“A worrying slowdown”, commented Ngozi Okonjo-Iweala, director of the World Trade Organization (WTO), after the presentation of her G lobal trade outlook 2023 report, which was published yesterday.
Their worries are motivated by the slowdown that global exchanges will experience this year: they will rise by only 0.8%, when in April the forecasts of this organization pointed to a more robust rise, of 1.7% . In other words, the figure has been halved in just over six months.
“The slowdown in trade appears widespread and involves a large number of countries and a wide range of goods, specifically certain categories of manufactures, such as iron and steel, office equipment and telecommunications, textiles, and clothing,” he said. WTO.
What happened? Circumstances are adverse: persistent inflation, economies struggling with stagflation, rising interest rates, slowdown in China and, of course, war in Ukraine.
Above all, fewer manufactured goods are exchanged. Globally, the volume of merchandise trade decreased by 0.5% year-on-year in the first half of 2023. “We see imports declining year-on-year in many countries, including the United States (-3.7%), the Brazil (-1.3%), the EU (-1.8%), the United Kingdom (-11.4%), Japan (-2.8%)”, they point out to the WTO. On the export side, the EU is completely stagnant, with 0.0%; China, with 0.2%, and Korea, with -0.4%.
These numbers need to be put into context. Before the great financial crisis of 2008 broke out, trade used to grow twice as fast as the world economy. It happened for decades, those of hyperglobalization. After that episode with the crash of Lehman Brothers, this phase of commercial grand opening entered a plateau. Exchanges maintained growth, yes. But they no longer doubled the pace of global GDP, but evolved at the same speed. What is remarkable about this latest report is that world trade is now growing at a slower rate than wealth.
Indeed, by 2023, the WTO estimates that global GDP will rise by 2.6%, and that trade will grow, in comparison, three times less (by 0.8%, as already mentioned). Is it time to talk about “deglobalization”? If you look at the data collected by the Global Trade Alert portal, 2,345 trade restrictive measures have been implemented in 2023, three times more than in all of 2019.
The WTO notes that the participation of intermediate goods in world trade – an indicator of the activity of global supply chains – fell to 48.5% in the first half of 2023, against an average of 51.0 % in the previous three years. These data could be a reflection of renewed protectionism and the separation of the world into opposing economic blocs.
“We see, indeed, some signs that show that the trade fragmentation data is related to geopolitical tensions. Fortunately, we have not yet reached a high degree of deglobalization. But the data indicate that the breadth of these chains may have peaked, at least in the short term,” admitted the WTO’s chief economist, Ralph Ossa.
The study also offers some interesting considerations regarding inflation. For example, world trade in services, which is one of the components that has contributed to soaring prices in recent months due to sustained demand, is finally hitting the brakes. “Preliminary data shows that growth in this sector could be slowing after the strong recovery in transport and travel last year: trade increased by just 9% year-on-year in the first quarter of 2023, down from 19% of the second quarter of 2022″.
Although the WTO predicts a recovery in trade by 2024, it remains cautious. This body recalls that “there is a risk that a rise in the prices of raw materials during the winter months in the Northern Hemisphere could undermine any incipient economic recovery and slow down trade volumes even more”.
As is often the case, emerging countries have the most to lose. In this sense, the WTO is concerned about the evolution of trade in food products. “In August 2023, its average price was 46% higher than in 2019, while fertilizer prices rose by 93%. Farmers could be forced to choose between using less fertilizer or planting fewer crops, which would reduce yields and increase the risk of hunger around the world.”
