Trade, the lifeblood of the world economy, is growing at its slowest rate in seven years and could falter even more should anti-globalization sentiment encourage governments to throw up more barriers.
That is the verdict from the WTO, which on Tuesday 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 2008 global financial crisis.
In an update to its forecasts, 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 would 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,” he said.
“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 forecast for this year, the WTO cut its projection for next year from 3.6 percent to between 1.8 and 3.1 percent.
The WTO warned of a number of risks, such as the effect of the British vote to leave the EU, 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 US 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 US 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.
The WTO’s downgrades came as the World Economic Forum (WEF) 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, the 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,” WEF’s founder and executive chairman Klaus Schwab said.
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