World trade seen growing 2.4 pct in 2017, uncertainty weighs: WTO
Protectionist ‘sword’ hangs over firming growth: IMF’s Lagarde
GENEVA, April 12, (RTRS): World trade is on track to expand by 2.4 percent this year, though there is “deep uncertainty” about economic and policy developments, particularly in the United States, the World Trade Organization (WTO) said on Wednesday.
The range for growth this year has been adjusted to between 1.8 and 3.6 percent, from 1.8 to 3.1 percent last September, it said, pointing to a risk that trade activity could be “stifled” due to lack of clarity about government policies.
“We should see trade as part of the solution to economic difficulties, not part of the problem,” WTO directorgeneral Roberto Azevedo said.
“Overall cautious optimism but trade growth remains fragile and there are considerable risks on the downside. Much of uncertainty is political,” he told a news conference.
The world must “keep resisting the erection of new barriers to trade”, he said.
The WTO has repeatedly revised preliminary estimates over the past five years as predictions of economic recovery prove overly optimistic.
Global trade grew by “an usually low” 1.3 percent in 2016, the slowest pace since the financial crisis, failing to match even its revised forecast of 1.7 percent of last September.
“The poor performance over the year was largely due to a significant slowdown in emerging markets where imports basically stagnated last year, barely growing in volume terms,” Azevedo said.
In 2018, global trade is forecast to grow by between 2.1 percent and 4 percent in WTO’s latest analysis.
“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,” it warned.
US President Donald Trump has made reducing US trade deficits a key focus of his economic agenda to try to grow American manufacturing jobs. He has taken particular aim at renegotiating trade relationships with China and Mexico. He is considering an executive order to launch a trade investigation that could lead to supplemental duties in certain product categories, a Trump administration official told Reuters on Monday.
“If policymakers attempt to address job losses at home with severe restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery,” Azevedo said in a statement.
Asked by reporters about US policies under Trump, he said that he waited confirmation of the new US Trade Representative (USTR).
“We are waiting to see the new trade team really in place, waiting for the new USTR to be confirmed so that we can have a more meaningful dialogue at this point in time we don’t have that. We are still waiting to see how the trade policy itself is going to shape up in the United States.”
Azevedo declined to comment on the upcoming French election, but said:
“Uncertainty has a freezing effect on investments and therefore on economic growth and output
“Getting over the election cycles is important particularly in the major economies so we have a clear view of what is coming, what the policies are. Predictability is extremely important for investments and economic growth.”
Global economic recovery is gaining momentum but could be cut off by a “sword of protectionism” now threatening global trade, International Monetary Fund Managing Director Christine Lagarde said on Wednesday.
Lagarde, speaking ahead of next week’s IMF and World Bank spring meetings in Washington, argued for countries to strengthen the post-war open trade architecture by cooperating multilaterally to solve trade issues such as reducing excessive external imbalances.
Her prepared remarks did not specifically mention US President Donald Trump’s “America First” trade agenda that aims to restrict imports into the United States.
But she said restricting trade would be a “self-inflicted wound” that would disrupt supply chains and raise prices for components and consumer goods, hitting the poor hardest.
For the first time in years, she said the global economy “has a spring in its step” as the Fund prepares to release new growth estimates on April 18.
“The good news is that, after six years of disappointing growth, the world economy is gaining momentum as a cyclical recovery holds out the promise of more jobs, higher incomes and greater prosperity going forward.”
The prospects are better for advanced economies, where manufacturing activity is stronger, as well as for emerging and developing economies, which will contribute more than three quarters of global GDP growth this year, she said. Higher oil and commodity prices have aided many commodity exporters, but their revenues will stay well below the boom years, she added.
“At the same time, there are clear downside risks: political uncertainty, including in Europe, the sword of protectionism hanging over global trade, and tighter global financial conditions that could trigger disruptive capital outflows from emerging and developing economies,” Lagarde said.
She reiterated her call for countries to use fiscal and monetary policy to boost demand and structural reforms to make economies more efficient.
She also voiced concern about lagging productivity growth and called for more investments in research. She said trade promotes efficiency and innovation, citing forthcoming IMF research that estimates that China’s integration into the global trading system accounted for as much as 10 percent of advanced economies’ overall productivity gains between the mid-1990s and the mid-2000s.
Governments also need to find better ways to aid workers who are displaced by technology and trade flows, Lagarde said.
“There is no magic formula. But we do know that greater emphasis on retraining and vocational training, job search assistance, and relocation support can help those affected by labor market dislocations,” Lagarde said.