On the upswing?

WTO forecasts increased trade in 2017, but warns upward trajectory could nosedive if countries turn to import restrictions    World trade is on the verge of a rebound.
   According to the latest forecast from the World Trade Organization April 13, the increase in trade across borders is expected to increase 2.4 percent in 2017, and on the high side at 4 percent, and should continue at about 2.8 percent for 2018.
   “A number of early indicators point to a recovery in trade growth in 2017,” said WTO Director General Roberto Azevêdo. “For example, container port throughput has climbed to a record high. Figures on global export orders are at their highest level in several years.”
   However, the WTO is hesitant to appear overly confident, citing myriad reasons that this projected trade growth could just as easily fall flat this year.
   “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,” the global trade body warned. “A spike in inflation leading to higher interest rates, tighter fiscal policies and the imposition of measures to curtail trade could all undermine higher trade growth over the next two years.”
   Azevêdo said some policymakers may be tempted to address domestic job losses by imposing import restrictions, which would further drag the global economy’s already long road to recovery.
   “Although trade does cause some economic dislocation in certain communities, its adverse effects should not be overstated – nor should they obscure its benefits in terms of growth, development and job creation,” Azevêdo said. “We should see trade as part of the solution to economic difficulties, not part of the problem.”
   He blamed automation as responsible for the near 80 percent loss in manufacturing jobs, not trade.
   It is estimated that 65 percent of children entering primary school today will hold jobs that don’t yet exist today.
   “The answer is therefore to pursue policies that reap the benefits from trade, while also applying horizontal solutions to unemployment which embraces better education and training and social programs that can quickly help get workers back on their feet and ready to compete for the jobs of the future,” Azevêdo said.
   The WTO said weak trade growth of 1.3 percent in 2016 was partly due to the slowing down of the global economies, but also “reflected deeper structural changes in the relationship between trade and economic output.
   “The most trade-intensive components of global demand were particularly weak last year as investment spending slumped in the United States and as China continued to rebalance its economy away from investment and toward consumption, dampening import demand,” the WTO said.

Global economic growth has been unbalanced since the financial crisis, but for the first time in several years all regions of the world economy should experience a synchronized upturn in 2017.

   “Global economic growth has been unbalanced since the financial crisis, but for the first time in several years all regions of the world economy should experience a synchronized upturn in 2017. This could reinforce growth and provide an additional boost to trade,” the organization added.
   The WTO explained that its forecast is based on expected GDP growth at market exchange rates of 2.7 percent for 2017 and 2.8 percent for 2018. This GDP estimate assumes that industrialized countries maintain their expanding monetary and fiscal policies, while developing countries continue to emerge from their recent economic slowdown.
   “Historically, the volume of world merchandise trade has tended to grow about 1.5 times faster than world output, although in the 1990s it grew more than twice as fast,” the trade body said. “However, since the financial crisis, the ratio of trade growth to GDP growth has fallen to around 1:1. Last year marked the first time since 2001 that this ratio has dropped below 1, to a ratio of 0.6:1. The ratio is expected to partly recover in 2017, but it remains a cause for concern.”
   Developing countries witnessed a 3 percent drop in imports during the first quarter of 2016, but they slowly recovered by the second quarter and this continued through the end of the year. Industrialized countries’ imports maintained a growth trajectory, but marginally. For the year, imports in industrialized countries reached 2 percent, with the developing countries remaining at 0.2 percent. Exports for both industrialized and developing countries experienced “modest growth” at 1.4 percent and 1.3 percent, respectively.
   “Despite positive growth in its exports and imports, North America was one of the biggest contributors to the weakness of world imports in 2016,” the WTO said. “In 2015, North American imports added 1.2 percentage points to world import growth of 2.9 percent, or 42 percent of the total increase. By contrast, the region only contributed 0.1 percentage points to world import growth of 1.2 percent last year.”
   The WTO attributed North America’s marginal performance in 2016 to persistent low oil prices and the decline in investments, especially in the energy sector.
   The trade body, however, noted that “Asia and Europe were the only regions making significant positive contributions to global import demand in 2016, with Europe contributing 1.6 percentage points (39 percent of the total increase) and Asia adding 1.9 percentage points (49 percent of the total).”
   The WTO said the dollar value of world merchandise trade in 2016 fell for the second year in a row, as exports dropped 3.3 percent to $15.46 trillion.
   Azevêdo warned that world trade still risks the imposition of tariff and non-tariff barriers.
   “The share of world imports covered by import-restrictive measures implemented since October 2008 and still in place is just 5 percent,” he said. “Of course it could be even lower—but it shows that the WTO did its job.
   “Now we need to keep strengthening the system, delivering new reforms and resisting the erection of new barriers to trade. As far as members are concerned, I see a huge level of commitment here in Geneva.”