there is no strong overall link in the sample between income 
levels and the share of processed agricultural products, it appears that all countries with a very low share of 
processed goods in their agricultural exports (15 per cent or less) are low or low middle-income countries (e.g. 
Cameroon, Ethiopia, Honduras, Pakistan, Sri Lanka, Uganda and Zimbabwe) (Appendix Table IA.3).
On the import side the trend toward a higher share of processed goods is even more striking. Among the 38 
traders shown in Appendix Table IA.3, only eight recorded a decrease in the share of processed goods. One 
notable exception to the general trend on the import side is China. China’s agricultural imports recorded an 
average annual increase of 9 per cent in the 1990s, the highest rate among the major agricultural importers. 
China’s imports of unprocessed goods surged ahead of processed products over the entire period.36 
The increased share of processed goods in agricultural trade can also be reviewed by distinguishing 
15 agricultural product categories at the global level. Not all these agricultural product categories have three 
stages of processing. Five have three processing stages, seven have two stages of processing and three are 
grouped within one stage of processing. The distinction among 15 categories enables us to see if the shift 
to more processing can be observed widely across categories or whether it is limited to a few sectors. It 
could also be that one single product group comprising processed goods expands strongly (or a group of 
unprocessed goods expands far less than the average), resulting in a structural shift in the aggregate of 
agricultural products to more processed goods.
Indeed, the data reveal that trade in beverages (which are considered 100 per cent processed) recorded an 
above average expansion in the 1990-2002 period (4.8 per cent annually) while natural fibres and hides and 
skins (which are considered 100 per cent unprocessed) recorded an absolute decrease or near stagnation in 
the observation period. In addition, wood products, which do not include a “processed stage” within our 
definition of agricultural products, recorded positive but less than average growth. 
33  For unprocessed goods an increase in value added may be achieved by a shift to higher quality. It has been observed that 
in many cases prices for unprocessed goods may differ significantly from low to top quality products.
34  If one excludes fish and wood from the data, the results at the country level are very similar to the observations made above: 
four out of five countries in our sample increased the share of processed goods in agricultural trade.
35  Countries with exports of agricultural products exceeding $6 billion in 2002.
36 There was a strong increase in the share of processed products in China’s agricultural imports up to 1996 followed by a 
marked decrease thereafter. Among the unprocessed products, import increases were particularly strong in oilseeds and 
wood (reporting tenfold and fourfold increases respectively between 1992 and 2001). The sharp rise in imports of oilseeds 
(unprocessed goods) went together with a sharp decline in imports of vegetable oils (a processed good) since 1997, which 
contributed significantly to the declining trend for processed goods at the end of the 1990s. I TRADE AND TRADE POLICY DEVELOPMENTS
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18However, the more dynamic expansion of processed goods is not limited to the divergent performance of these 
four product categories. In eight other categories (with the potential to move from unprocessed and semi-
processed to processed goods) there was a marked shift to more processed goods within the group (cereals 
and products, coffee, tea, cocoa and spices, fish, other foodstuff, meat and live animals, other agricultural 
goods (including cut flowers), tobacco and sugar and sugar products). A moderate decrease or stable share 
of processed goods was observed for the remaining categories (dairy products, eggs, fruits, vegetables and 
nuts and oilseeds, cakes and vegetable oil). 
This leads to the conclusion that for the period under investigation, and on the basis of the data available, a 
shift to more “processed” agricultural trade on a global scale can be confirmed. This shift is broad-based, since 
it can be observed across most product categories, across regions and among a large majority of countries. 
The widespread shift to the more dynamic category of processed goods does not necessarily imply that individual 
countries cannot achieve high export growth in unprocessed and semi-processed goods, as demonstrated by 
Chile. Chile’s outstanding export expansion in agricultural products is not related to a structural shift to more 
processed goods. Chile’s exports expanded at 9 per cent annually, while global agricultural trade rose 3 per 
cent annually in the 1990-2001 period. Chile’s dynamic export performance was broadly based with strong 
growth across destinations, product categories, and stages of processing. Many distinct agricultural categories 
showed a strong expansion in their export value. Particularly strong growth was observed for beverages, fish 
and wood. The United States and Japan had been the two most dynamic export destinations for Chile in the 
1990s, but Chile also gained market shares in the EU. Chile’s exports to China rose from very low levels in 
1990 to $376 million in 2001, thereby exceeding Chile’s shipments to MERCOSUR countries. 
To summarize, processed agricultural products have been a more dynamic component of international 
agricultural trade in the 1990s than unprocessed and semi-processed goods. This is true for a large majority 
of developed and developing countries across a wide range of products. Agricultural exports of developing 
countries to high-income markets also experienced this structural change. However, with respect to agricultural 
exports of low-income countries to the three major high-income markets, no shift towards an increased share 
of processed goods could be observed. This discussion has not addressed the possible influence of trade or 
other policies on structural shifts in agricultural trade. Interesting questions arise, such as what these statistical 
results reveal about the effects of tariff escalation. Further research would be needed, however, to address 
such issues. 19I TRADE AND TRADE POLICY DEVELOPMENTS
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I  TRADE AND TRADE POLICY DEVELOPMENTS
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AND POLICY DEVELOPMENTS WORLD TRADE REPORT 2004Appendix Table IA.1
World merchandise trade by region and selected country, 2003
(Billion dollars and percentage)
Exports Imports
Value Annual percentage change Value Annual percentage change
2003 1990-95 1995-00 2001 2002 2003 2003 1990-95 1995-00 2001 2002 2003
World 7274 8 5 -4 4 16 7557 8 5 -4 4 16
North America 996 8 6 -6 -5 5 1552 8 10 -6 2 9
 United States 724 8 6 -6 -5 4 1306 8 10 -6 2 9
 Canada 272 9 8 -6 -3 8 246 6 8 -7 0 8
Latin America 377 9 10 -4 0 9 366 14 9 -2 -7 3
 Mexico 165 14 16 -5 1 3 179 12 19 -4 0 1
 Latin America less Mexico 212 7 5 -3 -1 13 187 15 3 -1 -13 6
  Brazil 73 8 3 6 4 21 51 19 2 0-15 2
Western Europe 3141 7 2 0 6 17 3173 6 3 -2 5 18
 European Union (15) 2894 7 2 0 6 17 2914 6 3 -2 4 18
  Germany 748 4 1 4 8 22 602 5 1 -2 1 23
  France 385 7 2 -1 3 16 388 4 3 -3 0 18
  United Kingdom 304 5 4 -4 3 8 388 4 5 -3 4 12
  Italy 290 7 1 2 4 14 289 3 3 -1 5 17
 Switzerland 101 5 0 1 7 14 96 3 1 1 -1 15
Transition economies 400 13 7 5 10 28 378 12 4 11 11 27
 Central and Eastern Europe 191 11 8 12 15 29 225 15 9 9 11 27
 Russian Federation 135 - 5 -2 4 26 74 - -6 20 12 24
Africa 173 1 6 -6 2 22 165 5 0 4 4 17
 South Africa 36 3 1 -2 2 23 38 11 -1 -5 4 30
 Africa less South Africa 136 0 7 -7 3 22 126 3 1 6 4 14
  Oil exporters a 80 -3 12 -13 -1 30 42 3 0 17 6 19
  Non oil exporters 56 5 1 1 7 12 85 4 1 2 4 12
Middle East 290 2 12 -8 1 16 188 5 4 5 3 9
Asia 1897 12 5 -9 8 17 1734 12 3 -7 6 19
 Japan 472 9 2 -16 3 13 383 7 2 -8 -3 14
 China 438 19 11 7 22 35 413 20 11 8 21 40
 Six East Asian traders b 686 14 5 -12 6 14 615 15 2 -13 3 12
 India 55 11 7 2 14 11 70 8 8 -2 12 23
Memorandum items:
 NAFTA (3) 1161 9 7 -6 -4 5 1730 8 11 -6 1 8
 MERCOSUR (4) 106 9 4 4 1 19 69 22 2 -6 -26 10
 ASEAN (10) 452 17 6 -10 5 11 387 17 1 -8 4 9
 EU (15) extra-trade 1099 7 3 1 7 17 1114 4 6 -4 2 19
 Euro Zone (12) 2422 7 2 1 7 18 2385 6 3 -1 4 19
 EU accession countries (10) 198 - 8 11 14 28 233 - 9 6 11 25
 LDC (49) 44 5 8 0 9 ... 54 6 4 6 4 ...
 Developing countries 2178 10 8 -6 6 17 1963 13 5 -4 4 15
  Developing Asia 1338 15 7 -7 10 19 1244 15 4 -7 9 20
a  Algeria; Angola; Congo; Equatorial Guinea; Gabon; Libya; Nigeria and Sudan.
b  Hong Kong, China; Korea, Rep. of; Malaysia; Singapore; Chinese Taipei and Thailand.
Source:  WTO19I TRADE AND TRADE POLICY DEVELOPMENTS
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I  TRADE AND TRADE POLICY DEVELOPMENTS
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AND POLICY DEVELOPMENTS WORLD TRADE REPORT 2004Appendix Table IA.2
World trade of commercial services by region and selected country, 2003
(Billion dollars and percentage)
Exports Imports
Value Annual percentage change Value Annual percentage change
2003 1990-95 1995-00 2001 2002 2003 2003 1990-95 1995-00 2001 2002 2003
World 1763 9 4 0 6 12 1743 8 4 1 5 12
North America 322 8 7 -3 1 4 266 5 9 -1 1 7
 United States 282 8 7 -3 1 4 218 5 10 -2 2 6
 Canada 39 7 9 -4 -2 8 48 4 6 -1 -2 14
Latin America 60 8 6 -3 -4 6 67 9 5 0 -9 3
 Mexico 12 6 7 -7 -1 0 17 -2 13 -1 3 2
 Latin America less Mexico 47 9 6 -2 -4 7 49 13 4 1-12 3
  Brazil 10 10 8 -3 1 9 15 14 3 2-14 7
Western Europe 895 6 4 2 10 17 839 6 4 3 8 16
 European Union (15) 802 7 4 3 10 16 782 7 4 3 8 16
  Germany 112 8 2 5 15 12 167 9 1 3 3 12
  United Kingdom 130 7 8 -5 12 5 112 7 9 -3 9 11
  France 98 5 -1 0 7 14 82 5 -1 3 10 20
  Italy 73 5 -2 2 4 23 74 3 0 3 10 21
 Switzerland 33 7 2 -6 7 17 20 6 1 6 4 17
Transition economies 72 17 2 9 11 19 82 14 2 16 15 21
 Central and Eastern Europe 40 23 1 6 5 21 38 18 4 7 12 28
 Russian Federation 16 10 -2 17 20 18 27 11 -4 26 15 13
Africa 36 7 3 1 3 ... 46 5 2 3 2 ...
 South Africa 6 6 1 -7 0 26 7 10 -1 -9 3 36
Middle East 33 7 11 -9 -4 ... 49 2 5 -5 -1 ...
Asia 345 15 3 -1 8 6 394 13 2 -2 4 5
 Japan a 70 9 1 -7 2 8 110 8 -1 -7 0 3
 China 45 26 10 9 20 13 54 43 8 9 18 ...
 Six East Asian traders b 156 17 3 -1 6 3 149 17 3 -3 4 4
 India 25 8 21 19 12 7 20 11 15 16 -1 ...
Memorandum items:
 NAFTA (3) 334 8 7 -3 1 4 283 5 9 -1 1 7
 MERCOSUR (4) 15 11 6 -5 -11 12 20 16 3 -2 -24 8
 ASEAN (10) 72 20 -1 -1 7 -1 89 22 2 -1 4 3
 Euro Zone (12) 609 7 2 5 10 18 611 8 2 5 8 17
 EU accession countries (10) 48 - 1 5 8 20 41 - 4 6 16 26
 LDC (49) 7 10 3 0 6 ... 17 5 3 11 2 ...
 Developing countries 377 14 5 0 5 6 419 13 4 0 2 6
  Developing Asia 249 18 4 2 9 5 258 19 4 1 5 5
a  The travel category is estimated according to the 2002 methodology.
b  Hong Kong, China; Korea, Rep. of; Malaysia; Singapore; Chinese Taipei and Thailand.
Source:  WTO21I TRADE AND TRADE POLICY DEVELOPMENTS
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World exports of agricultural products by stage of processing, 1990-2002
(Billion dollars and percentage)
Billion dollars
Processed Semi-processed Unprocessed Total
1990 150.1 30.8 182.6 363.5
1991 159.8 29.9 181.6 371.3
1992 177.9 32.9 188.2 399.0
1993 173.0 35.1 174.8 382.8
1994 196.0 40.3 201.8 438.0
1995 228.0 44.6 239.1 511.7
1996 235.3 45.2 238.5 519.0
1997 232.2 44.8 233.5 510.5
1998 226.0 40.3 218.5 484.8
1999 223.0 38.6 210.6 472.2
2000 215.6 36.5 215.2 467.3
2001 226.9 37.3 212.9 477.0
2002 237.6 40.0 216.7 494.3
Percentage shares
Processed Semi-processed Unprocessed Total
1990 41.3 8.5 50.2 100
1991 43.0 8.1 48.9 100
1992 44.6 8.2 47.2 100
1993 45.2 9.2 45.7 100
1994 44.7 9.2 46.1 100
1995 44.6 8.7 46.7 100
1996 45.3 8.7 46.0 100
1997 45.5 8.8 45.7 100
1998 46.6 8.3 45.1 100
1999 47.2 8.2 44.6 100
2000 46.1 7.8 46.1 100
2001 47.6 7.8 44.6 100
2002 48.1 8.1 43.9 100
Note: Agricultural products include fish and wood. EU intra-trade included.
Source : UN Comtrade database and WTO. 21I TRADE AND TRADE POLICY DEVELOPMENTS
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I  TRADE AND TRADE POLICY DEVELOPMENTS
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Share of processed products in exports and imports of agricultural products in selected economies, 
1990-91 and 2001-02
(Percentage)
Exports Imports
1990-91 2001-02 1990-91 2001-02
North and Latin America
Argentina 50 51 55 46
Brazil  47 40 29 32
Canada  15 28 42 47
Chile  30 29 36 57
Colombia  7 19 35 39
Ecuador 6 20 28 50
Honduras 13 15 57 67
Mexico 21 42 39 45
Paraguay 19 29 94 75
Peru 67 61 36 45
United States  30 38 36 41
Western Europe
EU 15 57 61 44 49
  extra-trade 63 65 25 30
  intra-trade 53 59 54 58
Iceland  8 26 50 48
Norway 18 14 37 43
Switzerland 76 80 41 50
Turkey  23 35 38 25
Africa and Middle East
Cameroon  4 4 48 39
Israel 43 44 27 42
Jordan 27 54 34 42
Kenya 13 20 36 53
Oman 30 77 52 72
Saudi Arabia ... ... 56 50
South Africa 24 28 32 48
Tunisia 54 50 30 25
Zimbabwe  5 15 32 46
Asia
Australia  37 43 48 60
China  28 42 20 19
India 18 19 20 41
Indonesia 21 38 19 24
Japan 60 48 27 40
Korea, Rep. of 26 47 16 31
Malaysia 36 64 35 38
New Zealand  52 62 49 61
Pakistan 3 6 40 34
Philippines 41 46 47 50
Sri Lanka 3 5 24 33
Taipei, Chinese 53 27 25 37
Thailand  29 40 21 33
Note: Country names in bold indicate a major net exporter of agricultural goods. Numbers in italics indicate that data of the 
nearest year available to reference years have been used.
Source : UN Comtrade database and WTO. 23I TRADE AND TRADE POLICY DEVELOPMENTS
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I  TRADE AND TRADE POLICY DEVELOPMENTS
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Trade to GDP ratios in selected countries and regions, 1990-2003
(Percentage, exports and imports of goods and services at constant 1995 prices)
a  Including intra-trade.
b  Countries most affected by the Asian financial crisis: Indonesia, Korea Rep. of, Malaysia, Philippines and Thailand.
Source:  World Bank, World Development Indicators and WTO estimates.