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By Doug Palmer
WASHINGTON, Dec 11 (Reuters) - World trade has taken a dramatic turn for the worse as the global economic slowdown cuts into consumer demand and the cost of trade finance has shot up, a World Bank economist said on Thursday.
"Things are moving quite rapidly in the wrong direction," Bernard Hoekman, director of the international trade department at the World Bank, said in a speech to the Washington International Trade Association.
Chinese government data showing the country's imports and exports fell in November was worse than expected, Hoekman said.
The World Bank forecasts world trade to drop around 2.5 percent in 2009 before making a significant rebound in 2010, Hoekman said.
The 2009 downturn would be the first since 1982, and Hoekman said he personally was concerned the recovery might not come as fast as the bank's official forecast.
"I think there is a significant risk for a more prolonged slowdown, especially if we continue along the path of what seems to be happening in some of the major traders," he said.
However, developing countries are in much better shape to weather the crisis than just 10 years ago, Hoekman said.
Although some countries have reacted to the global economic downturn by raising tariffs, most have not resorted to protectionist measures yet, he said.
However, that remains a concern, especially as countries like the United States are moving to pump billions of dollars of subsidies into their struggling auto sectors, he said.
Also, countries could turn increasingly to countervailing and anti-dumping duties to protect industries from lower priced imports, he said.
The rules-based world trading system is likely to be tested harder than it was during the Asian financial crisis of the late 1990s, Hoekman said.
The credit crunch is exacerbating the slump in trade, as banks become more reluctant to make loans and many lenders specializing in trade have gone out of business, he said.
"Trade finance is becoming a lot more expensive. It's drying up and that's having a direct effect on the volume of trade," Hoekman said. (Editing by Tom Hals)