Chris Clague, managing editor and global lead on trade and globalisation, Economist Intelligence Unit
The one-two punch of the Brexit vote in June 2016 followed by the election of Donald Trump later that year made for the easy portrayal of a struggling global trade. In reality it had started receiving a pounding long before then. The failure of the Doha Round of multilateral negotiations—which is hard to date with precision—exposed major faults in the system. The onset of the global financial crisis in 2008-09 compounded the problem. Despite the commitments of the G20 countries and various other groups not to raise barriers to trade, all of them did so. This mainly took the form of non-tariff measures rather than the actual tariffs that are so much the focus of trade disputes now.
Nevertheless, trade persisted. It didn’t grow as fast as it had before, but from 2010 to the beginning of 2019 global trade in goods expanded by 29% according to the World Trade Monitor, a database compiled by the Netherlands Bureau for Economic Policy Analysis. Trade in services, which is more difficult to measure, is estimated to have grown at many multiples of the rate of growth of trade in goods, driven by cross-border data flows, among other factors.
That persistence is far from guaranteed, however. Trade conflict between the US and China, the world’s two economic superpowers, is starting to bite, although even now it may be too soon to tell who is going to bear the brunt of this.
Meanwhile progress has stalled in major regional trade negotiations such as the Regional Comprehensive Economic Partnership (RCEP), a pact between the ASEAN members and six other countries in the region. An agreement appeared within reach in recent days, only for India to raise last minute concerns about the impact of a flood of low cost imports from other RCEP member countries, particularly China. Failure to complete RCEP would deal a substantial blow to those countries seeking to advance trade liberalisation outside the confines of the World Trade Organisation (WTO).
Separately, the trade finance gap that greases the wheels of global commerce is estimated to be US$1.5trn by the Asian Development Bank (ADB). This figure has remained steady over the past few years. ”Country risk” is the bugbear this year according to the ADB survey of banks that provide trade finance.
More countries are also restricting cross-border data flows due to privacy and security concerns This presents a worrying trend for the services industry which relies on the free-flow of data to operate. Should more countries attempt a move towards a national cloud a whole host of industries would suffer, including accounting, research and development, consulting and legal.
Perhaps most importantly the WTO’s dispute settlement system, the body charged with resolving trade disputes, is on the verge of collapse. Such an outcome threatens to unleash even greater levels of protectionism around the globe than we are seeing now.
I look forward to discussing these issues at the upcoming World Trade Symposium, programmed by The Economist Events, on November 6th and 7th in New York. Shifts in global trade patterns, the US and China’s trade policies and digital trade will be the subject of thought-provoking and insightful conversations with experts and key decision-makers. Hopefully, by the end of the second day, speakers and attendees will not only have participated in stimulating discussions about the most pressing issues facing global trade today, but will also come away with new ideas about—and solutions to—those issues.