Global trade faces poor growth, says WTO

Global trade is poised for at least two more years of disappointing growth, according to a new forecast that will add what some see as increasing evidence that globalisation is stalling.

The latest predictions from economists at the World Trade Organisation released on Tuesday see trade growing at just 3.3 per cent this year, up from 2.8 per cent in 2014, and accelerating modestly to 4 per cent in 2016.

The figures are roughly in line with those for broader growth in the global economy which the International Monetary Fund on Tuesday forecast would expand by 3.5 per cent this year.

But that is the problem. For at least three decades before the 2008 financial crisis, global trade regularly grew at twice the rate of the global economy, leading some economists to hail an era of "hyperglobalisation". According to the WTO, the annual average recorded since 1990 has been 5.1 per cent growth.

With last year's growth of 2.8 per cent, global trade has now expanded at, or below, the rate of the broader global economy for three straight years.

The WTO has in the past been among the more bullish institutions on trade growth. Economists there initially forecast a strong recovery in trade last year, predicting that the volume of goods traded around the world would rise 4.7 per cent.

Roberto Azevedo, WTO director-general, blamed disappointing trade growth in recent years on the sluggish recovery from the financial crisis. He also warned that economic growth around the world remained "fragile" and vulnerable to geopolitical tensions.

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"But we are not powerless in the face of this gloomy picture," he said. "Trade can be a powerful policy tool to leverage economic growth and development. By withdrawing protectionist measures, improving market access, avoiding policies which distort competition and striving to agree reforms to global trade rules, governments can boost trade and seize the opportunities that it offers for everyone."

With Tuesday's forecasts the WTO seems to be joining a camp of economists who argue that the slowdown in trade growth is not only cyclical but has also been due to structural factors.

"In the short term at least," the WTO economists wrote, "trade expansion will no longer far outstrip overall economic growth as had been the general pattern for decades."

In a widely cited paper last year economists at the IMF and the World Bank argued that much of the slowdown in global trade was structural and due in large part to the way global supply chains were changing. In particular, they argued that China, which has built much of its economic success on importing parts and exporting finished goods, was increasingly absorbing entire supply chains and producing parts itself.

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