Protectionism has grown rapidly around the world and could have a serious impact on consumer prices and economic growth, a new World Trade Organization (WTO) report warned.
The WTO’s 20th monitoring report on G20 trade measures showed the amount of trade covered by new import-restrictive measures reached a new high of $481 billion from mid-May to mid-October. This is more than six times larger than recorded in the previous reporting period and the largest since the measure was first calculated in 2012.
At the same time, the WTO’s latest World Trade Outlook Indicator (WTOI) released Monday—which calculates growth—had a reading of 98.6, the lowest since October 2016 and reflected declines in all component indices. That’s below the previous value of 100.3 and falls under the baseline value of 100 for the index. Readings of 100 indicate growth in line with medium-term trends, while readings greater than 100 suggest above-trend growth and those below 100 indicate the opposite.
The WTOI report said the new results indicate that trade growth is likely to slow further into the fourth quarter and into 2019.
Continued moderation was driven by the steady decline in the export orders index (which carried a value of 96.6), which remained below trend and is nearing the weakest point recorded in 2012 during the Eurozone crisis, it noted. Indices for automobile production and sales (96.9), electronic components (93.9) and agricultural raw materials (97.2) have moved from on trend to below trend, while international air freight (100) and container port throughput (101.2) have dipped, thought they remain on trend.
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The latest results are consistent with the WTO’s downgraded outlook for global trade issued in September amid escalating trade tensions and tighter credit conditions in important markets. The revised forecast anticipated trade expansion to slow to 3.9 percent in 2018 and 3.7 percent in 2019 from 4.7 percent in 2017.
The G20 report covering the world’s top 20 economies said new import-facilitating measures of $216 billion also rose significantly during this period, though they came in less than half that of what trade-restrictive measures cost.
WTO Director-General Roberto Azevêdo warned the report’s findings constitute a source of serious concern that will demand immediate action to de-escalate the situation.
“The report’s findings should be of serious concern for G20 governments and the whole international community,” Azevêdo said. “Further escalation remains a real threat. If we continue along the current course, the economic risks will increase, with potential effects for growth, jobs and consumer prices around the world. The WTO is doing all it can to support efforts to de-escalate the situation, but finding solutions will require political will and it will require leadership from the G20.”
A total of 40 new trade-restrictive measures were applied by G20 economies during the review period, including tariff increases, import bans and export duties. This represents an average of eight restrictive measures per month compared to the six measures recorded during the previous review period from mid-October 2017 to mid-May 2018.
G20 economies also implemented 33 new measures aimed at facilitating trade during the review period, including eliminating or reducing import tariffs and export duties. This is in line with the trend between 2012 and 2017. In addition, liberalization associated with the 2015 expansion of the WTO’s Information Technology Agreement (ITA) continued to feature as an important contributor to trade facilitation, the report noted.
The continued expansion of trade‑restrictive actions and the uncertainty created by them could place economic recovery in jeopardy, the WTO noted, saying, “Further escalation would carry potentially large risks for global trade, with knock-on effects for economic growth, jobs and consumer prices around the world.”