Global merchandise trade volume is estimated to grow by only 1.2% in 2019 due to mounting trade tensions and a slowing world economy, World Trade Organization (WTO) economists said on Tuesday. In April, the economists had pegged volume growth for 2019 at 2.6%—down from 3.0% in 2018.
The projected sharp fall in international trade is largely attributed to US trade wars against China and other countries.
The WTO said several downside risks continued to remain high and the “2020 projection depends on a return to more normal trade relations."
WTO director-general Roberto Azevedo said: “The darkening outlook for trade is discouraging but not unexpected," adding that “beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards".
“Job creation may also be hampered as firms employ fewer workers to produce goods and services for export. Resolving trade disagreements would allow WTO members to avoid such costs," he added.
The WTO’s highest adjudicating body for global trade disputes is set to become non-functional from 11 December due to a continued obstructive position adopted by the US. However, Azevedo said: “The multilateral trading system remains the most important global forum for settling differences and providing solutions for the challenges of the 21st century global economy."
Azevedo did not mention the current impasse created by the US, which has blocked the selection of six judges to the WTO’s dispute settlement platform, the Appellate Body. “Members should work together in a spirit of cooperation to reform the WTO and make it even stronger and more effective," he said.
A WTO release said: “Slowing economic growth is partly due to rising trade tensions, but also reflects country-specific cyclical and structural factors, including the shifting monetary policy stance in developed economies and Brexit-related uncertainty in the European Union. Macroeconomic risks are firmly tilted to the downside."
WTO economists said “due to the high degree of uncertainty associated with trade forecasts under current conditions, the estimated growth rate for world trade in 2019 is placed within a range of 0.5% to 1.6%.
Trade growth could fall below this range if trade tensions continue to build, or outperform it if they start to recede."
The range of likely values is wider for 2020, ranging from 1.7% to 3.7%, with better outcomes depending on an easing of trade tensions.