April 12, 2024

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Global trade unlikely to hit 3.3% growth forecast as geopolitical tension rises, WTO says

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Global trade will probably miss its growth forecast for 2024 amid slower economic growth and downside risks, including Red Sea attacks, the World Trade Organisation’s director general has said.

“The Red Sea crisis and Panama Canal drought are new sources of delays and inflationary pressure, offering timely reminders of risks posed to global trade and climate change,” Ngozi Okonjo-Iweala told the 13th WTO Ministerial Conference in Abu Dhabi on Monday.

On October 5, the WTO forecast a 3.3 per cent growth in global trade for 2024 – a strong improvement from last year’s 0.8 per cent – but the projection was made before the Israel-Gaza war that began two days later.

Attacks by Houthi rebels on ships passing through the Red Sea are also disrupting global trade, with many ships taking a longer route along the southern tip of Africa to deliver goods to different countries around the globe.

Ms Okonjo-Iweala said geopolitical tension had worsened with the spread of conflict, creating problems for the growth of global trade.

She said the multilateral trading system was “under attack” and “misconstrued and undermined” in several parts of the world” amid US-China tensions and a consequent rise in protectionist policies.

Despite the challenges, “the multilateral trading system has shown a lot of resilience and it’s delivering,” Ms Okonjo-Iweala said during a media briefing on the sidelines of the conference.

“Under the multilateral trading system with the WTO underpinning, it is still delivering 75 per cent of world trade, still on WTO terms. We just saw two new members, Comoros and Timor Leste, join the organisation and we have 22 more in the queue.”

Comoros and the South-East Asian nation of Timor Leste formally joined the WTO on Monday, taking its total membership to 166.

Ms Okonjo-Iweala underlined the importance of co-operation in trade despite rising protectionist policies.

“If we don’t have it, it will be very difficult for parts of the world to adjust, if we fragment it, it will be very costly to the world, both developed and developing countries,” she said. “We need to avoid fragmentation and we need to focus on co-operation on trade.”

“Let’s not take the system for granted. Let’s not be complacent, we really have to work to keep it going.”

“If we don’t have it, I think that goods and livelihoods will be more difficult and more costly. As you have seen, it would be much more difficult to achieve some of the global objectives we have on climate change or managing pandemics and so on.”

She said there was a need to repair the multilateral trading system and reform it, however, to “make it fit for purpose, which is what we are doing”.

Meanwhile, Dr Thani Al Zeyoudi, Minister of State for Foreign Trade said the WTO remains a “powerful force” against protectionism and discrimination and is an important driver for a multilateral rules-based trading system.

“We must show the world that the WTO is “alive and well” and can deliver results that matter to people, the conference must show that the multilateral trading system can and will contribute to development,” he said.

He added that multilateral trading systems are at a “critical juncture”, facing challenges from climate change, cost of living pressures, debt, slow recovery from Covid and other developmental challenges.

Economic growth held up better than expected, despite slowing down, particularly in major economies such as the US and India, resulting in a softer landing for the global economy than expected, Ms Okonjo-Iweala said.

“However, there are places that are falling behind. The World Bank warns that the global economy is on track for its weakest five-year performance in thirty years. In many developing countries, debt distress, like high financing costs, remains a drag on economic prospects.”

Last month, the International Monetary Fund raised its global economic growth forecast, with increased prospects of a soft landing this year, but risks remain amid slow and divergent economic progress as geopolitical uncertainty mounts.

The multilateral lender expects the global economy to match last year’s 3.1 per cent growth in 2024 and improve slightly to 3.2 per cent next year.

Updated: February 26, 2024, 3:39 PM


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