Deglobalization: WTO slashes global export growth projections amidst rising geopolitical strains

What's the story? 

The World Trade Organization (WTO), based in Geneva, has drastically cut its projections for global export growth this year. This decision comes in the wake of a noticeable slowdown in the manufacturing sectors and increasing geopolitical discord that's causing global trade patterns to disintegrate. The organization now expects the world merchandise trade volume to expand by a mere 0.8%, a stark drop from the 1.7% increase it anticipated in April. WTO director-general, Ngozi Okonjo-Iweala, expressed deep concern over the implications of this deceleration for global living standards and emphasized the need for WTO members to steer clear of protectionism. 🌍

What does this mean? 

Recent reports from the WTO have indicated shifts in global supply chain activities. The proportion of intermediate goods in international trade, which serves as a measure of this activity, declined to 48.5% during the first half of 2023. This decrease stands in contrast to an average of 51% over the prior three years. Additionally, rising tensions between major players, notably the US and China, are evident. The fraction of Asian bilateral partners in US trade, especially for parts and accessories, dropped from 43% during the first half of 2022 to 38% in the same duration in 2023. While WTO's chief economist, Ralph Ossa, believes we haven't quite reached a broad deglobalization, he does caution that global supply chains may have hit a temporary plateau. 📉

Why should I care? 

These adjustments in the WTO's predictions don't stand in isolation. A tangible slump in the imports and exports of goods was noted towards the end of the previous year. As an illustration, the Netherlands Bureau for Economic Policy Analysis unveiled that global trade volumes plummeted by an annual rate of 3.2% in July, marking the most substantial dip since the early days of the COVID-19 outbreak in August 2020. This downtrend in trade has been ascribed to factors like surging inflation, elevated borrowing costs affecting demand, a pressured property market in China, and a global manufacturing lull. Moreover, global events such as the ongoing conflict in Ukraine have further clouded the trade prospects for 2023 and 2024. This broad-based trade deceleration impacts numerous nations and covers a diverse range of products, emphasizing its potential to reshape the global economic landscape. 🌐