World trade surge predicted

The World Bank forecast yesterday that international trade is poised to grow faster than at any time since the 1960s.

The latest round of trade liberalisation will bring the biggest benefits to some groups of newly industrialising countries, notably in Asia and Eastern Europe. By 2010, China, India and Indonesia will be among the six biggest economies.

Michael Bruno, the bank's chief economist, said Mexico's problems showed the process of integration in the world economy was not necessarily smooth. The crisis had, however, taught useful lessons.

"The most important is the need for disclosure by the country in question," he said. Officials at the International Monetary Fund and the World Bank believe Mexico disguised the size of falls in its official reserves in 1994 and failed to give full information on the scale of government indebtedness.

A second lesson was that there should be better surveillance by the international organisations and closer and faster co-ordination between central banks when a crisis broke out.

Mr Bruno added: "A country can always mess up its policies, and we cannot predict now which country will mess up in three years' time." The World Bank is, however, clear about what the right policies are, despite the fall from grace of star pupil Mexico.

It believes liberalisation, deregulation and education form the path to greater prosperity. With world trade forecast to grow by more than 6 per cent a year for the next 10 years, developing countries need to make sure they are integrated into the world economy.

Countries in Asia and some parts of Eastern Europe are in the best position to take advantage of rapidly expanding trade. Sub-Saharan Africa, where there has been almost no economic reform, will do much worse than the average, although at least incomes in these poorest countries should stop falling.

The World Bank believes industrial countries will grow by an average 2.8 per cent a year for the next 10 years. Their export markets will expand, and their consumers will enjoy lower prices as developing countries become more effective competitors. But the gains will need defending from protectionist lobbies.

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