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What’s next for the global trading system?

May 29, 21:19 UTC+3
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Global trade in 2015–2016 showed the lowest growth rate since 2009. But in late 2016 – early 2017, in spite of the alarming trends and general uncertainty, signs of its revival started to show. The key risks are now related to the rise in protectionist trade policies pursued by the leading countries.

  • According to an IMF report published in April 2017, world trade rose by 2.2% in 2016 in volume terms. The weak growth is mainly due to the slowdown in investments, lower exports and imports, and stock adjustments in the developed countries.
  • At the same time, the IMF pointed to “some signs of recovery” in the global trade “underpinned by stronger trade growth in China and India as well as in Russia and the Commonwealth of Independent States, where the contraction of imports moderated”. The IMF projects the global trade to grow at an annual rate of 4% in 2017–2018.
  • The WTO provided more conservative estimates. It expects the world trade to go up by approximately 2.4% in 2017, while also noting that due to strong uncertainty caused by political risks the indicator will be remaining in the 1.8–3.6% range in the short term.

Russia is one of the few global powers enjoying a foreign trade surplus. Yet, 2016 was one of the worst years for the country since 2009 in terms of its foreign trade turnover.

  • According to the Federal Customs Service, Russia’s foreign trade fell by 11.2% year-on-year, with exports and imports dropping by 17% and 0.4%, respectively.
  • Global trade leaders also reduced their foreign trade turnover in 2016. According to the WTO, the US exports and imports went down by 3% year-on-year, while in China, they decreased by 8% and 5%, respectively.

At the beginning of the 21st century, megaregional agreements looked like the next step in promoting trade globalisation. Over the past decade, major economies signed an unprecedented number of preferential trade agreements (over 400). Such trade deals as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) offer a great number of measures to lift trade barriers. If implemented, they would have brought about major changes. However, in January 2017, US President Donald Trump announced that the US was quitting the TPP.

The WTO also notes that, over the past few years, there has been a dramatic rise in protectionism that many countries see as a tool to mend the harm done by megaregional trade agreements. Many experts and market players view this trend as a serious threat that may lead to a veritable trade war.

  • From October 2015 to May 2016, G20 countries introduced 1,583 new trade restrictions.
  • The US Administration’s threats to introduce import taxes for goods originating form a variety of countries is one of the major concerns for the OECD.
  • Christine Lagarde, Head of the IMF, has warned that “the sword of protectionism hanging over global trade” and “tighter global financial conditions” are threatening to “trigger disruptive capital outflows from emerging and developing economies”.

The spring of 2017 was marked by a shift in rhetoric, with world leaders being increasingly hostile to the underlying principles of free trade and globalisation. The resolutions adopted at two forums involving heads of the G20 economies did not contain the traditional condemnation of protectionism and trade barriers.

  • On March 17–18, Baden-Baden hosted an annual meeting of the G20 finance ministers and central bank governors. None of the resulting documents emphasised commitment to free trade.
  • On April 24, as part of the IMF and the World Bank spring session, Washington played host to the meeting of finance ministers and central bank governors from the 24 leading economies making up the International Monetary and Financial Committee (IMMC). The meeting’s communiqué did not contain any decisive condemnation of trade protectionism either.
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