The World Trade Organisation (WTO) has raised concern over a sharp increase in unilateral trade measures, warning that if unchecked could fragment the world economy.
In its World Trade Report 2023, WTO notes that recent crisis in geopolitics, public health, environment has led many to argue that globalization exposes countries to excessive risks. They contend that greater economic independence – rather than interdependence – would better serve the well-being of their constituencies.
“Such views have begun to shape trade policy. At the WTO we observe a sharp increase in the number of unilateral trade measures. If unchecked, this trend could ultimately fragment the world economy,” WTO Director-General Ngozi Okonjo-Iweala says.
According to Iweala, the multilateral trading system overseen by the World Trade Organization was created just over 75 years ago based on the vision that fostering interdependence among economies would play a crucial role in achieving peace and prosperity.
This vision had emerged as a central lesson from three disastrous decades of deglobalization, marked by two world wars, the Great Depression, and political extremism. For three-quarters of a century it has guided policymakers as they laid the foundations for the integrated world we inhabit today.
However, this vision is currently being called into question. Recent crises, such as the COVID-19 pandemic and the war in Ukraine, have fed into perceptions that globalization exposes economies to excessive risks. Consequently, a trade-sceptic narrative has gained traction, suggesting that international trade is an obstacle to building a more secure, inclusive, and sustainable world. Viewing interdependence as a vice rather than a virtue, policymakers are now placing greater emphasis on economic independence.
The 2023 edition of the WTO’s World Trade Report presents new evidence of the benefits of broader, more inclusive economic integration as early indications of trade fragmentation threaten to unwind growth and development. The report, features findings on how re-globalization — or increased international cooperation and broader integration — can support security, inclusiveness, and environmental sustainability.
WTO Chief Economist Ralph Ossa said: “The main conclusion is that we need to embrace trade instead of rejecting it if we want to overcome the most pressing challenges of our time.”
“In particular, the report makes the case for extending trade integration to more economies, people, and issues, which is a process that we call “re-globalization,”” Ossa added. Trade integration “is a powerful tool to improve living standards, which helped lift hundreds of millions of people out of poverty.”
Starting with an analysis of the current state of globalization, the report confirms that geopolitical tensions are beginning to affect trade flows, including in ways that point towards fragmentation of trading relationships. WTO Secretariat calculations find, for example, that goods trade flows between two hypothetical geopolitical blocs — based on voting patterns at the UN General Assembly — have grown 4-6 per cent more slowly than trade within these blocs. However, the report contends that, despite these findings, international trade continues to thrive, implying that talk of de-globalization is on balance still not supported by the data. The publication points to the expansion of digital services trade, environmental goods trade, and global value chains in addition to the resilience of trade to recent global crises.
The report goes on to examine the relationship between economic integration and three major challenges facing today’s global economic order: security and resilience, poverty and inclusiveness, and environmental sustainability — areas in which arguments have gained ground that globalization has not delivered as expected or exposes countries to excessive risks. Looking at the evidence, the report makes the case that “re-globalization,” which is the renewed drive towards integrating more people, economies and pressing issues into world trade, is a more promising solution to these issues than fragmentation.
The report shows that trade openness is strongly linked with a reduced likelihood of conflict and has led to sharp declines in poverty for over four decades. Also, technology improvements enabled by trade have had a strong impact in reducing carbon emissions.
Finally, the report emphasizes the need for more trade and more cooperation to effectively address the major issues that policymakers are facing the world over — from security to inclusiveness to climate change.
WTO Projects Global Trade to Fall Between 13pc and 32pc (kenyanwallstreet.com)
