The World Trade Organisation (WTO) has lowered its global trade growth forecasts for 2019 to 1.2%, compared with its earlier 2.6% prediction issued last spring, with South and Central America bucking the downward global trend. EURACTIV’s partner La Tribune reports.
According to the WTO’s latest forecasts published on Tuesday (1 October), global trade growth will increase by a meagre 1.2% in 2019, which is not a good sign for international trade. WTO’s experts have halved their projections compared to those they had issued last spring, which foresaw a 2.6% growth rate.
In a statement, the organisation’s director-general, Roberto Azevêdo, explained that “trade disputes increase uncertainty, which leads to some companies postponing productivity-enhancing investments that are essential to raising living standards”.
On this point, many business leaders and investors have already expressed concerns about being shrouded in complete uncertainty because of a potential no-deal Brexit scenario.
US President Donald Trump said in a recent speech before the UN General Assembly he hoped for a trade agreement with China that would benefit both countries. He also called for a drastic reform of the WTO in light of Beijing’s “aggressive” behaviour. In particular, the American president criticised China’s “unfair” trade practices.
A drop in exports
Since 2017, the pace of international trade has fallen sharply from 4.6% in 2017 to 3% in 2018 and now to a predicted 1.2% in 2019.
However, North American exports could pick up again in 2020, as a 2.7% growth is expected. In terms of detail, the slowdown in exports was particularly marked in North America from 2018 to 2019 with a 2.8 percentage point decrease from 4.3% to 1.5%.
In Asia, the slowdown is also evident over the same period for exports, with a two percentage point drop (from 3.8% to 1.8%) between 2018 and 2019.
When it comes to Europe, the figures are less disappointing. For exports, the 2019 growth is expected at 0.6% compared to a 1.6% growth rate for the previous year.
South and Central America are the only two regions expected to see an increase in growth rates 2018 and 2019.
A decrease in the backlog of orders
Besides the difficulties of the global economy and the trade and technological confrontation between the US and China, WTO economists still fear a decrease of orders in the coming months.
“Monthly economic indicators provide some worrying clues about the current and future trajectory of world trade. An index of new export orders derived from purchasing managers’ indices has fallen from 54.0 in January 2018 to 47.5 in August 2019, the weakest reading since October 2012”, at the time of the sovereign debt crisis.
All values below 50 illustrate a contraction in trade.
In addition to this slump, there are geopolitical tensions in the Middle East. The recent attacks on oil infrastructure in Saudi Arabia have pushed oil prices up by about 20%, after which there was a rapid return to normal.
Last Monday (30 September), an official of the Saudi oil and gas company Aramco said that Saudi Arabia had returned to its production levels before the bombing of its two oil sites on 14 September.
Risk of escalation between the US and Europe
In parallel with the conflict between the US and China, relations between France and the US could deteriorate.
On Wednesday (2 October), the WTO authorised the US to impose customs duties on the European aircraft manufacturer Airbus, accused by Washington of receiving illegal subsidies.
In this dispute, which dates back to 2004, the EU for its part claimed that Boeing had received $19.1 billion in prohibited subsidies between 1989 and 2006 from various branches of the US government.
The application of customs duties by the United States would also have a “negative impact” on American airlines and jobs, Airbus CEO Guillaume Faury warned on Wednesday.