TWN Info Service on WTO and Trade Issues (Apr22/11)
14 April 2022
Third World Network

WTO: Global trade to drop to 3% in 2022 due to Covid-19 & Ukraine war
Published in SUNS #9555 dated 13 April 2022

Geneva, 12 Apr (D. Ravi Kanth) – Global trade has been badly hit by the Russia-Ukraine war, with world merchandise trade in volume terms now projected to drop to 3.0% in 2022, as compared to the earlier forecast of 4.7%, according to data released on 12 April by economists at the World Trade Organization.

The ongoing tensions as well as the damage caused to global trade seem to have cast dark clouds on what the WTO can accomplish at its 12th ministerial conference (MC12), which is tentatively scheduled for 12-15 June.

At a hybrid press conference on 12 April, the WTO Director-General, Ms Ngozi Okonjo-Iweala, said she doesn’t know what “deliverables” – fisheries subsidies, food security (not the permanent solution for public stockholding programs for food security in developing countries), and the temporary TRIPS waiver – can be achieved at MC12.

In fact, her conspicuous silence on what is happening between the four members – the US, the European Union, India and South Africa – on the leaked IP text suggests that the issue is still in limbo.

“No doubt, war has increased the tensions,” she said, adding that it is “highly uncertain. I cannot promise on what we can achieve at MC12, but we will continue to work.”

The DG has presented a rather somber picture on the rapidly unfolding developments in the face of the ongoing Russian war against Ukraine, the setbacks suffered by globalization, and re-shoring and on-shoring of key sectors, including fresh waves of industrialization.

The DG said world GDP at market exchange rates is expected to grow by 2.8% in 2022, down 1.3 percentage points from the previous forecast of 4.1%. Growth should pick up to 3.2% in 2023, close to the average rate of 3.0% between 2010 and 2019.

According to the DG, given the current GDP assumptions, merchandise trade volume growth in 2022 could be as low as 0.5% or as high as 5.5%.

She referred to issues such as re-shoring, industrialization, and de-globalization, while promoting her concept of “re-globalization” that would involve the marginalized countries in developing robust trading activities.

Ms Okonjo-Iweala provided the examples of Bangladesh, Vietnam, and Ethiopia, which have specialized in multiplying their trading strengths.

The DG emphasized that the WTO can be the centre for promoting multilateralism and multilateralization.

However, she mentioned in somewhat glowing terms, the allegedly WTO-illegal and non-mandated Joint Statement Initiatives (JSIs), particularly the JSI on digital trade.

THE COSTS OF THE UKRAINE WAR

Delving into the economic projections made by the WTO economists, the DG said that world merchandise trade dropped by almost 1.7% between the current figure of 3% and the earlier projection of 4.7% late last year.

The WTO economists have projected that world merchandise trade in volume terms is expected to grow at 3.4% in 2023.

The DG said that the war between Russia and Ukraine, who are essential suppliers of food, energy, and fertilizers, has created adverse conditions that could morph into food riots in several middle- and low-income countries, particularly in Africa.

She referred to grain shipments that are being held up in the Black Sea ports and the losses of agriculture produce in the Black Sea region, which would raise dire conditions for the supply of key food grains like wheat, oil seeds, and fertilizers.

“The war in Ukraine has created immense human suffering, but it has also damaged the global economy at a critical juncture,” she said, in a press release.

Ms Okonjo-Iweala said that the impact of the Russia-Ukraine war “will be felt around the world, particularly in low-income countries, where food accounts for a large fraction of household spending.”

“Smaller supplies and higher prices for food mean that the world’s poor could be forced to do without.”

Expressing concern over these developments, she said that “this must not be allowed to happen. This is not the time to turn inward. In a crisis, more trade is needed to ensure stable, equitable access to necessities.”

The DG said “restricting trade will threaten the well-being of families and businesses and make the task of building a durable economic recovery from COVID-19” more fraught.

She emphasized that “governments and multilateral organizations must work together to facilitate trade at a time of sharp inflationary pressures on essential supplies and growing pressures on supply chains.”

Yet, the DG’s alleged attempts to “plurilaterize” a multilateral trade organization by promoting the JSIs appear to divide the WTO into different silos to suit the interests of the powerful countries.

However, the DG said that “history teaches us that dividing the world economy into rival blocs and turning our backs on the poorest countries leads neither to prosperity nor to peace.”

She maintained that “the WTO can play a pivotal role by providing a forum where countries can discuss their differences without resorting to force, and it deserves to be supported in that mission.”

In releasing their forecasts, the WTO economists acknowledged that there is little hard data to project the economic impact of the conflict.

They said that current estimates based on the WTO Global Trade Model, capture: (1) the direct impact of the war in Ukraine, including destruction of infrastructure and increased trade costs; (2) the impact of sanctions on Russia, including the blocking of Russian banks from the SWIFT settlement system; and (3) reduced aggregate demand in the rest of the world due to falling business/consumer confidence and rising uncertainty.

When asked about the participation of Russia in WTO meetings, the DG said that proceedings at the WTO are not paralyzed, while admitting that some small-group meetings are not taking place.

But all the chairs are holding bilateral meetings on all the important issues, she said.

The DG emphasized that MC12 will be hosted as a “business-like” and streamlined meeting, without explaining whether such a process will remain “inclusive” and “multilateral” with the participation of all countries.