In its Interim Economic Outlook released yesterday September 21, 2016, the Organisation for Economic Cooperation and Development (OECD) has again expressed concern about the slowdown in global trade growth, echoing similar sentiments made by the International Monetary Fund (IMF) and the World Trade Organisation (WTO). Describing global trade growth as “exceptionally weak”, the report notes that the volume of global trade fell in Q1 2016 and remains subdued despite some recovery in Q2.
The OECD noted that weak trade growth was as a result of not only cyclical and structural factors but also “some backtracking” on the opening of global markets to trade in goods and services. Noting that trade is an important driver of productivity growth, the organisation warned that this deceleration could undermine productivity growth and living standards in future years. These issues are further explored in an OECD Economic Policy Paper entitled “Cardiac Arrest or Dizzy Spell: Why is World Trade so weak and what can Policy do about it?” which was also released that same day.
The OECD report has reiterated the need for policy action to boost trade, including avoiding trade protectionist measures, reducing unnecessary trade costs and removing impediments and distortions for cross border investment. Recognising that support for globalisation in advanced economies has weakened, the report also suggests that policies be implemented to ensure that the benefits of trade and investment are widely shared.
This low trade growth is also affecting global GDP growth. The OECD warned that the world economy remains in a “low-growth” trap and projects global GDP growth to remain flat at only 3% in 2016, with only a modest improvement in 2017.
The full press release may be obtained here.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.