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Info Service on WTO and Trade Issues (Dec22/09) Geneva, 14 Dec (Kanaga Raja) — Global trade is set to reach almost US$32 trillion for 2022, but its growth has turned negative during the second half of 2022, the UN Conference on Trade and Development (UNCTAD) has said. In its latest Global Trade Update, UNCTAD said global trade is set to reach a record level of about US$32 trillion for 2022. Trade in goods is expected to total almost US$25 trillion (an increase of about 10 per cent from 2021), while trade in services is expected to total almost US$7 trillion (an increase of about 15 per cent from 2021), it added. “Those record levels are largely due to robust growth in the first half of 2022. Conversely, trade growth has been subdued during the second half of the year,” said the UNCTAD report. It said during Q3 2022, trade in goods declined by about one per cent relative to Q2 2022, while trade in services increased by about 1.3 per cent during the same period. “The UNCTAD nowcast indicates that the value of global trade will decrease in Q4 2022 both for goods and for services,” said the report. While the value of international merchandise trade has stabilized during the second half of 2022, the volume of trade increased during Q3 2022 and is expected to continue increasing during Q4, it added. According to UNCTAD, positive growth in the volume of international trade indicates resilience of global demand. Deteriorating economic conditions and rising uncertainties have resulted in a trade slow-down during the second half of 2022, it said. “However, the decline in global trade has been nominal, as the volume of trade continued to increase throughout 2022, a signal of resilient global demand.” UNCTAD said that part of the decline in the value of international trade during the second half of 2022 is due to a decrease in the prices of primary products, especially energy. On the other hand, the report said the prices of internationally traded intermediate inputs and consumer goods have continued to increase during the same period, raising additional concerns about persisting global inflation. “The decline in the value of global trade has been so far limited to goods. Trade in services has been more resilient, with its value continuing to rise during the second half of 2022.” “The ongoing trade slowdown is expected to worsen for 2023,” said UNCTAD. While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends, it added. According to UNCTAD, the negative factors affecting the outlook for global trade are lower economic growth, high prices of traded goods, and concerns over debt sustainability. Economic growth forecasts for 2023 are being revised downwards due to high energy prices, rising interest rates, sustained inflation in many economies, and negative global economic spillovers from the war in Ukraine, it said. Persistently high energy prices and the continued rise in the prices of intermediate inputs and consumer goods are expected to dampen demand for imports and to lead to a decline in the volume of international trade, it added. UNCTAD also said the record levels of global debt and the increase in interest rates pose significant concerns for debt sustainability. It said that the ongoing tightening of financial conditions is expected to further heighten pressure on highly indebted governments, amplifying vulnerabilities and negatively affecting investments and international trade flows. UNCTAD said that the positive factors affecting the outlook for global trade are improvements in the logistics of global trade, and recently signed trade agreements coming into fruition, such as the Regional Comprehensive Economic Partnership (RCEP) and the African Continental Free Trade Area, as well as a number of smaller trade agreements. In terms of the improvements in the logistics of global trade, UNCTAD noted that ports and shipping companies have now adjusted to the challenges brought by the Covid-19 pandemic. New ships are entering service, and port congestion is being resolved. Freight and cargo rates are still higher than the pre-pandemic averages, but their trend is downwards, it said. The report also said other factors affecting international trade patterns include reshaping of global supply chains and the transition towards a greener global economy. Risks and uncertainties remain high for global supply chain operations, it added. “Risk mitigation strategies, such as the diversification of suppliers, re-shoring, near-shoring and friend-shoring, will likely affect international trade patterns in the coming year.” The report said that the efforts towards a greener global economy are expected to spur demand for environmentally sustainable products, while reducing the demand for goods with high carbon content and for fossil fuel energy. “This shift will reflect into international trade patterns,” it added. SOME GLOBAL TRADE TRENDS The report highlighted the import and export trends of some of the world’s major trading economies during Q3 2022. Except for the Russian Federation, the trade in goods for all major economies was well above levels of one year ago, it said. However, quarter-over-quarter rates reveal that these positive trends reversed for most economies in Q3 2022, it added. Noting that data on services is only available with a lag of one quarter, UNCTAD said in Q2 2022, the trade in services for most major economies was higher than in Q2 2021. “Quarter-over-quarter growth rates indicate that these positive trends have weakened considerably in Q2 2022.” It said in Q3 2022, the value of the global trade in goods was significantly above the levels of Q3 2021 for both developing and developed countries. Trade between developing countries (South-South) was about 13 per cent higher than in the same period of 2021, it said, adding that South-South trade excluding East Asian economies grew by 19 per cent. “The decline in trade of Q3 2022 with respect to Q2 2022 was similar for developed and developing countries.” When East Asian economies are excluded the more significant decline in developing countries’ trade is remarkable, said UNCTAD. Year-over-year growth rates remained strong across all geographic regions, except for the region comprising the Russian Federation, said the report. It said that on a quarter-by-quarter basis, trade declined in all geographic regions, except for East Asia for which trade remained at a level similar to that of Q2 2022, and for the region comprising the Russian Federation, whose imports recovered from the sharp drop in Q2 2022. At the sectoral level, UNCTAD said the substantial trade growth during the last year was largely due to increases in the value of the trade of energy products. While trade in some sectors also increased (e.g. apparel, chemicals, road vehicles), the value of trade in Q3 2022 was lower than in Q3 2021 for several sectors including pharmaceuticals, minerals, communication equipment and transport equipment, it added. In comparison with Q2 2022, the value of trade in Q3 2022 was lower for most sectors, but substantially higher in the sectors of apparel, communication equipment and office equipment, said the report. +
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