Protectionism stands in way of rebound in trade
Global trade could rebound this year — if rising protectionism and tighter economic policy stay out of the way.
Trade is likely to grow by 2.4% this year, according to the World Trade Organisation (WTO), up from 1.3% in 2016. The revival is forecast to be driven by continuing economic expansion in many countries, though measures to curtail trade, higher interest rates and tighter fiscal policies could all undermine growth, the WTO said in a report published on Wednesday.
While the global economic recovery is continuing, protectionist sentiment has been on the rise as many voters express anger over being left behind. President Donald Trump has pledged to renegotiate US trade deals including the North American Free Trade Agreement (Nafta), and the UK is preparing to exit the EU, the biggest free-trade area.
Central banks, meanwhile, are facing the dilemma of needing to raise interest rates to tackle rising inflation, while output remains lacklustre.
EDUCATION, TRAINING
All this risks damping trade and the world economy by extension, says the WTO. Governments should tackle economic issues at home by improving education, training and social programmes to help the jobless compete for work, it said.
“Trade has the potential to strengthen global growth if the movement of goods and supply of services across borders remains largely unfettered,” said Roberto Azevedo, director-general of the WTO. “However, if policy makers 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.”
Policy uncertainty is the biggest risk, the WTO said. If antitrade measures do arise, global trade growth could be closer to 1.8%, the lower end of its forecast range, than 3.6%, the top.
Many of Trump’s promises on trade remain muddy. In recent weeks, White House officials have said that both Mexico and the US stand to benefit from a renegotiation of Nafta. That is a change in rhetoric since January, when Trump tweeted that he would slap heavy taxes on businesses that move jobs to Mexico — a proposition that would risk violating WTO principles.