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TWN Info Service
on WTO and Trade Issues (Sept24/01) Geneva, 5 Sep (D. Ravi Kanth) -- The outlook for global trade remains highly uncertain due to rising geopolitical tensions, ongoing regional conflicts, shifting monetary policies in advanced economies like the United States, and falling export orders, according to the World Trade Organization's latest Goods Trade Barometer released on 4 September. However, the positive aspect appears to be a continued recovery in goods trade during the third quarter of 2024 after demand for traded goods stalled in 2023 when the US Federal Reserve hiked up interest rates to fight high inflation, the trade barometer suggested. Issued ahead of the WTO's Public Forum next week, the Goods Trade Barometer, which is a composite leading indicator for world trade, suggests that the latest barometer index value is 103, indicating a slow recovery. It also suggests that merchandise trade volume growth should remain positive in the second and third quarters of 2024. After remaining flat since the final quarter of 2022, the volume of world merchandise trade started to turn up in the fourth quarter of 2023 and gained momentum in the first quarter of 2024, the WTO suggested. In the first quarter of 2024, the last period for which data is available, trade was up 1.0% quarter-on-quarter and 1.4% year-on-year. Quarter-on-quarter growth in the last two quarters averaged 0.7%, which is equivalent to 2.7% on an annualized basis, the WTO economists suggested. They noted that this is quite close to the WTO's most recent forecast of April 2024, which predicted a 2.6% increase in world merchandise trade volume in 2024. However, the recent data in value terms show weaker than expected trade growth in Europe and stronger than expected growth in other regions. As a result, the WTO's regional projections may need to be adjusted in the next trade forecast update, which will be issued in mid-October, the WTO said. According to the latest release of data, "all of the barometer's component indices are currently on or above trend, with the notable exception of the electronic components index (95.4), which is below trend and falling. Component indices for automotive products (103.3), container shipping (104.3) and air freight (107.1) are all firmly above trend, although the automotive products index appears to have lost momentum recently." Further, the WTO said that "new export orders (101.2), usually the barometer's most predictive component, is marginally positive but has turned down, which could be a cause for concern going forward." In a similar vein, the index of raw materials (99.3) is nearly on trend but has declined sharply over the last three months, it added. NATIONAL SECURITY-DRIVEN TRADE RESTRICTIONS Though the WTO constantly refers to "geopolitical tensions" as being responsible for the slowdown in global trade, it remains silent on the factors contributing to these tensions, said people familiar with the development. As previously reported in the SUNS, national security-driven trade measures and policies being adopted by the US, the world's largest economy, seem to be stalling global trade, said people familiar with the development. In a news story in the Financial Times (FT) on 4 September, under the headline "How national security has transformed economic policy" in the US, the writers - Sam Fleming, Demetri Sevastopulo, and Claire Jones - have suggested that national security concerns have intruded into US trade policy. "Over the past decade, there has been a much greater willingness to use tariffs as part of industrial and trade policy," the writers argued, pointing out that "under Biden, there has also been a parallel emphasis on employing subsidies and other forms of state intervention to boost investment in key sectors." "This process is being turbocharged by the way that security issues are becoming entrenched in US government thinking about large segments of the economy, from manufacturing to new technologies," the writers said. "The growing intersection of economic policy and national security has many roots," they said, adding, however, that "the biggest factor has been China." "US officials have watched with awe and trepidation at the advances of Chinese state capitalism in many industries that are likely to dominate the first half of this century" and "retaining and restoring American manufacturing competitiveness has come to be seen as a defining geopolitical challenge," they argued. The US national security advisor Jake Sullivan appears to have justified these national security-driven trade and investment policies. He told the FT writers that "the role of national security in trade and investment policy and strategy is rising everywhere." "There are changes in the way that people are approaching the question of trade policy, international economic policy and that's true in market economies the world over," Sullivan maintained. Against this backdrop, not only could global trade become a casualty but also more worryingly, the raison d'etre of the rules-based WTO in the multilateral trading system, said people familiar with the development. +
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