“A worrying slowdown,” commented Ngozi Okonjo-Iweala, director of the World Trade Organization (WTO), after the presentation of its G lobal Trade Outlook 2023 report, which was released yesterday.
Their concerns are motivated by the slowdown that global exchanges are going to experience this year: they will rise by only 0.8%, when last April the forecasts of this organization pointed to a more robust increase, of 1.7%. That is to say, the figure has been reduced by half in just over six months.
“The slowdown in trade appears to be widespread and involves a large number of countries and a wide range of goods, specifically certain categories of manufacturing such as iron and steel, office and telecommunications equipment, textiles and clothing,” the WTO noted.
What has happened? The circumstances are adverse: persistent inflation, economies bordering on stagflation, rising interest rates, slowdown in China and obviously 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%), Brazil ( -1.3%), the EU (-1.8%), the United Kingdom (-11.4%), Japan (-2.8%)”, they point out in the WTO. On the export side, the EU is completely stagnant at 0.0%, China at 0.2% and Korea at -0.4%.
These figures must be put in context. Before the great financial crisis broke out in 2008, trade used to grow twice as fast as the world economy. It was like this for decades, those of hyperglobalization. After that episode with the Lehman Brothers crash, this phase of great commercial opening entered a plateau. The exchanges maintained their growth, yes. But they were no longer doubling the pace of global GDP, but were evolving at the same speed. What is striking in this latest report is that world trade is now growing at a slower rate than wealth.
Indeed, by 2023 the WTO estimates that world GDP will rebound by 2.6%, and that trade will grow three times less in comparison (0.8%, as already mentioned). Has the time come to talk about “deglobalization”? If you look at the data collected by the Global Trade Alert portal, in 2023, 2,345 trade restrictive measures have been implemented, three times more than in all of 21019.
The WTO notes that the share 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, compared to 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 blocks.
“We do indeed see some signs that show that 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 reached their maximum level, at least in the short term,” admitted WTO chief economist Ralph Ossa.
The study also offers some interesting considerations regarding inflation. For example, global trade in services, which is one of the components that has contributed to skyrocketing prices in recent months due to its sustained demand, is finally hitting the brakes. “Preliminary data shows that growth in this sector could be slowing after the strong revival of transport and travel last year: trade increased only 9% year-on-year in the first quarter of 2023, compared to 19% in the second quarter of 2022”.
Although the WTO predicts a recovery in trade by 2024, it remains cautious. This organization reminds that "there is a risk that a rebound in raw material prices during the winter months in the northern hemisphere could undermine any nascent economic recovery and further slow trade volumes."
As is often the case, emerging countries are the ones that 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.”
