“Trade has the potential to strengthen global growth if the movement of goods and supply of services across borders remains largely unfettered”: WTO chief Roberto Azevedo
Geneva: The World Trade Organization said it expected global trade to rebound slightly in 2017 but warned the threat of protectionism and other uncertainties risked hampering the recovery. The organisation forecast that global trade would expand by 2.4 per cent in 2017, up from just 1.3 per cent last year.
But it cautioned that “the unpredictable direction of the global economy in the near term and the lack of clarity about government action on monetary, fiscal and trade policies raises the risk that trade activity will be stifled”, acknowledging that trade growth this year could fall anywhere between 1.8 and 3.6 per cent.
Among the “policy shocks” that could easily send trade growth to the lower end of that range, it said, was the potential effect of Britain’s decision to leave the European Union, and a growing trend towards protectionist policies, including in the United States.
“Trade has the potential to strengthen global growth if the movement of goods and supply of services across borders remains largely unfettered,” WTO chief Roberto Azevedo said in the statement.
But he warned: “If policymakers attempt to address job losses at home with severe restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery.”
The WTO, which sets the rules of global commerce, has long been sounding the alarm over the “threat of creeping protectionism”, exemplified in a steady flow of protectionist rhetoric from US President Donald Trump’s administration.
Trump, who kicked off his presidency in January vowing to put “America First” and has blamed globalised trade for US economic woes and lost industrial jobs, has promised a more aggressive approach to open up foreign markets to US companies and has threatened to slap import duties on certain goods.
The US also refused at a G20 meeting in March to renew a long-standing anti-protectionist pledge, to the dismay of the group of top developed and developing nations.
Azevedo declined to comment directly on the US position, saying he was waiting for Washington to appoint a new representative to the WTO to launch a dialogue.
“We have to be patient and wait,” he told reporters.
The WTO chief did acknowledge that “trade does cause some economic dislocation in certain communities.”
But he stressed that “its adverse effects should not be overstated, nor should they obscure its benefits in terms of growth, development and job creation”.
“We should see trade as part of the solution to economic difficulties, not part of the problem,” he said. The sluggish trade growth last year — the weakest since the financial crisis — was in part due to slower economic activity overall, “but it also reflected deeper structural changes in the relationship between trade and economic output,” the WTO report said.
It pointed out that slumping investment spending in the United States and China’s shifting focus from investment to consumption had significantly dampened import demand.
WTO’s trade growth forecast for this year meanwhile looks more promising, even better for next year, when the Geneva-based body forecasts growth of between 2.1 and 4.0 per cent.
But WTO stressed that its more promising forecasts were predicated on a number of assumptions, including on anticipated economic growth this year of 2.7 per cent and next year of 2.8 per cent, up from 2.3 per cent GDP growth in 2016.
Trade is a key measure of the health of the global economy, which it both stimulates and reflects.
Historically, the volume of world merchandise trade has tended to grow about 1.5 times faster than global economic growth, but since the 2008 financial crisis the ratio of trade growth to GDP growth has fallen to around 1:1, WTO said.
Last year marked the first time since 2001 that trade grew at a slower pace than the economy, with the ratio dipping to 0.6:1, it said. — AFP