‘Dramatic slowing’ seen in global trade, as rhetoric rises
That’s the verdict from the World Trade Organization, which dramatically slashed its forecast for trade growth this year by about a third to its lowest rate since 2009, when the global economy was mired in recession in the wake of the financial crisis.
In an update to its forecasts Tuesday, the world’s leading trade body said anti-globalization sentiment could make matters worse, especially if policymakers respond to that in a “misguided” manner.
The Geneva-based WTO, perhaps best known for dealing with trade disputes, predicted that global trade will rise only 1.7 percent this year, way down from its April prediction for 2.8 percent.
It said the downgrade, which came as the WTO opened a three-day forum about ways to make trade more inclusive, was largely due to an unexpectedly sharp drop in merchandise trade volumes in the first quarter. Lower economic growth and trade in developing countries like China and Brazil as well as a deceleration in imports in North America lay at the heart of the sharp downgrade.
If the WTO’s forecast comes true, it will be the first time in 15 years that global trade grows more slowly than the world economy, which it expects to expand by 2.2 percent.
“The dramatic slowing of trade growth is serious and should serve as a wake-up call,” WTO director-general Robert Azevedo said. “It is particularly concerning in the context of growing anti-globalization sentiment.”
“We need to make sure that this does not translate into misguided policies that could make the situation much worse,” he added, referring to job creation and economic growth.
As well as reducing its 2016 forecast, the WTO cut its project for next year to between 1.8 percent and 3.1 percent from 3.6 percent.
The WTO warned of a number of risks, such as the effect of the British vote to leave the European Union, which has increased uncertainty in a part of the world where trade has been relatively strong.
Other risks include financial market volatility stemming from changes in monetary policy in developed countries — the U.S. Federal Reserve is set to raise interest rates again while the European Central Bank and the Bank of Japan could cut borrowing costs further.
It also voiced worries that growing anti-trade rhetoric around the world might affect trade policy.
One planned trade deal that looks to be in trouble is the proposed Trans-Atlantic Trade and Investment Partnership, commonly known as TTIP, between the United States and the EU.
TTIP aims to remove trade barriers between the two but the secretive discussions have reportedly become bogged down amid growing concerns — and protests — in Europe over what a deal would mean for food safety and privacy protections, among other things.
Trade issues featured heavily in Monday’s presidential debate between Hillary Clinton and Donald Trump.
In his pitch, Trump said the U.S. has to “renegotiate” its trade deals and “stop these countries from stealing our companies and our jobs.”
Meanwhile, Clinton cited the need for “smart, fair trade deals,” adding that the United States accounts for only 5 percent of the world’s population but needs to “trade with the other 95 percent.”
The WTO’s downgrades came as the World Economic Forum warned that a decade-long trend away from free trade around the world is hurting economies.
In its annual survey on competitiveness of 138 economies, WEF noted a global trend to increase barriers to trade without imposing tariffs. That can include quotas on trade, levies and other types of restrictions.
“Declining openness in the global economy is harming competitiveness and making it harder for leaders to drive sustainable, inclusive growth,” said Klaus Schwab, WEF’s founder and executive chairman.
The WEF, which is best known for hosting an annual gathering of business and political leaders in the Swiss ski resort of Davos, ranks a country’s competitiveness according to 12 factors such as the state of its infrastructure, its ability to foster innovation and the standard of its education system.
For the eighth straight year, Switzerland was ranked as the most competitive economy in the world, just ahead of Singapore and the United States.