WTO eyes global trade rebound but warns of risks

World trade volumes unexpectedly declined by 1.2% in 2023


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Ships and containers at the port of Barcelona, Spain. — Reuters
Ships and containers at the port of Barcelona, Spain. — Reuters

Published: Wed 10 Apr 2024, 5:35 PM

The World Trade Organisation said on Wednesday that global trade should rebound this year from an unexpected slump in 2023, but warned that regional conflicts, geopolitical tensions and economic policy uncertainty risked darkening the picture.

In its annual trade forecast, the WTO disclosed that world trade volumes unexpectedly declined by 1.2 per cent in 2023.

That downgrade was “mainly due to the worse-than-expected performance of Europe,” WTO chief economist Ralph Ossa told AFP, with lingering high energy prices and inflation drove down demand for manufactured goods.

The eurozone economy stagnated in the final quarter of last year, with Germany’s economy contracting by 0.3 per cent.

But a recovery in the global trade of goods is already under way, thanks in part to inflation slowing.

The WTO forecast that the global economy will continue to grow modestly over the next two years, by 2.6 per cent this year, and 2.7 per cent in 2025.

It expects merchandise trade volumes to increase by 2.6 per cent in 2024, and to expand by 3.3 per cent next year.

The 2024 forecast was lower than the 3.3-per cent hike the WTO predicted for the year last October.

“We are making progress towards global trade recovery,” WTO chief Ngozi Okonjo-Iweala said in a statement, stressing though that it was “imperative that we mitigate risks like geopolitical strife and trade fragmentation”.

The organisation said trade developments on the services side were far more upbeat last year, growing by nine per cent.

The organisation does not provide specific forecasts for the development in services, but said it expected further growth this year, in particular linked to swelling tourism and passenger transport around the upcoming the Olympic Games in Paris and the European football championships.

And WTO said that the inflationary pressures that weighed on trade last year were expected to abate in 2024. This, it said, would allow real incomes to grow again, especially in advanced economies, and thereby provide a boost to the consumption of manufactured goods. “A recovery of demand for tradable goods in 2024 is already evident,” WTO said.

But it cautioned that “geopolitical tensions and policy uncertainty could limit the extent of the trade rebound”.

The report pointed for instance to the Red Sea crisis and Suez Canal disruptions linked to the war raging in Gaza, which it said to now had been relatively limited.

But “some sectors, such as automotive products, fertilisers and retail, have already been affected by delays and freight costs hikes”, it pointed out.

“We are still in a period where trade is relatively resilient,” Ossa said, adding that for now, “we definitely don’t see any de-globalisation”.

But the WTO has warned that there seems to be a growing “fragmentation” of global trade.

Ossa pointed for instance to bilateral trade between the United States and China, which reached a record level in 2022.

Last year, trade between the two global giants meanwhile grew 30 per cent less than their trade with other countries, he said.

Signs of such fragmentation are also visible in the trade in services.

The United States last year increased its imports of services linked to information and communication technologies from Canada, but cut imports of the same services from Asia, and especially from India.

WTO has also warned of worrying signs of growing protectionist behaviour by some countries, although it refuses to name them.

“I think we are clearly in an important point in the history of globalisation,” Ossa said.

“I think a lot of governments are evaluating or reevaluating perhaps their trade policy choices and of course this is going to have consequences on how international trade is going to develop.”

The WTO chief economist pointed to the dozens of elections being held around the world this year, including some very high-stakes ones like in the United States, that could dramatically impact trade policies.

“The very fact that you don’t know how some of these policy choices are made (creates a) trade policy uncertainty (that) by itself already is a drag on international trade,” he warned.

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