Service on WTO and Trade Issues (Apr18/09)
World merchandise trade to grow 4.4% this year, says WTO
Published in SUNS #8661 dated 13 April 2018
Geneva, 12 Apr (Kanaga Raja) - World merchandise trade in volume terms is expected to grow 4.4% in 2018, with faster trade expansion being driven by stronger economic growth across regions, led by increased investment and fiscal expansion, economists at the World Trade Organisation (WTO) said on Thursday.
It their latest trade statistics and outlook, the economists said that grow this expected to moderate to 4.0% in 2019, below the average rate of 4.8% since 1990 but still firmly above the post-crisis average of 3.0%.
"However, there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could compromise the current outlook," they cautioned.
"The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation. However, this important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation," said WTO Director-General Roberto Azevedo in a press release.
"A cycle of retaliation is the last thing the world economy needs. The pressing trade problems confronting WTO Members is best tackled through collective action. I urge governments to show restraint and settle their differences through dialogue and serious engagement," he added.
At a media briefing on Thursday, Director-General Azevedo said that the outlook that is being published today is quite positive.
"It reflects the stronger economic growth that we are seeing in both developed and developing countries, and which is forecast to continue," he said.
Also present at the media briefing were Robert Koopman, the WTO Chief Economist, and Coleman Nee, an economist at the WTO.
"But let me be clear, these forecasts do not - and I repeat they do not - f actor-in the possibility of a dramatic escalation of trade restrictions," Azevedo pointed out at the media briefing.
"Our aim is to highlight the main factors currently driving trade" and to suggest possible outcomes, "not to peer into a crystal ball and predict possible policy decisions," the DG maintained.
"In 2017, trade growth was very strong. The volume of world merchandise trade grew by 4.7%. This significantly exceeds the 3.6% that we forecast in September last year," he said.
This is the fastest rate of expansion since 2011, when the global economy was still rebounding from the financial crisis, said the DG.
Growth for the year was up sharply from the very disappointing 1.8% that we saw in 2016, when both developed and developing economies recorded slow GDP growth and weak import demand, he added.
On the forecast for 2018 and 2019, he said continuing from last year's strong performance, "we see economic conditions converging to allow sustained grow thin trade and output. And this applies for both this year and next."
"Consumer and business confidence have turned upwards and economic growth is synchronized across regions. When all of these cylinders are aligned and fi ring together, the engine performs much better."
Estimating that world merchandise trade volumes will grow nearly as fast in 2018 as it did in 2017, Azevedo said "we expect that growth will remain quite strong in 2019 at around 4.0%."
"So this is good news. It represents the best run of trade expansion since before the crisis, supporting economic growth, development and job creation around the world."
"But of course, risks to the forecasts are significant, and they are predominantly on the downside," Azevedo cautioned.
"Monetary policy is likely to become less expansionary and financial conditions may become tighter, and this could produce some volatility in markets and capital flows."
To reflect this uncertainty, "we placed these forecasts within an indicative range of possible outcomes."
"However, I stress again that even this range does not take into account the more significant risk before us," said Azevedo.
The DG highlighted the "rise in tensions that we are seeing between some trading partners."
Without mentioning any of the countries concerned or even what the said measures are, the DG said that "some measures have already been implemented ; some are still proposals," and the "possibility of further escalation remains hypothetical at this stage, but a reality nonetheless."
"However, it seems that even the threat of further escalation may already be having an effect," said Azevedo, pointing out that in March, purchasing managers indices indicated a slowdown in export orders.
At the same time, a separate index of economic uncertainty has risen, he added.
"It is not possible to accurately map out the effects of a major escalation but clearly they could be serious," said Azevedo.
"A breakdown in trade relations among major players would derail the recovery that we have seen in recent years threatening the ongoing economic expansion and putting jobs at risk," he added.
He further said that "it is an interconnected economy and in this kind of economy the effects would be globalised reaching far beyond those countries who are directly involved. Poor countries would stand to lose the most."
"So, we have to do everything we can to avoid further escalation," said the DG, adding that, "I have been urging WTO members to take every action possible to avoid going down this road."
"The WTO was created as a forum for members to hold each other to account and they have been doing so effectively for many years."
"We must safeguard this strong growth that we are seeing today and ensure that trade remains an engine for economic growth, job creation and development around the world," Azevedo concluded.
During the subsequent Q&A session, the WTO spokesman gave the floor to only a few questions from reporters directed at Azevedo, namely two from the Wes tern media, two representing Chinese media and one representing Brazilian media, appearing to ignore some others known to be critical of the WTO chief and the secretariat on their responses to the trade conflicts unleashed by the United States - in blocking processes for filling vacancies on the Appellate Body, in raising tariffs on steel and aluminum imports from some countries, while exempting others, and plans for other trade measures against China, on basis of unilateral determination of "unfair trade practices" and violations of WTO obligations .
After taking the five questions, DG Azevedo subsequently left the media briefing on account of "other commitments."
According to the WTO economists, trade volume growth in 2017, the strongest since 2011, was driven mainly by cyclical factors, particularly increased investment and consumption expenditure.
Looking at the situation in value terms, growth rates in current US dollars in 2017 (10.7% for merchandise exports, 7.4% for commercial services exports) were even stronger, reflecting both increasing quantities and rising prices.
Merchandise trade volume growth in 2017 may also have been inflated somewhat by the weakness of trade over the previous two years, which provided a lower base for the current expansion, they said.
(A full report on the trade statistics and the press conference will appear in a forthcoming issue of the SUNS.)