Global trade growth to slow this year, WTO says, but trade is getting greener
World merchandise trade volumes will rise by a “subpar” 1.7% in 2023, with transactions “weighed down by the ongoing war in Ukraine, stubbornly high inflation, tighter monetary policy and financial uncertainty”, according to the World Trade Organization (WTO).
The forecast is higher than the WTO’s October estimate for 2023 growth of 1.0% because of an improvement in the outlook for the global economy. But it is still below the 2.6% average for the 12 years since trade volumes collapsed after the global financial crisis.
The new prediction follows a downturn in trade volumes in the final quarter of 2022 because of elevated global commodity prices, a tightening of monetary policy in response to inflation, and COVID‑19 outbreaks that disrupted production and trade in China, the WTO says.
However, goods trade was “remarkably resilient for most of 2022 despite a challenging macro environment”, it adds, noting that year-on-year trade volume growth averaged 4.3% for the first three quarters. Full-year trade growth for 2022 stood at 2.7%, putting it below the WTO’s forecast of 3.5%.
Green goods are bucking the trend, however, with 4% trade growth in the second half of last year, according to UNCTAD’s latest Global Trade Update. Trade in “environmentally friendly goods” – any products designed to use fewer resources or emit less pollution than their traditional counterparts – hit a record $1.9 trillion in 2022, up more than $100 billion from 2021. The top performers were electric and hybrid vehicles (up 25%), non-plastic packaging (up 20%) and wind turbines (up 10%).
“Trade continues to be a force for resilience in the global economy, but it will remain under pressure from external factors in 2023,” says WTO Director-General Ngozi Okonjo-Iweala. “This makes it even more important for governments to avoid trade fragmentation and refrain from introducing obstacles to trade. Investing in multilateral cooperation on trade … would bolster economic growth and people’s living standards over the long term.”
2. UK strikes its biggest trade deal since Brexit by joining trans-Pacific pact
The UK has joined a trans-Pacific trade pact as it looks to deepen ties in the region and build its global trade links after leaving the European Union in 2020. Its entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) marks the country’s biggest trade deal since Brexit.
UK exports to the 11 other countries in the CPTPP – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam – were worth £60.5 billion ($75 billion) in the 12 months to the end of September 2022. The agreement will cut tariffs on food, drink and cars, and will boost the UK economy by £1.8 billion ($2.25 billion) each year in the long term, the government says.
UK export markets for goods and services 4 quarters to the end of September 2022
Regulatory harmonization will not be required, as the countries in the CPTPP do not have a single market for goods or services, unlike the EU. Nevertheless, the deal has drawn some criticism over concerns that the UK will come under pressure to reduce standards on food and the environment to compete with CPTPP countries. The UK is liberalizing tariffs on palm oil from Malaysia, even though the product has been blamed for widespread deforestation. However, it has not agreed to remove a ban on hormone-treated beef.
The deal may not offset the impact of leaving the EU, with the UK’s Office for Budget Responsibility estimating the post-Brexit trading relationship between the UK and EU will reduce long-run productivity by 4% relative to remaining in the EU.
Britain’s goods exports have recently fallen behind those of all other G7 economies, with trade experts saying this is more evidence of the impact of Brexit, according to The Financial Times. UK exports in October-December 2022 – excluding precious metals – were more than 9% lower than their 2019 average.
3. News in brief: International trade stories from around the world
The EU has approved a landmark deforestation law that will ban imports of coffee, beef, soy and other commodities if they are linked to the destruction of the world’s forests. Companies that sell goods into the European Union will have to provide a due diligence statement and “verifiable” information proving their goods were not grown on land deforested after 2020. Deforestation is responsible for 10% of global greenhouse gas emissions.
Indonesia plans to propose a free trade agreement for some minerals shipped to the United States, so that companies in the electric vehicle battery supply chain that operate in the US can benefit from its tax credits. Indonesia’s nickel products have become increasingly important in the supply chain.
Flows of foreign direct investment (FDI) are increasingly moving between countries that are close geopolitically rather than geographically, the International Monetary Fund says. “These trends indicate that if geopolitical tensions continue to intensify and countries further diverge along geopolitical fault lines, FDI may become even more concentrated within blocs of aligned countries”, it says.
US Treasury Secretary Janet Yellen has warned that any moves by Washington to decouple from China would be “disastrous”. It comes as China is reportedly targeting Western interests in the country after several years of trade and technology restrictions from the US, The Financial Times reports.
The EU has moved to prevent a spillover of geopolitical tensions into trade by allowing retaliatory measures against countries that put economic pressure on EU members to change their policies. The “anti-coercion instrument”, which is expected to take effect in the second half of 2023, will allow the bloc to impose higher import tariffs or limit access to EU public tenders.
The African Continental Free Trade Area (AfCFTA) Secretariat has held its first Business Forum, as it looks to boost trade and investment across the continent. The event took place in Cape Town and featured a private-sector engagement platform drawing attention to areas such as agro-processing, the automotive sector, pharmaceuticals, transportation and logistics, as well as digital trade.
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