Caribbean Trade Law and Development

Tag: trade forecast

  • WTO: Trade tensions pose greatest risk to trade growth

    WTO: Trade tensions pose greatest risk to trade growth

    Alicia Nicholls

    Rising trade tensions and economic uncertainty account largely for the deceleration in global trade growth experienced in 2018 and will continue to pose the greatest risk to growth in 2019. This is according to the World Trade Organization (WTO) in its latest Trade Statistics and Outlook released on April 2, 2019.

    As I had noted in my first blog post for the year, 2018 was without doubt a challenging  year for global trade policy. Among the highlights (or low lights) were the tariff tit for tat between the US and China until a truce in December 2018 brought a halt to the planned imposition of more tariffs, and the imposition by the US of punitive tariffs on steel and aluminium imports, which led to retaliation by other major powers, most notably, the EU.

    It is little surprise then that according to WTO economists, global trade under-performed in 2018 expanding by 3.0%, down from the 4.6% above-average growth recorded in 2017 and slower than the 3.9% which was projected for 2018 in their September 2018 forecast. The uncertainty has led to a dampening of investment and consumption. Weak import demand in Europe and Asia depressed global trade volume growth in 2018. Higher energy prices were partly responsible for the 10% increase in the value of merchandise trade in 2018.

    In his brief remarks during a press conference on the latest forecast, the WTO’s Director General, Mr. Roberto Azevedo, noted that “the fact that we don’t have great news today should surprise no one who has been reading the papers over the last 12 months. Of course there are other elements at play, but rising trade tensions are the major factor”.  The Director General further explained that the range of new and retaliatory measures tariffs introduced affected widely trade goods. Other factors which affected global trade growth in 2018 were the weaker global economic growth, volatility in financial markets and tighter monetary conditions in developed countries, among others.

    World commercial services trade was much more positive with the value rising 8% in 2018 on the back of strong import growth in Asia.

    Looking forward, WTO economists now forecast world merchandise trade growth to slow further to 2.6% in 2019, which is a downward revision from their forecast of 3.7% in September 2018. WTO economists estimate some pickup in trade growth to 3.0% in 2020, with stronger growth predicted for developing economies than developed ones.

    They, however, caution that this forecast could be affected negatively if trade tensions continue to escalate, or positively if they ease. Director General Azevedo reiterated that “it is therefore increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in today’s economy”.

    The full forecast may be viewed here, while Mr. Azevedo’s remarks are available here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

  • WTO predicts weak global trade growth in 2016

    WTO predicts weak global trade growth in 2016

    Alicia Nicholls

    “Trade is still registering positive growth, albeit at a disappointing rate.” This is according to the World Trade Organisation’s Director-General Roberto Azevedo in the WTO’s latest Trade Statistics and Outlook released this afternoon. In its latest report, the WTO has significantly revised its forecast of global trade growth in 2016 to 2.8%, down from its forecast of 3.9% in September 2015. This is disconcerting news for Caribbean countries  as weaker global demand also impacts demand for Caribbean exports.

    2015 performance

    According to the WTO, the projected expansion of global trade at 2.8% in 2016 would be same rate at which global trade grew in 2015. In what was described as a tumultuous year for global trade on account of weak global demand, 2015 saw trade declines in developing and developed countries in the second quarter of 2015 and a rebound in the final half of the year. South America saw the lowest growth in imports in 2015 as Brazil’s recession dampened demand for imports.

    The WTO did not provide any data for the Caribbean’s 2015 performance in its report. However, recently published data from the Barbados Statistical Service showed, for example, that though Barbados’ total merchandise exports from January-December 2015 increased year on year by $17.1 million or 1.8%  over 2014,  this export growth was limited to a robust 16.6% increase in re-exports whilst domestic merchandise exports actually fell by 8.8%.

    2016 forecast

    Though projected trade growth remains positive, WTO economists have noted that the rate of global trade growth remains below the average global trade growth rate of 5% since 1990. This year’s forecast would also make it five consecutive years that global trade would have grown at almost the same rate as global GDP, as opposed to twice as fast. The report also notes that despite the growth in trade volumes, the dollar value of trade fell 13% in 2015  due to falling commodities prices and exchange rate volatility.

    According to the WTO’s Report, Asia will lead global export growth in 2016 at 3.4% growth, followed by North America and Europe, which are both estimated to see a 3.1% increase in their exports. For South and Central America, Africa, the Commonwealth of Independent States and the Middle East, the picture is not as rosy, with imports expected to contract (albeit lower) due to low oil and commodities prices. WTO economists predict that while exports from developed countries are expected to grow around the same rate (2.9% in developed countries and 2.8% in developing), developed economies imports are projected to grow faster (at 3.3%) than developing countries’ imports (at 1.8%) in 2016.

    Noting that “risks to the trade forecasts remain tilted to the downside”, the WTO highlighted the slowdown in the Chinese economy, the worsening volatility in financial markets, exposure of countries with high levels of foreign indebtedness to sharp exchange rate movements and declining business and consumer confidence in developed countries which could lead to slower GDP growth in the EU and US in 2016.

    At the same time, the WTO has also suggested that more accommodative monetary policy of the European Central Bank could promote growth in the Euro area and encourage demand for goods and services. The WTO also highlighted the threat of “creeping protectionism” due to the growth in trade restrictive measures. The good news is that global trade growth is expected to pick up in 2017 to 3.6%.

    These are developments which the Caribbean should continue to monitor closely, particularly the developments in the US and EU, our major trading partners, as well as China which has become a leading development partner for the region. The drop in oil prices has negatively affected oil exports from Trinidad & Tobago and its economy is currently in recession. Commodities exporter Suriname has also faced hard times due to the low commodities prices.

    The full press release may be accessed 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.