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Rising uncertainty, more effective WTO needed
Recent slowdown in trade growth was not only caused by lower global demand and the decline in commodity prices, but was also due to two underlying structural causes in the last two decades.
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Shipping containers are seen at a port in Qingdao, in China's eastern Shandong province on April 13, 2018. (AFP/-)
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fter almost 70 years of trade liberalization, trade has been challenged. Global trade contracted by 10.6 percent and 2.3 percent in 2015 and 2016, respectively, and many claim the contraction was due to shifting exchange rates and falling commodity prices.
In terms of volume, global trade recorded growth of 2.8 percent in 2015 and 2016. The multilateral system has been questioned, and even bilateral and regional free trade agreements (FTAs), perceived as alternatives to the multilateral system, have been defied.
However, the trade slowdown has taken place over the course of decades, even before the global financial crisis in 2008 and the recent declines in commodity prices. Trade growth is slowing down and the role of trade in GDP is falling.
Growth reached double digit figures in the three decades from 1960 to 1990. In the 1990s, the growth trend declined slightly to about 10 percent and then dropped further to between 6 and 10 percent in the 2000s.
Since the global financial crisis, trade growth has declined considerably. The average annual growth of global trade, which reached 5.4 percent during the 1990 to 2004 period, declined to 4.8 percent in the period between 2005 and 2016.
What we should pay more attention to is that the recent slowdown in trade growth was not only caused by lower global demand and the decline in commodity prices, but was also due to two underlying structural causes in the last two decades: (i) the slow growth of productivity and innovation, and (ii) the maturity of global value chains.
Recently, on the sidelines of The Organization for Economic Co-operation and Development (OECD) ministerial meeting, Australia and the director general of the World Trade Organization (WTO) initiated an informal WTO meeting in Paris on May 31.
