By Tom Miles
GENEVA (Reuters) - The World Trade Organization slashed its forecast for trade growth in 2013 on Wednesday, saying it feared protectionism was on the increase.
It cut its forecast for global trade growth in 2013 to 3.3 percent from 4.5 percent and said trade grew only 2.0 percent in 2012. That was the smallest annual rise since records began in 1981 and the second weakest figure on record after 2009, when trade shrank.
Trade in commercial services also grew by only 2 percent in 2012, to $4.3 trillion.
WTO Director General Pascal Lamy warned that 2013 could turn out even weaker than expected, especially because of risks from the euro crisis, and countries might try to restrict trade further in a desperate attempt to shore up domestic growth.
"The threat of protectionism may be greater now than at any time since the start of the crisis, since other policies to restore growth have been tried and found wanting," he said.
Lamy, who will step down at the end of August this year, called the 2012 growth rate "sobering".
"It's clear that conventional monetary and fiscal policies have failed to produce satisfactory results," he told a news conference at the WTO headquarters in Geneva.
With conventional thinking set against loosening budgets and uncertainty about the benefits of "ever more unconventional" monetary policies, Lamy said that liberalizing trade remained a "good bet at a modest cost", although he said the political cost of reforming was sometimes high.
Asked if he counted Japan's monetary easing as a protectionist policy, Lamy said its use was fine as long as it was coordinated, and the countries belonging to the G20 group had agreed not to "go it alone" with easing to gain an comparative advantage for their own exports.
"Whether or not they will walk the talk, we will see," he told a news conference at the WTO headquarters in Geneva.
"So far in my view, the major impact of this innovative quantitative easing has been more on capital flows, on interest rates, than on trade - although one could say that impact on capital flows and interest rates may, in a second round of calculations, impact currency or an economy's competitiveness."
Despite the hope of quickening trade this year and a provisional forecast of 5.0 percent growth in 2014, the annual rises are expected to stay below the historical trend of long-term growth, which was 6.0 percent for the 20 years leading up to the financial crisis but now stands at 5.3 percent.
"Traditionally we've reckoned on a 2:1 ratio of trade growth to GDP (gross domestic product) growth. This year it was 1:1 and we would expect to see that relationship re-establish itself," said the WTO's chief economist Patrick Low.
The WTO forecasts are based on global GDP growth of 2.1 percent in 2013, a consensus estimate that the WTO said was unchanged from 2012.
"Risks to the forecast are firmly rooted on the downside and are mostly linked to the sovereign debt crisis in Europe," the WTO said in a statement.
(Reporting by Tom Miles, editing by Stephanie Nebehay/Ruth Pitchford)