Global trade continues to grapple with geopolitical tensions and geo-economic fragmentation as we progress into the second half of 2024. Most economists around the world anticipate these tensions will escalate, leading to greater volatility in international trade and affecting the overall global economic outlook for this year and the next. The fragmentation of global trade is expected to result in increased localization and a widening gap between the Global North and South.
Against this backdrop, a report by the World Trade Organization’s Secretariat, published on July 8, 2024, offers a thought-provoking overview of trade and trade-related developments in goods from mid-October 2023 to mid-May 2024. According to the report, WTO members introduced more trade-facilitating measures (169) than trade-restricting ones (99) during the review period.
Most of these measures were on the import side, with a decline in new export restrictions, reversing the trend seen in 2021 and 2023, when new import restrictions outnumbered new export restrictions. This signals WTO members’ commitment to maintaining the flow of trade, suggesting that globalization persists, albeit in a different configuration.
The report also revealed an increase in the average monthly number of trade remedy initiations from 17 (mid-October 2022 to mid-October 2023) to 25, with nearly 90 percent introduced by G20 members. Meanwhile, the monthly average of trade remedy terminations decreased from 11 to only five.
This could be seen as a positive development, as more WTO members resort to ‘conventional’ methods to address surges in imports and unfair trade practices through trade instruments allowed under WTO agreements, rather than taking unilateral actions. This aligns with the efforts of WTO Director-General, Ambassador Ngozi Okonjo-Iweala, to rejuvenate the multilateral trading system and encourage member states to ‘walk the talk.’
However, the proliferation of trade remedy initiations may further fragment global trade, exacerbating challenges in an already struggling global economy facing climate change, high commodity prices, inflation, and rising shipping costs.
The global economic outlook for the second half of 2024 shows divergent regional growth patterns. The International Monetary Fund (IMF) projects a slight decline in global growth from 3 percent in 2023 to 2.9 percent this year. In contrast, the United Nations Conference on Trade and Development (UNCTAD) is cautiously optimistic, predicting around 3 percent growth due to positive trade trends in the first quarter of 2024.
This growth is primarily driven by emerging markets, while advanced economies are expected to experience slower growth. Inflation expectations have been lowered across all regions, and financial conditions are anticipated to ease over the year.
However, growth forecasts for regions like Europe and the Middle East have weakened considerably, while South and East Asia are expected to maintain robust economic activity, despite lower growth expectations for China.
Additionally, the advancement of generative AI is poised to significantly impact the global economy, potentially disrupting various sectors and accelerating technological adoption more rapidly than past advancements. Consequently, China may continue to boost its AI capacity to offset potential downturns in some sectors due to domestic and international challenges, though this could hypothetically increase China’s unemployment rate.
Overall, most economists agree that the biggest potential risks to global economic growth will stem from geopolitical instability and conflicts, followed by transitions in political leadership in countries with regional and international influence, inflation, changes in trade policy, and a slowdown in China’s economic activity.
South-South trade is expected to set the pace in terms of both exports and imports, while developed countries will likely see flat imports and a modest rise in exports.
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Iman Pambagyo is a former director general of trade negotiations and an Indonesian ambassador in charge of the WTO.
The views expressed in this article are those of the author.
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