By Shawn Donnan
The slowdown in world trade has been much worse than previously reported, with global trade volumes plateauing over the past 18 months amid a rise in protectionism, according to a new report.
The analysis illustrates why business leaders such as GE’s Jeff Immelt are anxious about trade and the world economy as politicians such as US Republican presidential candidate Donald Trump rail against “globalism” and promise to erect new barriers to commerce.
Policymakers and economists have grown increasingly concerned about a slowdown in global trade growth. But according to the latest report by Global Trade Alert, which monitors protectionism around the world, that growth has disappeared altogether with the volume of goods traded around the world stagnant since January 2015.
Such a prolonged period of no growth is rare in economic history, said Simon Evenett, professor of international trade and economic development at Switzerland’s University of St Gallen and the report’s lead author. “It really doesn’t happen very much outside of recessions,” he said.
The report is based on data collected by the Netherlands Bureau for Economic Policy Analysis, which publishes a much-watched monthly report on global trade volumes. Its latest data, for April of this year, shows that both exports and imports globally remain below where they were in January 2015 and have moved very little in the period since then.
Economists remain divided on the causes of the slowdown. While some blame a creeping protectionism that has begun to drag on the world’s economy, others see long-term trends at play such as the shortening of global supply chains and the increasing role of digital trade.
But bodies such as the IMF and the World Trade Organisation are paying increasing attention to protectionism. In the lead-up to a meeting of G20 trade ministers last week, the WTO warned that protectionist measures were being introduced at an accelerating rate and the IMF has been expressing growing concerns about what it sees as yet another threat to a tepid global economy.
In their closing communique the G20 ministers last weekend reiterated a post-crisis pledge to avoid any move to protectionism.
That message is at odds with much of the political debate in countries including the US, however. Mr Trump has been promising to rip up US trade deals such as the North American Free Trade Agreement and to impose punitive tariffs on goods from major trading partners including China and Mexico. Both he and his Democratic rival oppose a vast new Pacific Rim pact, the Trans-Pacific Partnership, negotiated by the Obama administration and awaiting congressional approval.
The G20 pledge is also at odds with the policy reality, said Mr Evenett. The number of discriminatory measures such as local content rules and subsidies for local industry introduced by governments was up 50 per cent in 2015 compared with the year before, according to the Global Trade Alert’s database. G20 countries accounted for 81 per cent of those measures.
The concern is that those sorts of moves could continue to grow as global trade slows and governments try to protect their own share of a diminishing pie, said Mr Evenett.
There is evidence that such measures are already having an impact on business decisions. In a speech in May at New York University, Mr Immelt said that faced with rising barriers to trade, GE had decided to shift to a strategy of “localisation” rather than globalisation.
“In the face of a protectionist global environment, companies must navigate the world on their own,” said Mr Immelt. “This requires dramatic transformation. Going forward: We will localise.”