By the end of 2024, global trade will register the slowest half-decade of growth since the 1990s, a report by the World Bank has said.
The report published on the Blog of the Bank hinted that trade growth will improve this year but it will still be half the average rate in the decade before the pandemic.
‘’In 2023, trade in goods and services expanded by the slenderest of margins, an estimated 0.2 percent, the slowest pace in 50 years outside of global recessions. It would have declined outright but for the growth of trade in services. Trade in goods shrank roughly 2 percent, the sharpest contraction during this century outside of a global recession,’’ World Bank disclosed.
The report added, ‘’The World Trade Organization’s (WTO) top decision-making body will have every reason to fret when it meets on February 26. International trade—a key engine of global prosperity since the fall of the Berlin Wall— has ground nearly to a halt and is set to remain anaemic in the coming years.
“That is an ill omen for people’s living standards everywhere. The rapid expansion of global trade after 1990 enabled one billion people to escape extreme poverty. It soaped up growth in developing economies, enabling many of them to narrow the income gap with wealthier economies. During the first decade of this century, per-capita incomes in developing economies grew 3.5 percentage points faster than in developed economies. Trade also sped up the diffusion of technology, contributing to productivity growth across the world.
“Yet memories are short. Today, misguided populism in many countries is doing serious damage to global trade. Many countries have lost their appetite for new trade agreements. In the 2020s so far, an average of just five agreements have been signed each year—less than half the rate of the 2000s. Their appetite for trade restrictions, meanwhile, seems insatiable. In 2023 nearly 3,000 trade restrictions were imposed across the world—roughly five times the number in 2015. Not surprisingly, the protracted weakness in trade has coincided with a pronounced slowdown in investment.’’
Suggesting the way forward, the Bretton Woods Institution said, “A good start for the global community would be to strengthen the rules-based international order. Policymakers should seek opportunities to reaffirm fundamental principles: the need to lower trade barriers, avoid distortive domestic policies, and build a broad and level playing field for international commerce. More specifically, they need to support the WTO to deliver on its mandate. Expectations for this month’s WTO meeting are understandably modest, but it presents another important opportunity to advance the trade agenda.”
At the national level, the World Bank, it’s time for countries to ditch their infatuation with trade restrictions—their long-term costs are often much larger than the short-term benefits they might bring. Recent trade restrictions have shifted the pattern of interdependence among countries only slightly.
“For example, following the trade dispute between the United States and China, countries that witnessed faster export growth to the U.S. between 2017 and 2022 also saw significant growth in their imports from China. The main result of trade restrictions is usually higher prices because supply chains become longer and more complex than they otherwise would be,’’ it said.
The World Bank further admonished, ‘’Governments everywhere would be wise to redouble their efforts to rejuvenate global trade. That means reducing trade-policy uncertainty, seeking new avenues to expand cross-border trade, and restoring the rules-based global trading system.”
