While slashing its forecast for growth in global trade for the entire of 2019, the World Trade Organization also issued a warning against a threat to loss of jobs and a drop in living standards because of the outbreak of tariff wars across the world with the toughest one ongoing between the United States and China.
The Geneva-based global trade arbitrator said that the pressure on the global economy has forced it to cut its forecast for trade in goods this year globally by more than half from 2.6 per cent to 1.2 per cent following a period of increasing acrimony in the US-China trade war, a general slowdown in global trade and economic growth and fears over the impact on the global economy because of a no-deal Brexit.
The unfavorable business environment discouraging firms from making on new capital investments, said Roberto Azevêdo, the director general of the WTO which is tasked with the responsibility of resolving of trade disputes between its member states. Many fear that this ability or power of the WTO is itself under threat.
“The darkening outlook for trade is discouraging but not unexpected. 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,” Azevêdo said. “Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”
Top trade negotiators are of the United States and China are scheduled to hold face to face negotiations on trade in Washington later this month as both the sides try to resolve the acrimonious trade war between the two largest economies of the world. The trade war which has been ongoing since more than a year now have seen both the sides imposing tariffs on each other’s goods worth billions of dollars and it has roiled the global financial markets and slowed down global trade growth.
On the other hand, the appointment of new judges to the WTO body that is entrusted with the job of deciding whether an appeal by a country against a ruling in a trade dispute should be upheld, is being blocked by the US.
“Resolving trade disagreements would allow WTO members to avoid such costs,” Azevêdo 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. Members should work together in a spirit of cooperation to reform the WTO and make it even stronger and more effective.”
Since its last forecast in April this year, there has been clouding of the forecast and global business environment, the WTO said, and added that if the trade wars across the world come to an end by the end, there can be a bounce-back in global trade growth to 2.7 per cent next year.
It is predicted that the growth in global trade is likely to be in the range of 0.5 per cent to 1.6 per cent for the current year because of a high level of uncertainty and that rate could even go down in the eventuality of more or added trade tensions.
The WTO said risks were “heavily weighted” to the downside and dominated by trade policy.
“Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination, while shifting monetary and fiscal policies could destabilise volatile financial markets,” the WTO said. “A sharper slowing of the global economy could produce an even bigger downturn in trade. Finally, a disorderly Brexit could have a significant regional impact, mostly confined to Europe.”
(Adapted from TheGuardian.com)